In his speech on public-service reform yesterday, David Cameron attempted to assuage fears over the coalition’s spending cuts. He said:
[When] we’re done with these cuts, spending on public services will actually still be at the same level as it was in 2006. We will still be spending 41 per cent of our GDP on the public sector.
The Prime Minister’s words were deceptive on two levels. First, he omitted to mention that this represents a reduction of more than 6 per cent of GDP (see table B2). Under Margaret Thatcher, spending fell by an equivalent amount (from 45.1 per cent of GDP to 39.2 per cent) but over 11 years, not five. Even then, the fall was largely due to economic growth, not spending cuts.
As I’ve pointed out before, during the Iron Lady’s time in office, spending rose by 1.1 per cent a year on average – the reason why it was so absurd for Nick Clegg to vow that there would be no return to the “savage cuts” of the 1980s.
Cameron was also wrong to claim that spending will be 41 per cent of GDP “when we’re done with these cuts”. True, spending will be 41.8 per cent in 2013-2014 but, as the graph below shows, it will fall again to 40.4 per cent in 2014-2015 and to 39.3 per cent in 2015-2016. Thus, the Prime Minister hid additional spending reductions of nearly 2 per cent of GDP. After the coalition’s programme of cuts is complete, spending will actually be at the same level as it was in 2004, not 2006.
Another significant detail is that the government’s spending cuts are permanent, not temporary. When asked by a Fire Brigade worker last summer if funding would be restored once the deficit has been addressed, Cameron replied:
The direct answer to your question, should we cut things now and go back later and try and restore them later, [is] I think we should be trying to avoid that approach.
The Prime Minister’s insistence that we should try to “avoid that approach” reveals an ideological attachment to the small state and to low levels of spending. The result will be permanently shrunken public services. Cameron is free to argue for this position, but next time he should do so on the basis of fact, not myth.
UPDATE: I should have pointed out that spending under Thatcher reached a peak of 48.1 per cent in 1982-83 before falling to 38.9 per cent in 1988-89, a reduction of 9.2 per cent, larger than the 8.1 per cent reduction planned by the coalition. But my substantive point stands: Cameron is hiding the true extent of the cuts.