More cuts: Not in Plan A

It was George Osborne who announced the arrival of the age of austerity.

It was he who told us when it would end.

Spending cuts would not be needed by the time of the next election as, by then, the deficit would be under control. That was Plan A.

Today's Spending Review is a reminder that Plan A is well off course.

The chancellor will announce another year of deep cuts to spending by government departments - cuts which Labour now says it will have no choice but to use as their starting point if they come to power in 2015 and cuts which the independent Institute for Fiscal Studies says will have to be followed by yet more years of cuts.

There are a number of key facts to bear in mind when considering today's announcements:

  • Most government departments have seen their day-to-day budgets cut deeper and for longer than ever before. Some departments will have lost almost a third of their budget by 2015
  • Overall public spending hasn't dropped because the cost of debt interest has gone up along with the cost of welfare spending particularly on our ageing population
  • The deficit - the gap between what government spends and what it gets in in taxes - has stopped shrinking. Although the chancellor will remind us that it has fallen by a third since 2010 a recent revision of the official statistics show that it actually increased last year albeit by a statistically insignificant decimal point. The budgetary "gain" made by cutting day to day spending has been wiped out by the slump in the amount raised in tax and the rise in other spending
  • Britain's national debt is still increasing

All the above may be facts but they are open to wildly different political interpretations. They can be used to prove that:

  • Our economic problems were even deeper than first feared and the government needs to keep making tough choices


  • That the Coalition hasn't really gripped the problem at all and now needs to cut the NHS, overseas aid and more from welfare as well as other budgets


  • That we are all paying the price of the failure of current economic policies

What they can't be used to prove is that Plan A is on course.

PS There is one other possibility. The forecasters who were too optimistic on the way into this crisis are being too pessimistic on the way out. The economy may recover faster than most believe which would mean that the next government doesn't need to make cuts on the scale today will suggest.