History offers no route-map: these spending cuts have no precedent
Glen O'Hara |
George Osborne's emergency Budget is the most important statement of a new governing ideology since James Callaghan's famous renunciation of Keynesian economics at the 1976 Labour Party Conference. In particular, the scale of the public sector cuts ahead are staggering - even to historians used to analyzing the roller-coaster of twentieth century economic growth. The next four years will see public sector spending fall by 25 per cent in real terms, outside of the NHS and the international aid budget. It may be that this proves impossible to achieve: and four incidents in the twentieth century demonstrate the scale of the challenge ahead. Three periods of public spending restraint - the 'Geddes Axe' of 1922-23, the years following the IMF loan of 1976, and the Conservatives' deficit reduction in the early 1990s - are all relevant here. But in none of those cases was the spending reduction more than nine per cent (the 'Geddes Axe', which aimed to achieve 20 per cent); the other two periods saw public spending fall by around five per cent. The Swedish and Canadian experiments of the 1990s have been closely studied in the Treasury, but it is also clear, fourth and last, that those planned spending reductions were nowhere near as draconian as the UK's new strategy, and took place over two parliaments, not one. The British fiscal experiment of 2010-14 is much, much tougher than any of these examples.
It is worth specifying what the 25 per cent figure will mean. In departments that have not been ring-fenced, spending on education would fall by £21bn; on transport by £6.5bn; at the Ministry of Defence, by £11bn; and at Business, Innovation and Skills, by perhaps £5bn. Cuts on this scale might mean, for instance, school closures, a halt to the Government's Academy drive, an end to railway subsidies, tolls on Britain's motorways, the abolition of regional economic support, or even, if the Government was to be taken at its word, the theoretical abolition of one of Britain's armed forces. Choosing whether to dissolve the Army, Navy or Air Force entirely would be a tough choice indeed. This level of public sector austerity might also be equivalent to closing or merging a swathe of Britain's universities - particularly those in England - with the greatest pain felt in the high-cost, research-intensive and prestigious Russell Group Universities. The economic and social repercussions of today's budgetary gamble will be with us for many decades to come. All in all, history now offers us no route-map, for the coalition has launched out onto unprecedented reductions in public spending that have the potential to fundamentally reshape our national life in almost every way. It is still difficult to conceptualise how shocking those changes will seem. That situation will not last much longer.Please note: Views expressed are those of the author.
See also: An ill-starred chamber