Throughout the Thatcher era Labour claimed public spending was being cut. Each year it rose. In 1978-9, the last Labour year, total public spending was £75 billion. By 1989-90, the last Thatcher year, public spending was £200 billion. This was up every year and up after allowing for general inflation.
According to this year’s budget plans, public current spending will rise from £600.6 billion in 2009-10, the last Labour year, to £692.7 billion in 2014-15, the last planned year of the Coalition government in this Parliament. That’s a rise of £92.7 billion, or more than 15%: a rise of £1500 for every man,woman and child in the UK.
Total spending including capital will rise from £669.3 billion in 2009-10 to £737.5 billion, a rise of £68.2 billion. This shows that capital spending will be cut, according to the plans inherited from the last Labour government which the Coalition government has accepted.
So why then do we hear so much about cuts?
There are three main reasons.
1. Some departments and Councils had wildly optimistic plans for increased public spending over the next five years. They are now having to cut the increases in the plans. This is very different from having to cut important things they are already spending on.
2. Many public sector managers believe in the “parade of the bleeding stumps” to try to frighten or shock the Treasury and the Cabinet into making more money available. They deliberately claim they have to cut important things to force the hand of the paymasters. It was always thus. When it comes it to it, if they do not get more money, they often then manage things more sensibly and avoid the bad cut. Sometimes they go ahead regardless, cutting clumsily to make a point.
3. The Treasury has asked to see what larger cuts in spending would look like, as they presumably wish to establish new priorities and need to see what could be achieved by cutting in one place to spend more in another. The Treasury’s requests have given departments more scope to play the “inappropriate cuts” game under item 2.
If a major private sector company needs to cut its costs – or reduce its forecast increases in spending in future years – it usually does so in private, hammering out what is feasible without worrying customers and shareholders. A leading retailer, for example, would not start off by saying in public they would have to open the store for shorter hours, cut out a couple of departments or worsen the quality of the service. They would normally look at how they can they cut stocks without cutting product availability, how they can do all the back office functions with fewer staff, how they can they buy better.
We need a new tone and approach to public sector budgets. It is bizarre to listen to this debate about massive cuts, when we know that overall spending will rise. It will be a sign of very bad public sector management in individual Councils and quangos if we end up with clumsy cuts in services, when the overall spending totals allow us to avoid such an outcome.