Economic statistic of the week: how the cuts compare

Courtesy of a written answer in Parliament, we have a top-level comparison of how the previous Labour Government’s spending plans for the end of this Parliament compare with what the Coalition Government is now planning.

Against the benchmark of what public spending would have been if welfare rules and the like had been left unchanged and other public expenditure increased in line with inflation (i.e. DEL spending increased in line with inflation, AME spending based on no rule changes), Labour was planning to cut spending by £56 billion.

By contrast, the Coalition Government is planning to cut spending by £81 billion. The difference between these two figures is made up of:

Higher efficiency savings: £7 billion
Welfare and related savings: £18 billion
Lower national debt interest payments: £3 billion

… but also higher departmental spending (DEL) by the Coalition compared to Labour’s plans of £2 billion.

Two things strike me about this comparison. First, how much of the difference in spending plans comes down to welfare changes. Second, how little we still know about what Labour would cut. Under Labour’s plans, the non-welfare and related spending would have been slightly lower than the Government is planning and yet Labour now opposes many of the other cuts and changes. So quite what was Labour planning to cut?

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30 Comments

  • I can’t think of any single cut that Labour has actually supported. Their motto of opposition to cuts: “too hard, too fast” actually means “any at all”. The two Eds are fraudulent in the extreme, but people are saying they would vote for them because it is the easy way out just to carry on as before.

    I think it would serve Labour right if we produced a “shadow budget” showing the total extra spending their current posturing would have resulted in and the extra billions (tens of billions) of interest payments it would have caused.

  • JustAnotherVoter 25th Feb '11 - 9:14am

    “planning to cut spending by £81 billion”

    It annoys me whenever I see this figure quoted. It is a fantasy figure based on a fantasy projection of how much a fantasy government might have been spending in 2015. Which is in turn based on a fantasy projection of revenues, growth, and inflation.

    Planned spending is going from £696bn (2010-11) to £739.8bn (2014-15) in cash terms.

    Quote that, or quote the planned real-terms cuts to overall spending (about 11% over five years).

  • Can someone not do a computer game with all the choices available for spending cuts – a kind of `make your own labour budget?`

  • And still it goes on.

    Mark, Labour are not in power. No matter how much the Liberal Democrats try to frame the argument as “but Labour would have cut” the fact remains that:
    a) the Lib Dems campaigned on a platform of “Not as many cuts as the Tories and not as fast”
    b) That was dropped as soon as you went into Coalition
    c) The cuts are beginning to be seen by all but the Tory press as too much, too fast

    Labour don’t have to say what they would cut. They’re in opposition. The electorate doesn’t and wouldn’t care. You seem to have political blinkers on. The Tories in opposition didn’t give a single detail out as to what they would cut right up to and beyond election day. Why should Labour? And try to give an answer that doesn’t involve some sort of moral responsibility. This is politics, not the moral maze.

    I don’t understand what pieces like this are trying to say. It seems to be part of a collective attempt by the Lib Dems to deny to themselves that their own economic plans involve cuts. And cuts to welfare, including housing and disability benefits. It astounds me that the party has sunk so much since I left it – from a beacon of the Centre Ground and economic moderates to a party defending George Osborne’s every utterance.

    You can’t justify the economic course you’re on by saying “but Labour would cut too”. Its political suicide.

  • It doesn’t matter what Labor would do, they lost. The Coalition are in charge and they are responsible for whatever happens to the economy.

    It’s doing worse than they first thought.

    http://www.bbc.co.uk/news/business-12577154

    If the Lib Dems were convinced by Osborn’s economic arguments then they will be held just as responsible. Of course you could explain that coalition compromises, blah, blah, sniff of power, what can we do, etc then you’re just as responsible. The Lib Dem presence should have meant strong arguments for policies they believed were the correct course, despite Tory wishes, this capitulation and incompetence is proving a disaster for everyone but for Dave, George and their rich mates.

  • @cuse and @Dan in fact, a) is only partly correct. Whilst the ‘speed’ comment may be true, the amount [and ultimately speed too] is quite clearly defined by our manifesto as not bound by either political and dogmatic obsession with the state as either big or small, but rather on economic reality.

  • @g – I’ve just read the link.

    I seem to remember all the Coalitionists on thsi site saying “GDP estimates are always wrong – the 0.5% contraction will be revised up in January”.

    @Dan Falchikov. Taking people out of tax has nothing to do with cuts. Gideon’s balanced that by lowering the 40% threshold. I didn’t say Lib Dems are denying the need for cuts. I said that there seems to be collective denial that it is happening by trying to answer the “are cuts necessary” question with “Labour would have done it”. You mention polling evidence. I think you are the one advocating “wishful thinking” if you think your current 11-12% olling position is suddenly going to reverse based on your economic stance.

    In case you missed g’s link – the ONS just revised the last quarter’s GDP figures down again – to a 0.6% contraction. Not 0.5%

  • @ Cuse

    “Labour don’t have to say what they would cut. They’re in opposition”

    I don’t know how many times I heard this laughable statement. What value do Labour’s pronouncements have on this matter then? If they are not suggesting any alternative course of action, they are simply empty posturings, devoid of any significance. If you criticise, it is up to you to say what you would do instead. Labour is therefore saying it would tax more or borrow more. How much more would it put up taxes and how much more would it borrow? No-one knows.

    What the poor fourth quarter figures mean is how miserable Labour’s management of the economy was that it is so utterly dependent on public and consumer borrowing for growth. Germany managed to grow without massive amounts of borrowing, so why not the UK? I think we know the answer to that one, don’t we?

  • Top of the league 25th Feb '11 - 12:55pm

    “Germany managed to grow without massive amounts of borrowing, so why not the UK? ”

    Germany’s net public sector debt as a % of GDP is currently higher than the UK :

  • “Germany managed to grow without massive amounts of borrowing, so why not the UK? ”

    Germany also didn’t spend £125 billion of direct Investment to their greedy banks which had overstretched themselves

  • Top of the league 25th Feb '11 - 1:01pm
  • @ Top of the League

    The German debt is accumulated from years past, particularly the costs of reunification during the 1990s. What we are talking about is the deficit, which in the UK’s case is 11% of GDP while in Germany it is 3.3%. So sorry, but you have got your figures wrong.

    Germany has a small deficit and high growth. The UK has a huge deficit and low or no growth. The difference lies in the management of our economies, with the Germans planning long term, keeping hold of their productive industries and investing in infrastructure, and the UK under Labour selling everything in sight, wasting vast amounts of public money and relying on the explosion of the financial sector to pay for its extravagance.

  • @ Top of the league

    As an explanatory note, the deficit is how much you add to your debt pile each year. So while the UK accumulated public debt is comparatively low now, it is exploding by 11% of GDP each year. That is why the situation is worrying and needs to be dealt with. If we can’t show that we have a consistent plan to sort this out, the UK is going to get hammered by the markets and we will end up paying vast amounts of “danger money” in the form of higher borrowing rates. That is why Labour’s attitude is totally, reprehensibly irresponsible.

    On top of that, our households also have £1.5 trillion (i.e. 1,500 billion) of debt due to the explosion under Labour of mortgage debt (massively high multiples of income resulting from the “light touch” approach) and unsecured borrowing (credit cards and consumer loans). Up to the end of the 1990s, UK personal disposable income per year and total financial liabilities (i.e. debts) kept pace with each other, meaning people’s debts were at a serviceable level. But in the last decade, household debts have zoomed to 1.5 times income. This makes them hugely vulnerable to rising interest rates. Bringing consumers down from this “debt mountain” without something catastrophic happening is going to take quite some doing. The consumer economy will take a decade or more to recover to a point where household balance sheets are back in shape.

    Labour has walked the economy to the edge of a very deep, dark economic precipice and, party point scoring aside, we had better hope the UK economy does start to show some signs of life in 2011 or a tough economic situation could be about to get a whole lot worse.

  • @Robert C

    It wasn’t Labour who sold everything in sight. It was the Tories, your coalition partners.

    I don’t disagree that Labour could have done a lot more and behaved very differently, but we are reaping the consequences of Thatcherism at the momement and we have a government wanting to continue it on a scale far greater than Labour ever did.

  • @ Matt

    I think I’ve explained above why Labour is to blame for the poor performance of the economy. If you look at the recent public spending figures, current government spending is going up year on year, so you can’t blame the cuts. They haven’t come in yet. What is happening is consumers are finally waking up to how much debt they built up under Labour and the positive impact of 0.5% base rate is coming to an end.

    I never said retail sales would perform better than forecast, so I don’t know what you are talking about.

    As for the rest of the economy, I will grant you I was wrong about this first revision – there is another one to follow. It seems the ONS is still convinced that there was zero effect on manufacturing from the weather and only a small one elsewhere in the economy, which I believe is unrealistic considering it was the worst December for over 100 years. The ONS, although authoritative, is not gospel truth

    Sorry to disappoint you, but the economy is not heading into a double dip recession and most business surveys (Markit, CBI etc.) show positive growth for the first quarter of 2011. The only exception is retail, which is hammered due to massive consumer indebtedness, and we all know whose fault that is.

  • @ g

    Just answer me one thing: who was in charge for the last 13 years to May 2010?

    I think that answers your point.

  • @RobertC

    You have been consistent on your vitriol directed at Labour for their non-disclosure of whatever cuts plans they have. I know that whatever I say about it, you’re going to disagree with me. But consider this.

    The Coalition is still in “blame Labour” mode for the deficit. But the unlikely source of Peter Hain made an excellent point on Question Time last night. Both Tories and Lib Dems up until 2010 agreed with Labour spending plans. Then turned round in the election campaign to state “It’s all Labour’s fault” – and whereas the need for cuts was accepted across all 3 parties – not one of them went into detail on where the axe would fall pre-election. The Tories especially were asked in almost every interview “where would you cut” only to have it ignored and side-stepped.

    “If you criticise, it’s up to you to say what you would do”. Fair point – if you were empowered with making the change. But if you’re not – it has no worth. Take the Lib Dems avowed opposition to VAT rises in the campaign. At no point was the message “We wouldn’t raise VAT and would do this instead”.

    And as for your assertion that the Q4 figures are Labour’s fault – I am speechless. I thought it was the snow’s fault. Or how about this. If the Q4 figures had been positive – would that be down to Labour’s superb management of the economy – or would it be down to Gideon?

  • @ Matt
    “As I said, the cuts have not physically come in yet, however psychologically they did”

    Well whose fault is it for shouting about how dreadful they are going to be? There has been a consistent campaign of alarmism and shroud waving from vast numbers of people who are totally opposed to any cuts whatsoever, aided and abetted by the BBC which has been exceptionally keen to give media space to any group that can claim the world will end unless we carry on spending exactly as before.

    “How can they show positive growth half way through the quarter?”

    Because they show both business under way and orders coming in, as well as expectations beyond that. So they are both forward and backward looking.

    @ Cuse

    Q4 showed two things: a major effect from bad weather and a weak underlying economy. The weak underlying economy is down to lack of export growth and lack of private sector investment. If Labour isn’t to blame for the underlying state of our economy after having been in power for the last 13 years, then who is? It is hardly down to Coalition who, as of December, had been in office just seven months, is it?

  • @Robert C

    If Q4’s figures were great – would Labour get the credit.

    If Q1 2011 figures are great – will it be down to the Coalition – or Labour?

  • @cuse

    Let them get on with it m8 as they know deep down what they are doing is wrong.Just go to any Tory blog and read how they are laughing at Nick taking one for the team and its not even his own team.That is what Torys are writing about .The VAT rise,tuition fees and all his other lies and double deals will come back to haunt him and his party.They deserve all they get.The amount of people i meet, who have not voted or not bothered to vote for a while,but who are going to vote Labour at Mays election makes me hopeful of giving the Lib Dems the good kicking they need at the ballot box.
    Andrew Edinburgh

  • Robert C

    Are you sure you are not a marxist? You appear to have no concept of individual or corporate responsibility. You blame high levels of personal debt on the government – seemingly without realising that every individual had a choice about whether to take advantage of high income multiples or not. At the same time, you blame lack of regulation for excessive borrowing by greedy banks – seemingly without realising that the fact that something is not regulated doesn’t mean that you have to do it.

    There is currently no regulation preventing me from poking myself in the eye with a sharp stick. Presumably if I choose to do so, it will be the coalition’s fault for its shameful lack of regulation!

  • Labour would not carry out the massive and damaging reorganisation of the NHS being rushed through by the Coalition – there’s £1.8 billion saved for a start.

    And is it really sensible to throw public money at “free schools” whilst at the same time cancelling long-overdue repairs to existing schools?

  • The fact so many of you have unthinkingly swallowed Osborne’s line that there has to be £80bn cuts is unbelievably worrying.

    The fact is that, if the government had a proper policy and strategy to support economic growth and job creation (which the Labour government had, before being smashed up by the Coalition), the subsequent drop in unemployment benefits and dramatic rise in tax receipts would’ve taken care of most of the deficit. That’s how the UK has always gotten rid of its deficits in the past (which have historically been, on average, larger as a proportion of GDP than it is now) – and there were signs that it was indeed working when, mid-2010, when Labour’s economic policies were still largely in force, borrowing was coming in lower than forecast and growth was stronger than expected – now that the Coalition have started cutting too soon and too deeply, borrowing is creeping above projections, and we’re the only major economy to be in decline.

    It’s true that there needs to be a degree of fiscal retrenchment, to the tune of about £30bn (from either cuts or tax rises), because the economy is fundamentally smaller than everyone thought 5 years ago, and we won’t be able to rely on quite as much tax coming from the financial sector or the housing market ever again – but it’s far less than the £100bn fiscal retrenchment Osborne insists on, and it’s laughable to suggest that it HAS to come by taking away from the poorest in society.

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