Update 53: January 2016 - The Comprehensive Spending Review

Plainly only time will tell if the Corbyn phenomenon substantially changes British politics. But there can be no doubt that another episode in the second half of 2015 will indeed shape the political future for a long time to come. The Chancellor’s Comprehensive Spending Review in November 2015, his first since he was released from the constraints of coalition with the Liberal Democrats, will greatly change the size and shape of the British state over the life of the present Parliament.

‘Comprehensive Spending Review’ is a bit of a misnomer insofar as ‘Review’ suggests only analysis and reflection. The Review actually sets out public spending plans for several years ahead. Like the annual Budget the Review is largely ‘spun’ for partisan political purposes (and is attacked by Opposition parties with the same aims.) In Update 44, January 2014, I discussed the Chancellor’s previous Autumn State under the heading ‘It’s the politics, stupid.’ This should always be the motto of the student seeking to make sense of what Chancellors say. The language is the language of economic calculation, but this is always code for political calculation.

This is not to say that the Review has no economic consequences. On the contrary: they are momentous, but are not always as officially presented. The student of British politics must therefore be grateful to the impartial think tank, the Institute for Fiscal Studies, which always issues a clear headed analysis of what lies behind the sound and the fury. The IFS’s analysis of this Review does bring home the huge ambitions of the Chancellor, and of the new Conservative Government. If the Review is realised (and it will be, barring some catastrophe, because the Conservatives now have a decent prospect of remaining in office until 2020) the British state will be transformed. The fundamental point is this. The Chancellor has kept the commitment to maintain (and even increase in real terms) spending in a small range of ‘protected’ areas (notably overseas development, defence and health). But to square the circle of spending in protected areas and cutting overall he has had to plan huge cuts elsewhere. The most eye catching (or painful) reductions are in the transport (nearly 40 per cent) and in the local government budget (nearly 60 per cent.)

Moreover, these are against a background of significant cut backs since the Conservatives originally came to office with the coalition: local government in the years from 2011 to 2019 will overall undergo cuts of 79%. This is the context for the government’s devolution measures in England, notably the ambition to create a ‘Northern Powerhouse.’ In current spending what is being devolved is the task of managing these reductions in day to services: in plain terms, deciding which services to close or curtail.

References:

Of the many studies by the IFS of the implications of the Review the most revealing is Gemma Tetlow’s presentation on spending plans, to be found at: http://www.ifs.org.uk/uploads/publications/budgets/Budgets 2015/Autumn/Tetlow_public_spending.pdf

The official documentation of the Review can be accessed at: https://www.gov.uk/government/topical-events/autumn-statement-and-spending-review-2015