Some facts to remember amid the political hullabaloo over Alistair Darling agreeing that his cuts would be more severe than Margaret Thatcher.
1) Thatcher raised public spending
Under her premiership, public spending grew at a healthy average of 1.1 per cent a year. She was a fiscal hawk who only managed to put a brake on the growth of the state.
As this IFS chart shows, only in two years did public spending actually fall in real terms: 1985/6 and 1988/9. Even then she planned to freeze spending, not cut. It only fell because of lower than expected social security outlays.
2) Only twice in the 20th Century has public spending been significantly reversed
In terms of fiscal austerity, nothing compares to the “Geddes Axe” of the 1920s. The Treasury officials are already looking over the history.
After the Geddes report, central government spending was cut by a quarter in five years. It then flat-lined for another six years. Civil service numbers were slashed by 35 per cent. The only other example of a sustained public spending squeeze was after World War II.
3) Labour’s planned departmental cuts will be more painful than Thatcher and Healey
Darling has pencilled in a rise in public spending of around 0.4 per cent over the next parliament. Once debt interest and welfare are stripped out, the IFS calculate that the rest of public spending will fall around 1.4 per cent a year.That is twice as severe as the cuts 0.7 per cent squeeze under Thatcher.
We have not seen five years with an average annual real cut as big as this since the mid-1970s. The PBR figures also suggest that we will see real cuts not just on average over the Parliament but in every year of it – and we have not seen cuts for four or five years running since before the war.
Jim Pickard
Kiran Stacey