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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How Labour risks becoming a party without a country

Without establishing the role of Labour in modern Britain, the party is unlikely ever to govern again.

“In my time of dying, want nobody to mourn

All I want for you to do is take my body home”

- Blind Willie Johnson

The Conservative Party is preparing itself for a bloody civil war. Conservative MPs will tell anyone who wants to know (Labour MPs and journalists included) that there are 100 Conservative MPs sitting on letters calling for a leadership contest. When? Whenever they want to. This impending war has many reasons: ancient feuds, bad blood, personal spite and enmity, thwarted ambition, and of course, the European Union.

Fundamentally, at the heart of the Tory war over the European Union is the vexed question of ‘What is Britain’s place in the World?’ That this question remains unanswered a quarter of a century after it first decimated the Conservative Party is not a sign that the Party is incapable of answering the question, but that it has no settled view on what the correct answer should be.

The war persists because the truth is that there is no compromise solution. The two competing answers are binary opposites: internationalist or insular nationalist, co-habitation is an impossibility.

The Tories, in any event, are prepared to keep on asking this question, seemingly to the point of destruction. For the most part, Labour has answered this question: Britain will succeed as an outward looking, internationalist state. The equally important question facing the Labour Party is ‘What is the place of the Labour Party in modern Britain?’ Without answering this question, Labour is unlikely to govern ever again and in contrast to the Tories, Labour has so far refused to acknowledge that such a question is being asked of it by the people it was founded to serve. At its heart, this is a question about England and the rapidly changing nature of the United Kingdom.

In the wake of the 2016 elections, the approach that Labour needs to take with regard to the ‘English question’ is more important than ever before. With Scotland out of reach for at least a generation (assuming it remains within the United Kingdom) and with Labour’s share of the vote falling back in Wales in the face of strong challenges from Plaid Cymru and UKIP, Labour will need to rely upon winning vast swathes of England if we are to form a government in 2020.

In a new book published this week, Labour’s Identity Crisis, Tristram Hunt has brought together Labour MPs, activists and parliamentary candidates from the 2015 general election to explore the challenges facing Labour in England and how the party should address these, not purely as an electoral device, but as a matter of principle.

My contribution to the book was inspired by Led Zeppelin’s Physical Graffiti. The track list reads like the score for a musical tragedy based upon the Labour Party from 2010 onwards: In My Time of Dying, Trampled Underfoot, Sick Again, Ten Years Gone. 

Continued Labour introspection is increasingly tiresome for the political commentariat – even boring – and Labour’s Identity Crisis is a genuinely exciting attempt to swinge through this inertia. As well as exploring our most recent failure, the book attempts to chart the course towards the next Labour victory: political cartography at its most urgent.

This collection of essays represents an overdue effort to answer the question that the Party has sought to sidestep for too long.  In the run up to 2020, as the United Kingdom continues to atomise, the Labour Party must have an ambitious, compelling vision for England, or else risks becoming a party without a country.

Jamie Reed is Labour MP for Copeland.