The news media are so full of reportage about George Osborne’s Spending Review of Wednesday 26th June (like in the Guardian newspaper, The Telegraph newspaper, or BBC News or Channel 4 online or that anyone could be forgiven for thinking that government departmental spending is to be slashed by up to 10 per cent tomorrow. That is not the case. The Spending Review published on 26 June is for the year 2015/16 and is (as has been reported) at least as much politics as economics – the Conservative party particularly seeking to paint the Labour party into a corner.
Be that as it may, the politics described by the economics within both the document and the Chancellor’s speech deserve our attention, outlining as they do an approach to people, society, and the state.
The full document laid before Parliament describes a range of changes to both the AME or Annual Managed Expenditure (expenditure on items which are primarily demand-driven such as debt interest, pension payments, and welfare spending – among other things) and the DEL or Departmental Expenditure Limits (spending on such things as defence, health, education, etc – which are more easily predictable over a three-year spending review cycle.)
The ‘winners’ and ‘losers’ tell their own tale: These departments (among others) can expect a near-10 per cent cut – Cabinet Office, Communities & Local Government, Energy & Climate Change, Environment & Rural Affairs, Justice, and even the Treasury; while other departments have been earmarked for cuts closer to 5 per cent – Business and HMRC. It is telling, on the other hand, that the Defence budget is to expect a 2 per cent reduction, while the Intelligence Agencies MI5, MI6 and GCHQ are to expect a 3 per cent increase.
Politics, as the politicians remind us at every turn, is about making choices.
Talk of an AME of £745bn overall, or cuts of £11.5bn across Whitehall understandably makes ones eyes water. Perhaps the impacts on people make more sense. The Treasury has helpfully, therefore, published a report on the distributional impacts on households by income quintile.
This report demonstrates that while the greatest impact will, indeed, fall on the richest fifth (those with the broadest shoulders,) the next-hardest-hit is the poorest fifth of the population. Much more dependent on ‘benefits in kind’ (such as public health or education,) it is those at the bottom of the income distribution who (will) suffer most from public spending cuts.
Anticipating some of the impacts of the spending review, the Resolution Foundation published a deeply discouraging report ‘Narrowed Horizons’ on ‘the fiscal choices.’
Politics are, indeed, a matter of choices. Some may be more difficult than others, and some may be more obvious than others. Let’s not pretend, however, that all politicians – of whatever hue – are the same.
They make their choices, and we have to make ours.
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