In 2010 I pointed out that public spending was going up every year of this Parliament in cash terms. I also forecast that this government would control the costs of public spending better than the previous government, so real current public spending would also rise. Most commentators, politicians and journalists thought this wrong and talked about the real terms cuts to come.
The OBR now confirms that real public consumption rose 2010-2013 inclusive at a rate of 1% per annum. They state ” Real government consumption continues to contribute positively to GDP growth despite ongoing restraint in nominal spending. “(restraint here means modest increases). (pp 79-80 of the OBR book)
The OBR also says that in the next Parliament the plans in yesterday’s statement should mean continued control over the costs of public services, which limits the impact of the future restraint on cash public spending on its real level. Indeed they expect the costs of provision to fall, as they assume productivity and technology gains in delivery of services. What is odd is that we did enjoy such gains in the previous decade.
It is curious that no-one else seems to read this section or use it in the debates on what has happened and what might happen to public spending, presumably because it stands in the way of the austerity and cuts stories. Whilst it is obviously true that some budgets have been reduced and some may be reduced in the next Parliament, the overall position is now confirmed that both cash and real public consumption has risen. Capital spending, which was cut sharply by the outgoing Labour government, remained cut at the beginning of this government but has now benefitted from substantial increases from the new lower base.