As far as Britain’s economy is concerned, the spending review, just published, changes little. There was the “reprofiling” predicted first in the Financial Times, but it amounted to only £2bn a year of additional gross capital expenditure. This will not make the difference between stagnation and recovery. The Treasury is right: there is no Plan B.
The big news is pretty much as expected:
- It’s not a good time to be working in the public sector. You have a good chance of losing your job, you will have a pay freeze over the next two years and you will see your take-home pay cut by an increase in your pension contribution averaging 3 per cent.
- The chancellor has found another £7bn of further savings from social benefits, which have limited (to some extent) the cuts to public services.
- After this small mitigation of cuts, departmental budgets will still face the most severe constraints in the post-War period. These will be noticed. They act to bring down the deficit significantly so that public borrowing is expected to be 2 per cent of national income by 2014-15.
- Health, schools and overseas aid have been relatively protected. Recipients of benefits, public sector employees and local government are the big losers.
- The government claims the measures are fair. Because fairness is in the eye of the beholder, it has chosen a method of presenting fairness to give this result. This is policy-based evidence-making on heat.