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9 March 2015

“Public spending was 35% under you!“ How Labour plans to rebut this Tory attack

The low point in 2000 pre-dated the government's spending increases for health and education. 

By George Eaton

Ed Balls attacked George Osborne’s planned cuts with vintage relish at his RSA speech this morning. Late in the parliament, the OBR’s finding that the Tories’ programme would mean public spending falling to its lowest level as a share of GDP since 1930s has gifted the shadow chancellor a classic Brownite dividing line.

One of the Conservative ripostes to this is that spending stood at a similar level under Labour in 2000 (35.9 per cent) when Balls was in the Treasury as Brown’s chief economic adviser. “[The] world didn’t cave in then,” they tweeted earlier. But Balls’s team are ready to counter this charge. As one aide pointed out to journalists after the speech, this low point came after Labour had stuck to the Tories’ spending plans for two years and before the heavy spending on the NHS and other areas. The world may not have caved in but, he noted, voters were demanding to know when the health service would finally recive the resources it needed (with Tony Blair memorably providing the answer on the Frost programme in 2000). Public spending subsequently rose to more than 40 per cent by 2004-05. The key point is that 35 per cent was an anomaly, a point in the trajectory. Are the Conservatives arguing that Labour was wrong to spend the money it did on health and education? Another reason why public spending briefly fell to this level is that, at that time, the economy really was going gangbusters

The Tories have responded by highlighting their commitment to protect health spending. But this only invites the question that Balls posed earlier. Since under the current plans, three government departments (the Foreign Office, the DWP and Transport) would cease to exist (“insofar as their day-to-day budgets are concerned”), is it really conceivable that Osborne will deliver his programme? Balls suggested that he would be forced to cut NHS spending and/or introduce patient charges and raise VAT (as he did in 2010, having similarly insisted that he had “no plans” to do so). The question now is whether Osborne will use his pre-election Budget next Wednesday to amend his plans. The current trajectory would result in a surplus of £23.1bn by 2019-20 but the Tories’ pledge is only to run some kind of surplus. Were Osborne to scale back his fiscal consolidation, Balls’s attack, though far from neutralised, would be weakened. 

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