Spending Review Expert Panel: Adam Corlett: A review that drifted into Budget territory
Adam Corlett is an Economic Researcher at Centre Forum. You can follow him on Twitter here.
Today’s 2.8% cut in departmental spending should be seen in light of the further 7.6% reduction still pencilled in for 2016-18. The next election will take place just one month into the 2015-16 year discussed today, and any new government could choose to alter the Chancellor’s settlement or replace it with tax increases. But if current forecasts prove correct, it seems likely that today’s cuts are here to stay.
Reflecting the welcome shift of opinion over the past year, there was much emphasis on capital spending. Whether the amount of investment (too little), the timing (too late) and the allocation can help growth in the short-term remains to be seen. Tomorrow’s update on infrastructure spending will hopefully inform whether the promised support for affordable housing is significant, and whether there has been any progress on the many projects and schemes announced over the past few years. On localism, Ed Balls derided George Osborne for delivering a Single Local Growth Fund of £2bn, compared to the £49bn (or even £70bn) pool that Lord Heseltine called for, but that begs the question - would Labour free more resources for the single pot if they won in 2015?
Across this parliament, defence has fought off the kinds of cuts felt by many other departments, and it sounds like the military's 494 horses are safe for now. As the Chancellor said, it “will remain, at over two per cent of our GDP, one of the largest defence budgets in the world”. Among the 28 NATO countries, Greece and the US are the only other countries spending more than the 2% target. Given this, the Treasury must stick to its insistence that any spending on replacing Trident will come out of this budget, and continue to question whether this is the best use of funds.
It’s hard for those outside to know whether the intelligence agencies need the increased funding they received. Let’s hope that this was not simply a political exercise following the Woolwich attack, and that this money will not be wasted on any measures that are illiberal and ineffective.
At times the Chancellor seemed to drift into Budget territory, with tax bungs and not insignificant welfare savings. The continuing support for freezes in council tax is notable, not least in contrast to Lib Dem and Labour calls for more property taxation for the wealthiest. Owners of mansions have seen their annual tax decrease in real terms.
On the “welfare cap” and whether the basic state pension should be excluded, Labour are right. The cap is little more than a political trap, designed to cause embarrassment to any government which breaches or removes it. But what remaining use does the cap have in clarifying trade-offs if the biggest area of welfare spending is excluded? Further views from CentreForum on what ought to have been contained in the Spending Review can be read here.