The politics of the Spending Review

24 Jun 13

There is no need to limit this week's Spending Review to one year or to have it so early. These decision are caused by the desire of the two coalition parties not to tie themselves together ahead of the 2015 General Election

It is striking that not a single political commentator has even asked the question: why is the government tearing itself apart over a one-year Spending Review that doesn’t need to happen until next year, if at all?

Spending Review 2010 covered four financial years – from 2011-12 through to 2014-15 – and therefore ends on 31st March 2015. Spending reviews are not, as everyone assumes, decisions – they are merely statements of intent. They have no legal force. Spending decisions in the UK are still only legally taken at the annual Budget (in March each year) – up until Parliament passes the relevant legislation, they are just plans.

SR2013 is said to be covering only one financial year, 2015-16. But it is being announced in June 2013, more than 16 months before it really needs to be. The last two Spending Reviews were announced in October the year before they started the following April. In which case the Spending Review doesn’t need to be announced until October 2014.

The other process question is: why is this only a one-year Spending Review? If it is being announced in June 2013, why not adjust the spending plans for 2014-15 and 2015-16? And why not go up to 2017-18 for which the Chancellor has announced the spending target totals, but not the detail?

First, I will be very surprised if SR2013 doesn’t adjust 2014-15 spending plans, although they might not say that’s what they are doing. Every Spending Review since 1998 has been ‘adjusted’ in subsequent budgets, so its hard to see the government rigidly sticking to what they said back in 2010. Indeed, they’ve already made lots of changes since then. My guess is they will just hope no-one notices 2014-15 figures on Wednesday are not the same as they were back in 2010.

Second, why stop at 2015-16? The official line is that this is because March 2015 will be the last Budget before the election in May 2015 and it has to set the spending for the year ahead, despite the election. Which doesn’t answer the question why not go further – why not tell us what a continued LibDem/Tory coalition would do to reduce the deficit to zero, as they promised back in 2010 to do by 2015?

The answer is obvious enough – the two parties do not want to tie themselves together with the same set of spending priorities before the General Election. And that’s probably the reason they are setting the 2015-16 spending plans now, rather than June or October next year – they are hoping everyone will have forgotten by May 2015 what they agreed to in June 2013 (assuming they do agree, which seems in doubt with only a couple of days to go).

All of which of course ignores the big issue – that the reason George Osborne is looking for £11.5bn of extra cuts in 2015-16 is because his economic and fiscal plans set out in 2010 have gone disastrously wrong. Deficit reduction has stalled, borrowing is up this year and the target for a zero-deficit keeps receding ever further into the future. At current rates, it's doubtful he’ll even reach the 50% deficit reduction target Labour promised in the May 2010 General Election during this Parliament.

Instead of sneaking out a quiet Spending Review to cover just one year, SR2013 is turning into an epic Whitehall battle that will be pored over for years to come. Perhaps George Osborne now wishes he’d just stuck to SR2010 and bunged out a ‘holding’ Budget in March 2015?

This post first appeared on Colin Talbot's blog Whitehall Watch

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