We're hearing a lot about the £81bn of 'cuts' identified in the Comprehensive Spending Review, so you'd be forgiven for thinking that spending is going to fall by £81bn. But that isn't the case at all, as p.78 of the CSR document makes clear:
The Spending Review sets out the Government’s plans to cut £81 billion from TME by 2014-15 as set out in Table A2. This figure is calculated in comparison to the level of spending if DEL had grown in line with inflation and AME had followed the Office of Budget Responsibility’s forecast with no policy changes.
Essentially this means that the government starts by assuming that one half of public spending, departmental expenditure limits, will go up by 10 percent over the next five years, while the other half, annually managed expenditure, will rise by 23 percent. Any deviation from the growth is called a cut.
This strikes me as a peculiar and rather dishonest approach, which obviously makes it much more difficult to 'sell' any reductions in public spending. Then again, I guess that's probably the point.
