George Osborne has given little sense of where he wants spending cuts to fall, but what we do know is surprisingby Emran Mian / July 23, 2015 / Leave a comment
After the general election, the Queen’s speech and the Summer Budget, ministers may have been looking forward to the end of the parliamentary term. Then, on the very last day before recess, the Chancellor set them work for the holidays: the spending review. The Treasury expects to see proposals from every non-protected department to cut costs by between 25 per cent and 40 per cent. Departments have all of August to come up with them, before “initial ministerial discussions” in September.
But there is some relief for them. The Chancellor continues to moderate his plans for spending cuts little by little. In the Summer Budget, he pushed back the target date for achieving a surplus by one year. He also tweaked taxes up a little. Now, in the document launching the spending review, he has made clear that, in the first year for which spending plans have still to be settled—2016/17—£3bn of cuts are needed. This is a low start, before the requirement rises to £11bn in the second year of the spending review period and £20bn by the end of it. At the least, this means Departments have a bit more time to implement a change in “the shape of the state”—as the Treasury’s document puts it—and realise the larger chunk of the savings needed from them.
What ministers are lacking for their summer assignment is a clearer sense of what new shape the Chancellor has in mind. The document says remarkably little about the principles that might guide reform. Instead there is a breezy confidence about the feasibility of making further cuts. As the foreword puts it, “we know we can achieve this… because we have done it before.” That isn’t entirely convincing for two reasons. First, the second half of a decade of austerity inevitably poses harder choices than the first; and second, the government did actually have a strong set of hypotheses in the first half about how it would save money. It focused on outsourcing, holding down pay in the public sector, reforming public sector pensions, and aggregating procurement spending to achieve economies of scale, and moving services online. There is no broad set of similar theories about how to save money this time.