The leaked 'cuts'


Westminster is very excited about the recent leak from HM Treasury, which apparently revealed that – despite its repeated statements to the contrary – the government is planning to cut public spending by a cumulative 9.3 percent from 2011 to 2014. But is that really what the leaked documents suggest?

Well, up to a point. It is true that total departmental expenditure limits (DEL) will fall by 9.3 percent in real terms over that period. Look at this in cash terms though, and it just means departmental spending is going to fall from £390.5bn in 2010-11 to £386.3bn in 2013-14. And that's difficult to get excited about.

Moreover, departmental expenditure limits only represent part of public spending – about 58 percent of it in 2009-10. The real story in the Treasury's leaked figures is what's happening to the other parts of public spending. As the Institute of Fiscal Studies' Robert Chote wrote in The Times:

...the Treasury expects debt interest payments to rise by 11.1 per cent a year, social security costs by 1.4 per cent a year and other “annually managed expenditure" (such as public sector pension payments and contributions to the EU) by 3.1 per cent a year.

The result of this is that total public spending – surely the figure we should be most concerned with – is set to rise from £620bn this year to £760bn in 2013-14, when we will still be running an annual deficit of almost £100bn.

Of course I'm happy that politicians are finally talking about cutting public spending, but if they imagine that these so-called 'cuts' will be enough then they've got another think coming. Vince Cable seems to realize this – his recent paper for Reform suggested up to £112bn of cuts over the course of the next parliament. George Osborne and Alistair Darling have some catching up to do.