I'd been meaning to summarise the Lib-Con spending plans for some time, but City AM have saved me the bother:
IT is time for a reality check.
The public spending cuts planned by the coalition only involve reversing, over five years, a small part of the enormous increase in expenditure which took place under Gordon Brown...
In 1999-2000, government spending was £343bn. Had this merely moved in line with inflation, total expenditure would have reached £450bn in cash terms by 2009-10. Yet actual spending in that year had jumped to £669bn, an entirely unaffordable 53 per cent increase in real terms.
The spending plans outlined in George Osborne’s emergency budget reduce real terms outlays from £697bn this year to £671bn in 2015-16. Remarkably, spending in real terms then will still be much higher than it was in 2008-09.
The numbers are telling. Total expenditure in nominal terms in 2008-09 was £630bn, £669bn in 2009-2010, going up to £697bn this year, £700bn in 2011-12, £711bn in 2012-13, £722bn in 2013-14, £737bn in 2014-15 and £757bn in 2015-16.
In every single year, spending goes up in cash terms. It is only when one adjusts for inflation that the cuts become apparent...
It’s Because We Don’t Have Real Problems…
10 minutes ago
8 comments:
"It is only when one adjusts for inflation that the cuts become apparent..."
But Ben and Mervyn keep telling us that there is no inflation, just horrible deflation, which would mean public spending would increase!
Best get printing (which is by far the easiest way to default on all those promises) guys!
Don't forget the debt interest which will take an increasingly large chunk of the pot, forcing cuts elsewhere. Thats the legacy of the 'prudent' Brown years, right there.
sobers, I did some number on public sector current expenditure (PSCE is basically spending less capital spending) minus debt interest.
It is forecast to rise in cash terms as follows:
2011/12 +£11.6b or 1.95%
2012/13 +£7.5b or 1.24%
2013/14 +£7.2b or 1.17%
2014/15 +£8.9b or 1.43%
Capital spending gives way to keeping the bureaucrats employed I'm afraid.
SL, maybe.
S, and don't forget that the Lib-Cons intend to merrily continue running up deficits. Even by their optimistic forecasts for increasing tax receipts, public debt will keep on rising until 2013-14.
As we well know, if debt-to-GDP increases by 10%, the average interest rate paid increases by 0.4%, so if the ratio is now 60%, debt interest costs us 2.4% of GDP (60% x 4%) and if it rises to 70%, debt interest costs us 3.08% of GDP. And that's before we worry about the drag that the higher debt imposes on us for decades after that.
PS, an increase from 2.4% to 3.08% of GDP is about £10 billion a year.
Odd I know and probably due to an understandable oversight (they're soooo busy and the little people wouldn't understand anyway) but I've never heard this point made by Stephanie Flanders, Robert Peston or any others of the economic and financial "journalists" employed by the BBC - or indeed anyone chosen for interview on, for instance, the Today programme.
U, it's all just so much Indian Bicycle Marketing. The can have a good old faux row about whether to increase public spending by 2% or by 1% a year and present it as a real political divide between "austerity" and "spending for growth".
The real divide is between "Keeping public spending about the same" and "Getting public spending back to 1999-00 levels, when orphan children ran the streets barefoot and the unemployed had to queue up at soup kitchens etc".
Looks like the markets will force greater spending cuts then. What a total disaster.
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