Backing down over a £13 million cut in a grant to a charity giving books to young children is not going to make much difference to our public spending position. The government plans to spend around £700 billilon this year.
The government’s friends will say it shows wisdom and flexibility. A not very well judged cut attracted substantial opposition, so the administration has reversed it to avoid hassle in a well meant political gesture. The government’s critics may say it shows a lack of determination to control spending, following on a similar reversal over school sport money.
The problem for the government is that it follows hard on the heels of the November public spending and borrowing figures. I reported here the record borrowing, shortly after reissuing more ideas to curb spending. I showed how public spending was running more than 5% up on a year earlier, if you take the amount so far this financial year. Some of you pointed out that November monthly spending was more than 10% higher than the same montha year ago.
The government persuaded the markets and the wider world that it was cutting public spending, by the use of language talking about 25% cuts. As explained here, they were never planning to actually cut overall public spending in cash terms. If the high spending and borrowing numbers become too high they could face trouble with the markets, and be forced into higher interest rates and a bigger squeeze on the private sector to pay the public sector bills. Some of us urged them to go for lower total public spending figures this year, to make a bigger reduction in this year’s deficit. I did not urge overall cuts, but a lower rate of cash increase, as I felt their public spending levels pose a risk to the wider economy and the recovery.
If you wish to control public spending you do have to engage with the public sector lobbies and change the terms of the debate. If slower growth in spending is called a cut, you have problems selling your policy to the wider public. The more ominous noises for the government are now coming in the NHS. There the government decided on a ring fence to avoid all “real terms” as well as cash cuts. Despite that, warning noises are emerging that the NHS will not be able to manage on a very small real terms increase.
Under the old rules of how to play the public spending game some of the figures for valued services are very tight in future years. As the government’s appetite to battle over public spending is likely to diminish the nearer to a General Election it gets, it makes it even more sensible to choose some battles on public spending today that it is prepared to fight, and dig in and win them. All that the state does currently is not affordable. Choices have to be made. The government needs to change the way the public debate about increases and cuts is fought, and choose more areas where it is prepared to see spending actually reduced in cash terms. Failure to control public spending could leave us at the mercy of market movements that damage our overall standard of living.