Cuts

It is impossible to judge the defence review without seeing the full budget breakdown, available only to government officials. But even with the information we now have, it is pretty clear that some assumptions are incoherent. Some plans just don’t add up. The most obvious issues are with the shape of the army after 2015.

There may be big troop cuts hidden in this review that Cameron just didn’t want to mention.

1) The mystery of Britain’s 29,000 surplus troops in 2020

At the moment Britain’s 110,000 strong land forces can sustain a deployment of around 10,000. By 2020 this enduring deployment will fall to brigade level, which amounts to around 6,500 men.

This is basically an admission that we will be unable to sustain as big a role in the next Afghanistan or Iraq.

But more curious is the fact that we’re not cutting the land forces by as much as we’re cutting the deployments we expect them to sustain.

The “force generation” ratio — the proportion of troops to boots on the ground — will actually deteriorate over the next decade according to the defence review, even though Liam Fox has ordered a separate review on how to improve it. 

Jim Pickard

I was in the room at Manchester’s TUC conference when Ed Miliband was asked if he would attend the anti-cuts TUC rally tomorrow in London. “I’ll attend the rally, definitely,” he replied. As I wrote at the time it was a significant moment, not least because David Miliband sounded much more ambivalent. Their different replies may have made a difference in terms of crucial votes from union members.

Now Polly Curtis at the Guardian is reporting that Mili-E will not be there tomorrow; instead he will have some private chats with union officials. It’s a striking U-turn. 

Jim Pickard

The National Housing Federation – which represents housing associations – will warn today that plans to build 270,000 affordable homes for low income families over the next decade could be axed as a result of the spending review.

The campaign group doesn’t know what’s in the CSR but is estimating that funding for new developments will be cut by up to 50 per cent; which is probably not far off the mark by my estimate. (The DCLG will slash spending on property grants; it’s also rumoured to be cutting its own staff by 40 per cent).

The National Housing Federation claims it has heard that housing is likely to be one of the biggest losers out Wednesday’s CSR – with the danger of building grinding almost to a halt. 

There’s been lots of speculation over the Treasury’s plans on sickness benefit. The Times flagged up a proposal to “means test”, while the Observer has a letter pointing to £2.5bn of incapacity benefit savings from an unspecified reform.

No final decisions have been taken. But reading between the lines, it sounds like moves are afoot to scale back “contributory incapacity benefit” (which I’ll explain in a second).

If so, it blows a rather big hole in George Osborne’s claim that a he’ll be finding savings from ending the “lifestyle choice” of those determined to “pull down the blinds” and scrounge on benefits. These reforms largely take money from people who have worked and fallen ill, rather than those who’ve allegedly chosen a life on the “sickie”. 

Jim Pickard

Apologies if this argument has already been made elsewhere – if so I haven’t seen it. Amid all the hoopla about the IFS report on the Budget (which suggests that it falls hardest on the poor) most commentators seem to have missed a very simple point: cuts to public spending are, by their very nature, bad news for poor people.

Why? Because people with less money are more reliant, proportionately, on the state. That applies to a vast range of public services such as subsidised transport, care, education and of course benefits.

I do agree with Nicolas Smith of the TUC when she says that “it’s time for the Government to stop pretending that the steepest cuts since WW2 are compatible with fairness”. That always seemed a tenuous argument by the coalition. 

Option: Cut the officer corps of the armed forces by a quarter, returning the ratio of top brass to lower ranks the 1 to 7 level that prevailed through the cold war.

Saving: In salary alone, the saving is around £400m a year. There are then knock on savings from bonuses, housing costs, private school fees, the entourage, the offices, travel costs, training, the pension etc.

The case for a cut: Britain’s armed forces are more top heavy with officers than at any point in the 20th century. As the armed forces have shrunk in size, the lower ranks have suffered more than the officer corps. It now looks terribly unbalanced. The ratio of officers to lower ranks has fallen from 1/10 in the Second World War, to 1/7 in the cold war, to 1/6 through the late 1990s, to 1/5 today. There was no strategic decision to change this structure — it is a symptom of a bureaucracy protecting those at the top at the expense of efficiency. Most striking is the trend since 1997, which is shown in the chart below. Senior officers (colonel and above) have increased by 8 per cent, while the lower ranks have been cut by 12 per cent. What is the rationale for that? There are now more admirals than active warships and two-fifths as many RAF officers of one star and above as there are in the US Air Force, which is roughly eight times the size. 

Jim Pickard

News just in from the culture department where many of its 55 public bodies are to be abolished, merged or streamlined.

The most eye-catching is the abolition of the UK Film Council, which invests government grants and Lottery money in film development. (Although Jeremy Hunt, culture secretary, insists that ‘government and Lottery support for film will continue’).

The body has helped to fund 900 films since it was set up in 2000, although it’s not exactly clear from its website which ones they were. (The BBC tells us that they include Bend it Like Beckham and the Last King of Scotland – pictured).

Also to be abolished is the Museums, Libraries and Archives Council. Ditto the Advisory Council on Libraries and the Legal Deposit Advisory Panel. And the Advisory Committee on Historic Wreck Sites. 

Whitehall finally puts its worst fears to paper today. After months of agonising preparation, officials will finally dispatch the budget bids to the Treasury. The letters themselves include a plea for leniency that runs for about four to five pages. But the important part is a blood-curdling chart that shows how the department would find cuts of up to 40 per cent cut. “The sacred cows lining up for slaughter,” in the words of one official.

 

Jo Johnson

This is the hair shirt parliament and MPs will need to lead from the front. Ministers have started the process by axing the limos, one of the toughest cuts so far negotiated. Now, as trailed in the last parliament, it is time for rank-and-file backbenchers to do their bit to fill in the £156bn deficit. The House of Commons Commission, a body run by John Bercow, the speaker, has agreed to cut £12m from the budget for the House in the current year.

This marks the start of what the body claims will be a fundamental review of expenditure, which will deliver further savings over the next three years. The savings to be made this year are 5 per cent more than the Commission had originally planned, and will reduce estimated spending for 2010/11 to £219m.
This action follows the Commission’s decision in December 2009 to cut House expenditure by 9 per cent by the end of 2012/13. 

On the basis of Osborne’s spending plans, it looks like the coalition is either:

Before you accuse me of exaggerating, take a look at the rough maths. (This is courtesy of the ever-sharp Ian Mulheirn at the Social Market Foundation.

There seems to be a growing appetite to cut the cost of public sector pensions. A year ago, it was basically off the cards — no party would have dared take the political risk. But the coalition are now slowly making the case. There is a strong chance of a levy being imposed, if the government holds its nerve.

The stats in the OBR report today, which for the first time breaks out the annual cost of public sector pensions until 2015, are genuinely concerning. 

David Cameron is warning that every individual will be hit by the coming cuts. But don’t expect the pain to be spread fairly across all groups. If the coalition agreement is anything to go by, the elderly will be given a free ride at the expense of everyone else.

We’re in the midst of a fiscal crisis, but there is hardly a perk left for over 60s — the most wealthy section of society (see IFS chart) — that hasn’t been protected by the coalition.