Chart of the day: how spending on day-to-day public services will have been cut by 37% by 2018-19

by Stephen Tall on April 4, 2014

It is simply not true – as our critics on the left pretend – that we are slashing and burning the state. By the end of this Parliament, public spending will still be 42% of GDP. That’s higher than at any time between 1995 and when the banks crashed, in 2008.

    Nick Clegg, 10th March 2013

It’s a soothing line from Nick Clegg, designed to reassure Lib Dems that the Coalition’s austerity programme is simply curbing the spending excess of the Blair/Brown years.

However, as Steven Toft (AKA Orwell Prize-winning blogger, Flip Chart Rick) highlights here, the reality isn’t quite as soothing. The reality is that spending on day-to-day public services is being cut by a quite massive amount.

The reasons are partly demographic (an ageing population is putting a lot more strain on pensions, benefits and spending on health and social care) and partly economic (the weak labour market means lower tax revenues and higher social security payments): “The result of this increased pressure on public finances is a shift in state spending away from public services and towards welfare and debt repayments.”

And here’s what it means for day-to-day spending on public services:

day-to-day-spending-graph

According to the government’s plans, then, while overall public spending reduces by 3.9 percent between 2010-11 and 2018-19, per capita day-to-day spending on public services falls by around 28 percent over the same period. Economic and demographic pressures on public finances translate what looks like a relatively modest cut into a very big one. …

It is unlikely that health or education spending will reduce significantly, given the pressures on both. The IFS reckons that the NHS needs a real-terms increase on 1.2 percent per year just to keep pace with demographic change. Even with its protected budget, therefore, the service is beginning to struggle.

The result of all this is some pretty big cuts to most other departments. According to the IFS, the implication of protecting health and education is that cuts to other areas of spending will need to average 36.6 percent. This will hit local government particularly hard.

It will need someone with more time than me to dig out the data and work out when a government last spent as little as £3,899 per head, at today’s prices, on day-to-day public services. My guess, just looking at the IFS graphs, is that it must have been some time in the 1990s, when we had a much younger society placing less demand on services like health and social care.

It’s well worth reading Steven Toft’s post – Is the state shrinking? – in full.

And for Lib Dems then to reflect whether pledging to increase the personal allowance threshold to £12,500 at an estimated cost of £5 billion per year in 2014–15 prices is a responsible manifesto pledge for a progressive party.

* Stephen Tall is Co-Editor of Liberal Democrat Voice, and editor of the 2013 publication, The Coalition and Beyond: Liberal Reforms for the Decade Ahead. He is also a Research Associate for the liberal think-tank CentreForum and writes at his own site, The Collected Stephen Tall.

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