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those-savage-cuts-in-full

Given the fuss the unions are making, you would be forgiven for thinking that the coalition government’s planned public spending cuts are every bit as swingeing as the BBC would have us believe. But the actual figures from the emergency budget do not bear this out. Let’s look at Total Managed Expenditure (TME) first:

Year TME (£ bn) Nominal change (%) Real change (%)
2010-11 696.8    
2011-12 699.8 +0.43 -1.54
2012-13 711.0 +1.60 -0.39
2013-14 722.0 +1.55 -0.44
2014-15 737.5 +2.15 +0.14
2015-16 757.5 +2.71 +0.70

As this table shows, the government’s proposed cuts are pretty small beer. In nominal terms, spending will rise every year. In real terms (assuming 2 percent a year price inflation) this equates to small cuts in 2011-12, 2012-13 and 2013-14, followed by small rises in 2014-15 and 2015-16. Compared to the c.60% real terms public spending rise that took place under the previous government, this is, frankly, insignificant.

It is also fair to say that capital spending will bear the brunt of what little cuts do in fact take place:

Year Capex (£ bn) Nominal change (%) Real change (%)
2010-11 59.5    
2011-12 48.7 -18.5 -19.76
2012-13 46.5 -4.52 -6.39
2013-14 43.3 -6.88 -8.71
2014-15 44.9 +3.70 +1.66
2015-16 46.1 +2.67 +0.66

Current spending meanwhile (and almost all ‘vital, front-line public services’ fall into this category) will rise every year between now and 2015-16, even in real terms:

Year Current Ex. (£ bn) Nominal change (%) Real change (%)
2010-11 637.3    
2011-12 651.1 +2.17 +0.16
2012-13 664.5 +2.06 +0.06
2013-14 678.6 +2.12 +0.12
2014-15 692.7 +2.08 +0.08
2015-16 711.4 +2.70 +0.69

Now, OK, these are not exactly big rises – but nor are they swingeing cuts that will (a) have any significant effect on the economy or (b) on the public services-using population at large. What the coalition’s spending plans really amount to is a five-year, real terms freeze of current expenditure, combined with three years of significant falls in capital expenditure. The overall impact of that is a a very small, real terms drop in TME (roundabout 1.5%) between now and 2015-16.

I guess I can see why this would upset the public sector unions, who have grown used to the endless bread and circuses delivered by Gordon Brown’s shameless profligacy. But everyone else needs to take a deep breath, look at the numbers, and then calm down.