The Spectator

The madness of ring-fencing government spending.

As ministers trooped one by one into George Osborne’s office last week for negotiations over the Spending Review, most looked pretty grim, steeling themselves against news of cuts to come. But three more cheerful figures stood out: the Secretaries of State for Health, Education and International Development. Their budgets, which between them account for more than a third of public spending, have been ring-fenced, with the result that the Chancellor is left scratching around elsewhere to hit his target of reducing spending by £11.5 billion.

And although £11.5 billion sounds like a lot of money, in the context of what’s needed, it is a pitifully small gesture. Three years after an ‘austerity budget’, the government is not overspending by just £11.5 billion a year; it is splurging nearly £130 billion a year more than it receives in revenue. The scale of the problem should be far too great for any budget to be ring-fenced, let alone the budgets of Health and Education — two of the biggest-spending departments.

So what could the Chancellor be thinking? It’s inconceivable that he has been through the Health and Education budgets line by line and concluded that there is no fat to be trimmed. He might have at least queried the fact that 7,800 NHS staff are being paid more than £100,000 a year.

The decision to ring-fence Health and Education is, of course, raw politics. The Chancellor, who is keener on political campaigning than economics, has studied the Tony Blair manual to attaining and keeping power and has come to the conclusion that there are two things — schools and hospitals — that the electorate minds more about than any other. The government must therefore, he thinks, avoid at all costs being accused of ruthlessness or, God forbid, not ‘caring’.

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