From the TUC

#Budget2015: The worst public spending cuts are still to come

18 Mar 2015, by in Economics

There was much pre-Budget speculation that the Chancellor was going to use today’s Budget to ease off on austerity and reduce the scale of planned public service cuts in the year ahead.

But although he’s made some minor changes to his future forecasts, the scale of spending reductions he has scheduled for the next parliament is substantial.

Spending may no longer fall as a share of GDP in 2019-20, but as the OBR has said, we still face a ‘rollercoaster profile for implied public services spending through the next Parliament: a much sharper squeeze on real spending in 2016-17 and 2017-18 than anything we’ve seen over the past five years followed by the biggest increased in real spending for a decade in 2019-20’ (a conveniently scheduled increase which avoids spending as a proportion of GDP getting quite back to where it was in the 1930s).

Looking at year on year growth in departmental spending, the OBR show the scale of the Chancellor’s proposals.

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The numbers behind the chart are unequivocal – departmental spending is set to fall by 5.4 per cent in 2016-17 and 5.1 per cent in 2017-18. That’s a rate of spending cuts that is 2.4 percentage points more severe than in any year of austerity to date. Even in 2011-12, when service cuts were at their most significant, spending fell by 3 per cent of GDP.  The cuts the Chancellor has planned for 2016/17 and 2017/28 are 80% greater than those we have seen before.

 

It gets worse, as the OBR has also helpfully set out how spending has changed between departments over time. This shows that presuming NHS spending remained constant at around 6 per cent of GDP, education at around 3 per cent and international development at 0.4 per cent other services would be set to face even more dramatic cuts. The chart below sets out the trajectory for spending overall. If health, education and international development retained their relative shares (a substantial challenge given the need for spending on health in particular to rise in real terms simply to keep up with the increased demand that demographic change brings), then spending on everything else would fall from 11.2 per cent of GDP in 2010/11 to just over 5 per cent of GDP by the end of the next parliament.

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Finally the OBR has also considered total government consumption of goods and services. This includes all government spending on services, and is as good a way of looking at public service spending over time as is available. On this measure, spending is set to fall even more dramatically, back to its lowest share of GDP since 1948.  

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The Chancellor gave no detail today as to where these cuts will fall or what his plans are for departmental spending in the next parliament. Given the unprecedented scale of the austerity package he is planning, this is remarkable.

 

One Response to #Budget2015: The worst public spending cuts are still to come

  1. #Budget2015: A review of how the Chancellor manipulated the figures to political ends – ToUChstone blog
    Mar 20th 2015, 10:16 am

    […] to be aware of what is actually going on. Over the past two days we dealt in various pieces with the unchanged scale of the cuts and the unchanged extent of the damage they will inflict (as well as many other issues). Today, I […]