3 Sep 2012

Austerity? What Austerity?

Scott's been saying in comments that "there is no austerity". What do the figures look like? This the graph produced by publicspending.co.uk with the treasury estimate for 2012 (which the government are likely to overshoot).

A rise of £6.63 billion, 
from £681.33 billion to £687.96 billion

 Clearly the rate of increase in spending has slowed, but the total of government spending has continued to increase. So in a sense Scott is right - there is no austerity. In terms of a percentage of GDP total government spending will drop from 45.13% to 44.11% a drop of 1.2%. However we know that the government are likely to overshoot and so it's likely that even in %GDP terms the government will have spent more.

But some sectors have had real cuts. Comparing the 2011 figures with the OBR projections for 2012 (which are unlikely to be very accurate, but are all we have to go on at present).

A cut of £140 million.

A drop of about £20 million 
which is much less than 1%.

A drop of £1.6 billion

Up, then down, and now on the way up again

By Contrast some departments have seen massive increases:

Interest payments spiked in 2011 and continue to rise, 
though we're supposed to have low interest rates

Spending on defence is expected to increase by £170 million; 
but welfare by £2.4 billion, and pensions by £7.8 billion.

The increase in spending is clearly being drive by increases in welfare and pensions from this point of view. Though the IMF points to a drop in government revenue as the primary driver of increased borrowing overall.

Consider that older people are more likely to vote, and tend to vote Conservative. Cutting pensions would be a disaster for a Conservative government. And consider that the government have spent a huge, but undisclosed, amount on anti-welfare propaganda since taking office, and have made every effort to popularise the idea of welfare as payments to the unworthy.

Since they cast the main economic problem as one of too much government debt, this has made welfare cuts a popular policy. This has allowed government to attack people on out of work, illness and disability payments. And note that unemployment is 8% so a lot of people are out of work. Seen in this light the government scramble to cut welfare, thereby placing a heavier burden on the poor and disadvantaged makes good political sense - it not only protects Tory voters, but appeals to Tory moral arguments about the undeserving poor. They may be economic morons, but they have political cunning.

Meanwhile the country is slowly going downhill. The latest reports suggests that removing more regulations (i.e. protections from rapacious business) is the way to prosperity. The trend is to maximise regulations for people and minimise regulations for business. And I can't help thinking that the equation can not add up to anything very prosperous or happy for the masses.

1 comment:

  1. Be interesting to see the FY12 figures when they come out on total government spending as a % of GDP. My expectation is we'll see a further small decline to around 44.9% basically a rounding error.

    But totally agree with you that the elephant in the room are the inter-generational wealth transfers behind these numbers. More spending on the elderly and less spending on everyone else.

    And it is only going to get worse in the coming years as the baby boomer cohort start their 30 years of retirement and there political power gets greater and greater. I very much doubt with the current NHS model they'll be able to keep a lid on health costs.

    Sadly aside from Willets no politician is making any noise on this issue. But then again why would they upset their largest constituency.

    This inter-generational debt crisis seems a perfectly designed insoluable problem for a democracy.


Keep is seemly & on-topic. Thanks.