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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Stop pretending an independent Scotland couldn't join the EU

The SNP has a different set of questions to answer. 

"But Spain", is the common response to a discussion of whether, by voting for independence, Scotland could effectively reverse Brexit. "Disaster for Sturgeon as Spain BACKS May over plans to block Scottish independence vote," declared the Brexiteer's favourite, The Express, this month. Spain, according to this narrative, would unilaterally puncture the SNP's bubble by vetoing readmission to the EU. An independent Scotland would be cast adrift into the North Sea.

I just don't buy it. I have put this question to everyone from former EU member state ambassadors to the former World Trade Organisation head and the answer has been the same: "It can be managed." 

There is also a crucial difference between Spain vetoing Scotland entering the EU, and considering its application on its own merit. Spain is indeed nervous about encouraging Catalonian separatists. But read between the lines. Spain's position on Scotland has so far been to say it would have to exit the EU, become independent and reapply. 

Last time I checked, that's not a veto. And from an EU perspective, this isn't as arduous as it might sound. Scotland's regulations would be in line with EU regulations. It would not upset the balance of power, nor fuel an identity crisis, in the way that Turkey's application did. Spain could justify acquiesence on the basis that the circumstances were extraordinary. And for a club struggling to hold together, an eager defector from the renegade Brexit Britain would be a PR coup. 

Where it is far more arduous is for the Scottish National Party, and the independence movement. As I've written before, roughly a third of SNP voters also voted Leave. Apart from the second-glass-of-wine question of whether quitting one union to join another really counts as independence, Scotland's fishing industry has concrete concerns about the EU. SNP MP Joanna Cherry has observed that it is "no secret" that many Leave voters worked in fishing. 

Then there are the questions all but the most diehard Remain voters will want answered. Would Scotland take the Euro? Would a land border with England be an acceptable sacrifice? Would an independent Scotland in the EU push for reforms at Brussels, or slavishly follow bureacracy's lead? The terms of EU membership for an independent Scotland may look quite different from those enjoyed by the UK.

Rather than continuing to shoot down the idea that an independent Scotland could join the EU - a club happy to accept other small countries like Ireland, Austria and Malta - opponents of the Scottish independence movement should be instead asking these questions. They are far harder to answer. 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.