The Spending Statement concentrated on spending totals for 2015-16. The government does need to plan ahead. The Coalition government will preside over the first two months of the financial year 2015-16. The new government elected in 2015 may continue with the year’s spending plans for the rest of the year, or could decide to have a summer budget to make adjustments.
The Announcement seems to have be greeted by agreement between all three main parties in the Commons that the totals are correct. Labour did not wish to propose spending and borrowing any more. Labour never suggests spending less overall. A Lib Dem Chief Secretary undertook much of the Minsisterial level work to get the Statement agreed. It was signed off by both the PM and his Deputy.
Labour’s position is to say that whilst they accept the totals of spending, they disagree with the detail and the priorities. I look forward to hearing more from them nearer the election over how they would shift the budget around within the agreed totals. It is helpful to know that they, like the Coalition, think a cash increase of 2% is as much as can be afforded.
The durability of these totals may be high from the political point of view, but it could be tested by the markets and by future economic changes. The Green Book backing the Statement centres around the reduction in the deficit. To cut the deficit the government both needs higher tax revenues from growth as well as controlled increases in spending under these plans.
If growth starts to outperform the reduced forecasts it would be good to think extra revenue will be used to cut the deficit faster, rather than triggering a hunt for ways to spend more money. If growth were to disappoint again owing to say another severe phase to the Euro crisis or from a continuing failure of banks to finance the recovery in various parts of the world the government would also have to revisit the strategy and make some more difficult decisions.
The development of the detailed thinking on the welfare cap will be important. So far we learn that they wish to strengthen job search by unemployed people and require them to attend Job centres weekly; to require all applicants to improve their spoken English; and asking all lone parents to prepare for work when their child turns three.
Living within a 2% increase in overall budgets will be much easier if the reforms and effficiency drives set out by the government work well.