Political Promise

The 2010 Spending Review: Initial Thoughts

In Newswire on October 20, 2010 at 1:16 pm

Allan Edgar shares his thoughts on the Comprehensive Spending Review.

The coalition governments spending review marks, once again, a new chapter in British society. The public will once again be asked to draw in their belts and prepare themselves for an indeterminable time of lean public spending.

Chancellor of the Exchequer George Osborne began the most severe spending review by highlighting the three principles by which his government have arrived at their conclusions; reform, fairness and growth. The debate over the spending review will continue in the next few days, week and months. Initially however, the budget has managed few surprises and the ‘ringfencing’ promised for the NHS and Education has been, on the whole, largely kept.

However ‘the deepest cuts in living memory’ as described by shadow chancellor Alan Johnson will see a predicted personnel loss of 490’000 in the public sector over the current parliamentary term. Most departments, excluding only the NHS, have seen their budgets slashed. This includes the treasury budget being slashed by 33%, 7.1% a year from local councils, 8% defense savings as disastrously announced yesterday, from a PR perspective, and 6% a year each from the Home Office and the Ministry of Justice. Moreover, 7 billion will be taken from the welfare budget and the Queen will see a 14.1% decrease in royal household expenses as she enters another recession on the throne.

Perhaps the departmental winners, relatively, are the police who will see only a 4% budget decrease, education which will see only a 1% decrease and the flagship policy of ringfencing the NHS. In spite of this however, the NHS has seen its worst financial settlement since the early 1980’s and a leading police chief has insisted that there is no doubt there will be few police on the streets in the next few years.

Arguably the most important facet of the review however and indeed the task of the coalition government is to stimulate the private sector in order to compensate for the huge loss in personnel which the public sector will experience over the next few years. With an average budget decrease of 19% per department, as opposed to the widely expected 20%, private enterprise will have a big responsibility to generate tax revenues for the treasury and bring unemployment down with 7.7% currently employed; increasingly likely to rise and even nearing the levels seen at the time of the miners strike in the 1980’s.

Moreover, the temptation to score political points by hitting the banks has been avoided or at least deferred until the independent commission on banking reports next year. Each department is to report next month on proposals for reform and how it intends to operate with the decreased budgets and will perhaps give indication of how quickly redundancies will come.

As the debate begins on the review, the reaction by shadow chancellor Alan Johnson should highlight how Miliband’s Labour Party intend to maintain their opposition to cuts as reiterated by Alistair Darling this morning. They will no doubt disagree with the assertion that reform, fairness and growth guided the spending review.

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