Public spending cuts: we need a real debate
The BBC’s political editor, Nick Robinson, is spot on when he predicts a loud but largely misleading debate between the main parties about public spending cuts as we head towards the next election. Labour will claim the Tories are planning indiscriminate and swingeing cuts if they get into office while also claiming to be making major ‘efficiency gains’ themselves to bring the public finances back into line. And the Tories will argue the Government has wasted money like a drunk on Friday night since 1997 meaning Cameron et al. will have to inject a serious dose of fiscal responsibility back into the public finances.
What we won’t get is a serious debate about what is driving the debate itself. The IMF figures I quoted in a previous post show that the UK’s outstanding public debt remains very healthy even after the latest efforts at stimulus. The actual annual gap between state borrowing and spending is undoubtedly rising but the size of our economic stimulus is small compared to other countries so we may just have to accept that the deficit needs to get a bit bigger. And most notably the Government’s current spending plans mean that they will actually be withdrawing public funds from the economy in 2010 just while all other advanced economies are still injecting stimulus.
So why will the politicians be focusing on spending cuts? More to do with the electoral expediency of looking tough on the public sector and on ‘wasteful’ spending than anything to do with good economics or the actual facts of state debt.