Plans go far beyond even what fiscal conservatives would view as strictly necessary. Photo: Getty
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Planned spending cuts go far beyond what is needed to end borrowing

The big news is what George Osborne didn’t mention.

Growth is up this year – but in return will be lower than expected in previous years. Tax receipts have disappointed, and have been revised downwards in the coming years too. This much was generally expected. But the good news is George Osborne is still on track. Statistical revisions this year have helped a bit. Lower than expected interest payments have helped a lot.

The coalition plan is still in line with the Conservatives’ mission to eliminate borrowing by 2018-19. Public sector debt is expected to start falling in the middle of the next parliament. But to keep up with borrowing targets when taxes are looking weak, more cuts are being pencilled in – from 2016-17 to 2018-19, departmental spending is being squeezed even further than previously expected, by around £5.8bn a year on average.

But there is more going on here than simply some extra cuts being pencilled in (yet again) to ensure that the public finances stay on track to meet the fiscal targets.

Not mentioned in the Chancellor’s speech, but quickly apparent from the OBR’s report is that the current government is planning spending cuts that would go far beyond what is needed to eliminate borrowing. Although borrowing will have turned into a surplus by 2018-19, the OBR’s figures show that the current government plans to keep cutting beyond that, to create an overall annual surplus – after including investment as well as day-to-day spending – of over £23bn by the end of the next parliament.

Compared to holding departmental spending flat as a share of GDP, that amounts to a cut of £14.5bn. The result is that the government is now only 40 per cent of the way through its cuts to departmental spending, with the OBR expecting the remaining 60 per cent to come after the election.

What exactly are the Conservatives trying to achieve here? Their plans appear to go far beyond even what fiscal conservatives would view as strictly necessary. Even their plan to entirely eliminate borrowing, including borrowing to fund investment that boosts growth, is questionable.

IMF research shows that government investment, such as spending on infrastructure, can raise GDP with no overall rise in public debt. So a target to entirely eliminate borrowing for investment makes little economic or fiscal sense. And given that we have somehow managed to reduce government interest payments whilst debt is still increasing suggests that now is still an excellent time to borrow for investment in growth.

The government has given the public no rationale for these extra cuts. As a proportion of GDP, government spending is being taken back to the level last since in 1938. If there was room for doubt before, there appears to be little now. A dramatically smaller state, not fiscal credibility, is the real goal here.

Nida Broughton is Chief Economist at the Social Market Foundation

Nida Broughton is Senior Economist at the Social Market Foundation.

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Appreciate the full horror of Nigel Farage's pro-Trump speech

The former Ukip leader has appeared at a Donald Trump rally. It went exactly as you would expect.

It is with a heavy heart that I must announce Nigel Farage is at it again.

The on-again, off-again Ukip leader and current Member of the European Parliament has appeared at a Donald Trump rally to lend his support to the presidential candidate.

It was, predictably, distressing.

Farage started by telling his American audience why they, like he, should be positive.

"I come to you from the United Kingdom"

Okay, good start. Undeniably true.

"– with a message of hope –

Again, probably quite true.

Image: Clearly hopeful (Wikipedia Screenshot)

– and optimism.”

Ah.

Image: Nigel Farage in front of a poster showing immigrants who are definitely not European (Getty)

He continues: “If the little people, if the real people–”

Wait, what?

Why is Trump nodding sagely at this?

The little people?

Image: It's a plane with the name Trump on it (Wikimedia Commons)

THE LITTLE PEOPLE?

Image: It's the word Trump on the side of a skyscraper I can't cope with this (Pixel)

THE ONLY LITTLE PERSON CLOSE TO TRUMP IS RIDING A MASSIVE STUFFED LION

Image: I don't even know what to tell you. It's Trump and his wife and a child riding a stuffed lion. 

IN A PENTHOUSE

A PENTHOUSE WHICH LOOKS LIKE LIBERACE WAS LET LOOSE WITH THE GILT ON DAY FIVE OF A PARTICULARLY BAD BENDER

Image: So much gold. Just gold, everywhere.

HIS WIFE HAS SO MANY BAGS SHE HAS TO EMPLOY A BAG MAN TO CARRY THEM

Image: I did not even know there were so many styles of Louis Vuitton, and my dentists has a lot of old copies of Vogue.

Anyway. Back to Farage, who is telling the little people that they can win "against the forces of global corporatism".

 

Image: Aaaaarggghhhh (Wikipedia Screenshot)

Ugh. Okay. What next? Oh god, he's telling them they can have a Brexit moment.

“... you can beat Washington...”

“... if enough decent people...”

“...are prepared to stand up against the establishment”

Image: A screenshot from Donald Trump's Wikipedia page.

I think I need a lie down.

Watch the full clip here:

Stephanie Boland is digital assistant at the New Statesman. She tweets at @stephanieboland