There's a lot of talk going on at the moment about how severe the cuts outlined in the Comprehensive Spending Review (CSR) are actually going to be. City AM's Allister Heath, the Centre for Policy Studies, John Redwood, and Dominic Lawson have all suggested that the cuts are set to be rather modest. ConsevativeHome's Tim Montgomerie disagrees, saying that the government's cut really are going to hurt and that the right is making a mistake by pretending otherwise. So what's the real story? I've put together a short, opinion-free briefing that aims to answer this question, by examining the spending totals outlined in June's Emergency Budget. My conclusion is reproduced below, but if you want to see my tables and graphs, you can click here for a PDF.
An unbiased assessment of the spending totals outlined in the Emergency Budget allows us to say the following about what is going to happen to public spending over the next five years. In constant 2010-11 prices (assuming 2 percent a year inflation):
- Total Managed Expenditure will go down by 1.5 percent.
- Departmental Expenditure Limits will be cut sharply, by 12.6 percent.
- Annually Managed Expenditure, meanwhile, will rise by 11.8 percent.
- Current spending will rise very slowly, by a total 1.1 percent over the period.
- Capital spending will fall rapidly, by a total of 29.8 percent over the period.
The point of the Comprehensive Spending Review is to divide up the total figure for Departmental Expenditure Limits between the various government departments, and to outline the policy measures that will be undertaken to keep spending within those limits.
The ring-fencing of Health and International Development, and the semi-protected status of Education and Defence, means that much more significant cuts will have to be made to the Departmental Expenditure Limits of other departments. Policy Exchange's Andrew Lilico has suggested an average cut of 33 percent.
However, it is important to remember that cuts in Departmental Expenditure Limits will largely be counter-balanced by rises in Annually Managed Expenditure. The fall in total spending will be correspondingly modest. It is also important to bear in mind that the focus of the overall cuts will be on capital expenditure. The noticeable impact on the average public service user will therefore be limited.
Finally, it may be that the fairest measure on which to assess the coalition government’s spending plans is that of Total Managed Expenditure excluding debt interest payments. On this basis, public spending will fall by 4.2 percent over the five years to 2015-16. Whatever we hear about particular cuts to specific spending areas on Wednesday, this is the overall figure to keep in mind.
