The axeman came. And the Chancellor's handiwork was as terrible as expected. With yesterday's Comprehensive Spending Review (CSR), George Osborne continued the job he began in June's emergency Budget. The decision four months ago to eradicate the UK's structural deficit over the course of a single parliament was always going to necessitate the most severe cuts in public expenditure seen in the post-war era. What we got yesterday was a clearer picture of what that austerity will mean in practice.
There were, it must be noted, some points of light in the CSR. The ring-fencing of central government grants to local councils will be lifted from next year. The Treasury doubtless wants to devolve responsibility for the cuts to come. But, even so, this represents a welcome empowerment of local government after decades of relentless centralisation. Similarly, if drastic cuts to the Justice budget compel reform of the draconian, wasteful and ineffective policy of locking up ever more people, some good can result from the swinging axe.
The "pupil premium" in education spending is a welcome recognition of the principle that extra money should follow those from less well-off backgrounds through the system; and the funding for early-years education shows a welcome recognition of the overwhelming importance of these years in a child's development. The protection for the international aid budget is likewise to be applauded. And while the science budget was frozen, the outcome for Britain's university researchers could have been far worse.
Yet these are pinpricks of light in a very dark horizon. The figures in the CSR foretell a squeeze of epic proportions on local services. The local government budget will fall in real terms by 27 per cent over four years. This is likely to mean fewer social workers, pressure on rubbish collection and the closure of libraries. Social housing construction is set to stagnate, rising by just 27,500 homes a year despite ever-growing demand for such accommodation. The danger is that the severity of these cuts will cause councils to sink even further in the public's estimation, fatally setting back the cause of localism.
Despite some investment in carbon capture, wind technology and the establishment of a green investment bank there will be severe cuts to the environment and climate change budgets. And a widening of roads, a rise in the cap on rail fares and a reduction in bus subsidies suggest that this Government's green convictions are less deeply held than it claims. Arts funding comes out badly with a 20 per cent cut over the Parliament. Free museum entry will remain, but the Arts Council will have considerably less to distribute. As for the BBC, it is clear that the Corporation was ambushed this week. Whatever the wastage at the BBC (and it certainly exists) it is impossible to see how an effective 16 per cent budget cut can by absorbed without its output suffering.
Fairness was one of the themes that Mr Osborne said was running through the CSR. But the truth is that there was not enough of it. The rise in the state pension age has long been inevitable. The closure of the loophole through which the very wealthy avoid tax by ploughing their remuneration into pension pots is, of course, welcome. And since the benefits trap does need to be dismantled, the £2bn upfront investment in Iain Duncan Smith's "universal credit" is good news. Yet the zeal with which the Coalition will go about shaking up the welfare system for the poor sits uneasily with the kid-glove treatment of wealthy pensioners, who will continue to receive their winter-fuel allowance payments and free bus travel among other benefits. Meanwhile, it is an inescapable reality that the less-well off rely more than the prosperous on local council services. And it is poor people, not the wealthy, who will suffer as the legal aid budget takes a hammering.
Furthermore, the fundamental macroeconomic gamble that the Coalition is taking remains unchanged. Notwithstanding the capital expenditure that will be maintained, lower departmental government spending over the next four years will suck demand out of the economy at a time when the recovery is still fragile. Around half a million public-sector workers over the next four years will lose their jobs, or not be replaced when they depart. The shockwaves will travel deep into the private-sector job market too, as a host of firms find their government contracts cancelled. There is a grave danger that, despite the optimism of some representatives of the business community on display this week, the private sector will not take up the slack.
It would be wrong to characterise everything unveiled by the Coalition as regressive. But, in the end, fairness and a growing economy are two sides of the same coin. The country will not get one without the other. If this Government's economic policy ends up undermining growth, its claim to be upholding fairness will soon be snuffed out.Reuse content