Why Osborne's cuts aren't "soft"

The misleading claim that Osborne is only cutting spending by one per cent a year.

Supporters of George Osborne's economic strategy have made it their mission to convince the world that his cuts are not harsh, savage or draconian but are in fact "soft", "mild" and "insignificant". It's a smart tactic designed to make Labour's opposition to the cuts look hysterical and economically deluded.

The most prominent and articulate exponent of this view is Spectator editor Fraser Nelson. In a blog published yesterday, he wrote: "Osborne's cuts aren't harsh or drastic: they're mild and probably insufficient. There's almost no organisation on the planet that agrees with Balls that cuts of less than 1 per cent a year are too harsh and too fast -- he ends up looking like a loser."

Nelson's figures aren't wrong - Osborne really is cutting spending by just 0.6 per cent this year and by just 3.7 per cent across this Parliament. But they are deeply misleading. The figure for total cuts includes non-discretionary spending such as welfare benefits (the "automatic stabilisers" Osborne recently referred to) and debt interest, masking the true extent of the coaliton's squeeze on public services.

The Treasury table below, which looks at departmental spending in isolation, shows what all the fuss is about. The Home Office is being cut by 25 per cent (see the final column). Education is being cut by 11 per cent. Transport is being cut by 15 per cent. The Foreign Office is being cut by 28 per cent.

The total cut to departmental spending is 11 per cent, the largest, as the IFS has noted, since 1945. If we strip out the NHS and International Development - the ring-fenced departments - the total cut is 19 per cent.

I should add that higher inflation means that the cuts will be even worse. The NHS, for instance, which was due to receive a small real-terms increase, will now suffer a small real-terms cut (the reason why it was so foolish for Cameron to "guarantee" last week that spending would rise).

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Another tactic beloved of the right (most notably John Redwood) is to point out that spending, in defiance of Osborne's cuts, continues to rise. Gordon Brown's government spent £50.6bn in May 2010 but Cameron's splashed £54.1bn last month. What's more, the latest Treasury figures show that total state expenditure, which stood at £669.7bn in 2009-10, will be £743.6bn by 2014-15. The cuts are all in the left's head.

But the claim that the cuts are mythical is only achieved by the old trick of measuring public spending in cash terms, rather than as a percentage of GDP. The latter is by far the more sensible measure. At times of economic expansion, it is only reasonable to assume that some of the proceeds of growth will go towards improving public services, and public-sector inflation is typically higher than the average growth in prices.

If we look at public spending as a proportion of GDP, the true picture emerges. The cuts will reduce public spending from 47.6 per cent of GDP in 2010/11 to 41.0 per cent in 2014/15. For many on the right, this is still an unacceptably high level of expenditure. But one can hardly deny that it represents a substantial reduction in the scope and size of the state's activities.

Rather than hiding behind misleading figures, it would be more intellectually honest of the right to make the case for Osborne's cuts, red in tooth and claw. Once the coalition's squeeze is complete, their statistical conjury won't fool anyone.

George Eaton is political editor of the New Statesman.

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Cabinet audit: what does the appointment of Andrea Leadsom as Environment Secretary mean for policy?

The political and policy-based implications of the new Secretary of State for Environment, Food and Rural Affairs.

A little over a week into Andrea Leadsom’s new role as Secretary of State for Environment, Food and Rural Affairs (Defra), and senior industry figures are already questioning her credentials. A growing list of campaigners have called for her resignation, and even the Cabinet Office implied that her department's responsibilities will be downgraded.

So far, so bad.

The appointment would appear to be something of a consolation prize, coming just days after Leadsom pulled out of the Conservative leadership race and allowed Theresa May to enter No 10 unopposed.

Yet while Leadsom may have been able to twist the truth on her CV in the City, no amount of tampering will improve the agriculture-related side to her record: one barely exists. In fact, recent statements made on the subject have only added to her reputation for vacuous opinion: “It would make so much more sense if those with the big fields do the sheep, and those with the hill farms do the butterflies,” she told an audience assembled for a referendum debate. No matter the livelihoods of thousands of the UK’s hilltop sheep farmers, then? No need for butterflies outside of national parks?

Normally such a lack of experience is unsurprising. The department has gained a reputation as something of a ministerial backwater; a useful place to send problematic colleagues for some sobering time-out.

But these are not normal times.

As Brexit negotiations unfold, Defra will be central to establishing new, domestic policies for UK food and farming; sectors worth around £108bn to the economy and responsible for employing one in eight of the population.

In this context, Leadsom’s appointment seems, at best, a misguided attempt to make the architects of Brexit either live up to their promises or be seen to fail in the attempt.

At worst, May might actually think she is a good fit for the job. Leadsom’s one, water-tight credential – her commitment to opposing restraints on industry – certainly has its upsides for a Prime Minister in need of an alternative to the EU’s Common Agricultural Policy (CAP); a policy responsible for around 40 per cent the entire EU budget.

Why not leave such a daunting task in the hands of someone with an instinct for “abolishing” subsidies  thus freeing up money to spend elsewhere?

As with most things to do with the EU, CAP has some major cons and some equally compelling pros. Take the fact that 80 per cent of CAP aid is paid out to the richest 25 per cent of farmers (most of whom are either landed gentry or vast, industrialised, mega-farmers). But then offset this against the provision of vital lifelines for some of the UK’s most conscientious, local and insecure of food producers.

The NFU told the New Statesman that there are many issues in need of urgent attention; from an improved Basic Payment Scheme, to guarantees for agri-environment funding, and a commitment to the 25-year TB eradication strategy. But that they also hope, above all, “that Mrs Leadsom will champion British food and farming. Our industry has a great story to tell”.

The construction of a new domestic agricultural policy is a once-in-a-generation opportunity for Britain to truly decide where its priorities for food and environment lie, as well as to which kind of farmers (as well as which countries) it wants to delegate their delivery.

In the context of so much uncertainty and such great opportunity, Leadsom has a tough job ahead of her. And no amount of “speaking as a mother” will change that.

India Bourke is the New Statesman's editorial assistant.