Fraser Nelson

Those hidden cuts in full

Those hidden cuts in full
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The truth about the Pre-Budget Report was revealed today by the Institute for Fiscal Studies: the new National Insurance tax will hit everyone on £14k or over, not £20k - and there are implied 19 per cent cuts of some £40 billion in the “non-protected” areas. The event was sold out, because it now has the reputation as the only place you learn the truth about Budgets passed by this government. Yet again, Gemma Tetlow from the IFS has unearthed the cuts which the Chancellor felt he had to conceal from the public (and – unwittingly, I hope - lied about this morning on the radio). Coffee House showed you yesterday that the spending totals from April 2011 onwards would be flat – but that doesn't include soaring debt interest and the cost of dole bills. Factoring them in is hard, but the IFS have a model of doing so. The result shows £35.7 bn of cuts over a three-year period: £15.4bn in year one, £7.6bn in year two, £12.9bn in year three. Here’s Gemma’s graph:

 

 

Now, let’s remember that Darling (again, I like to think, under duress) promised to protect “frontline schools” – whatever they may be – hospitals etc. This would mean that non-protected spending would be cut by 6.4 per cent each year for the two-year period (ie, 12.3 percent cut over those two years). Again, Gemma’s chart tells it all:

 

 

And if you extend this for a third year, says Tetlow, 19 percent is the “cumulative cut required for other DELs (by 2013-14) if you continue to protect health, schools, ODA, sure start for a third year. This amounts to about £40bn in real terms”.

 

The pain, she says, will likely be felt in defence, unis, transport, housing. Short of dissolving the army and opening the prisons, I’m not sure how Darling would achieve this. Neither is he. Neither is anyone. But his claim that there would not be any cuts to government departments today lies in tatters.

 

NERDY POSTSCRIPT – HOW DARLING MANAGED TO CONCEAL ALL THIS: He spoke about “current spending” in his PBR speech – and this rises by an average 0.8 percent over the three-year period. But “investment” plunges by 19 percent a year (yes, per year) over the same period. He didn’t say this, or print spending totals in the Budget. Strange, you might think, that he does not do spending totals: if you know the component parts, you can add them up as Coffee House did yesterday. The Treasury spin operation wants journalists to tell readers only about “current spending” – so by giving them only one spending figure, it hopes to spin them this way.

 

The all-important Total Managed Expenditure (TME), reported by precisely zero newspapers this morning, shows spending frozen in real terms. But even this is not the real story as it doesn’t allow you to work out the cuts: and if it were not for the IFS, perhaps no one would. But you can guess the dole/interest costs: working out gilt yields, debt requirement, making a rule-of-thumb projections for the 5.8 million people claiming benefits etc. The IFS did this after the April budget, which showed a 2.9 percent cut across departments or 7 percent a year (which, if health were protected, would be 10 percent cut a year - hence the Tory 10 percent cut figure). The IFS calculates there are deeper cuts this year, mainly due to an upwards revision in expected dole bill.