Public spending cuts are speeding in one, apparently inevitable, direction. But if the economy worsens, should the coalition go into reverse gear?
Like an unstoppable train in a disaster movie, the Comprehensive Spending Review is hurtling towards us and we anticipate the crash with a mixture of fear and excitement. But maybe we hope and fear too much.
Many people expect the full extent of the cutbacks to be revealed on October 20. So civil servants, who have been paralysed from making decisions for months, hope at last to get clarity.
Local councillors worry about how tough things will be but believe they will at least know the damage. And charities, communities, leisure and arts centres suspect the worst but are now starting to want to know what it is – the uncertainty hanging over everyone is debilitating.
But how much will we find out? We more or less know the aggregates – ministers have been clear on these. As the battles between Chancellor George Osborne and Work and Pensions Secretary Iain Duncan Smith play out, we should find out a lot more about where the government sees the split between Departmental Expenditure Limits and Annually Managed Expenditure spending, which it has less day-to-day control over.
But even here it would be wrong to take at face value the specific amounts pencilled in. A lot of Ame is about social security and unemployment-related payments and so depends as much on how the economy performs as it does on policy decisions. It also includes interest payments on the debt – again, outside day-to-day control. And any assumptions of falling spending – as benefits are changed or axed – will be conditional on any necessary changes in legislation getting through Parliament.
On Del totals, ministers will finally have to name some definite amounts – and give more detail on the capital-current split. But the detail will probably disappoint those on the ground who want to know if their project is going to be axed, how hard their locality is going to be hit or whether libraries, social housing or support for mental health are being cut more than the average.
The Treasury and the department will have wanted to have an idea of the actual impact of the cuts at local level but they won’t have gone that deep – especially as there aren’t any Public Service Agreements now. Also, to some extent, localism excuses the centre from the consequences of the national decisions at local level.
Conference season has been as expected to some extent. The Liberal Democrats looked anxious – but as they have tied themselves to the mast of the coalition, they can do no more than moan. Labour, with its ‘new generation’ leader, is enjoying the public’s discomfort over the cuts but is still unclear what its alternative policy is.
Perhaps the biggest surprise was the Tories – some are in heaven: a fiscal crisis has allowed them to cut down the state in ways they have always dreamt of. But many are nervous since they know cuts will not play well in their own locality and hope it will soon be replaced with a storming economic recovery.
After October 20, as the money, or what is left, cascades down, the circus will move on to the people who set budgets lower down the food chain – councils and local branches of national organisations. Then, in turn, voluntary groups and publicly supported bodies have to decide what to cut with their reduced settlement. For months to come, there will be lots of decisions, lots of angst, and lots of service and job losses.
Will the spending settlement last its full term? Del totals often tend to stick – even if circumstances change. But if estimates of the structural deficit fall, and growth is higher, would it be right to stick to the settlement? And if things got worse, should more be cut or should the coalition go into partial reverse gear?
In truth, October 20 will tell us a lot, but the uncertainty and worry will continue.
Dan Corry is a former senior adviser on the economy at Downing Street
