Spending cuts are with us. Yes the truth always is dragged, shame-faced, out of a Labour budget the day after it’s delivered – and this time there was a real corker lurking in the statistical annex. Public spending is finally being cut, and significantly – by around £20 billion a year. Alistair Darling spoke with forked tounge when he said he’d “protect frontline public services while keeping current spending growth in real terms at an average of 0.7 per cent a year.” This fooled Fleet Street, fooled the Tories, fooled me. But it didn’t fool Gemma Tetlow, a research economist at the IFS whose briefing I’ve just come back from. Here is the scam she unearthed.
The slowdown in spending growth from 1.1% to 0.7% was only current spending, which masked a 17% cut in what the Treasury categorises as “investment” spending (ie, roadbuilding etc). Put the two together, and total spending is being cut (yes, cut) by 0.1% in real terms from 2011-12 to 2013/14. Now, debt interest payments will be up 8.4% in that timeframe – so other budgets will have to fall by 0.6%. Except social security bills can’t fall, so on cautious estimates Tetlow reckons there will be an average 2.3% cut (yes, cut) a year across other government departments each year over this three-year period likely to be covered by the 2010 Spending Review.
This is a crucial departure. Labour can no longer go on about “Tory cuts” – they are cutting, and significantly – but still nowhere near enough to balance the books. The Tories need no longer fear the cuts debate. Danny Finkelstein can sit down with John Redwood and decide which cuts can go where. The Treasury has finally yielded to the 72 percent of the public who want cuts. Except Darling obviously thought he’d keep this secret.
The sheer deception is breathtaking, and pointless. Is it really too much to ask for a Chancellor in a recession not to hide behind the technical meaning of “current spending” and admit that public service budgets are being cut and substantially? But he may have gotten away with it had it to been for Gemma Tetlow, who charitably offered the suggestion yesterday that “there is a gap in the Treasury’s lexicon where the word ‘cut’ should be.” This gap is in Westminster’s lexicon too. But, I suspect, not for much longer.
P.S. Crucially, the cuts are scheduled for the Tory years, whereas (as I revealed yesterday) this year is a mammoth rocket boostered pre-election surge – spending in 2009-10 will increase more than any other Labour year. So Brown is taking the St Augustine view: give me fiscal discipline, but not yet.
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