Andrew Lilico

Undoing the spending of the last government

Undoing the spending of the last government
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In the table below, we consider how the budgets of various departments grew over the last Labour government. It spells out the very large rises in Health and Education (together, the rises in these two departments accounted for 61 percent of the total rise in departmental expenditure over the period). And we can see that other departments, such the Foreign Office, experienced cuts.

Then, in the later columns, we consider what percentage falls today’s cuts represent and what proportion of the total rises since 2004/5 they undo.  We see that the largest cuts fall on CLG communities, down by 7.3 percent, reversing 74 percent of the rises over the last Parliament.  Other departments experiencing cuts of 5 percent or more include Transport (reversing 65 percent of the rises since 2004/5), Work and Pensions (reversing 90 percent of the previous rises), and Environment, Food and Rural Affairs (which experienced a 5.3 percent cut in its budget even though that budget had actually fallen over the last Parliament).  Other notable losers were the Home Office and the Ministry of Justice (reversing 73 percent and 44 percent, respectively, of their increases over the last Parliament), and the FCO, and Chancellor’s Departments which each experienced material cuts even though their budgets had contracted over the past Parliament.

By contrast, where the spending had really gone up before, either there were no cuts at all or cuts were small.  Health and International Development had no cuts at all, whilst Education and Energy & Climate Change reversed only 4 percent and 5 percent of their rises over the past Parliament.  Of course, in Health, for example, many of the same efficiency savings were found as elsewhere, but the government chose to recycle these savings back into Health spending.

One point not often noticed is that one effect of the ringfence on Health is that the proportion of total spending accounted for by Health continues to rise as other departmental budgets are cut.  For example, before today, Health constituted 27.6 percent of total departmental spending for 2010/11. After today, it constitutes 28.0 percent.  It will be interesting to see how willing other departments are to see this process continue, as departments that have not experienced rises now start to experience large cuts, and the departments that previously experienced large rises continue to increase as a proportion of total spending.

Anyway, here's the table (click for a larger version):


Source: PESA 2009, except for BIS*, which we constructed from the BERR and IUS budgets.  Note that CLG Local Government is based from 2006/7 instead of 2004/5 for statistical reasons.  Note also that the Chancellors’ Department figure here excludes AME cuts and the Culture, Media and Sport figure excludes the Olympic Development Authority cuts.

Andrew Lilico is Chief Economist at Policy Exchange