Is the state shrinking? Yes, even if John Redwood says it isn’t

There’s no money left in the kitty! We’ve maxed out the nation’s credit card! By this point, I find it hard to be reasonable when confronted with these inane metaphors*. But there’s been another response, recurrently voiced by the Tory right over the last few years, which is less effective for them as a rhetorical strategy but  also more difficult to straight forwardly repudiate: there are no real cuts. I’ve been trying to find a good video of this case being made (“what austerity? there’s no austerity! the state is still growing”) but instead all I could find was this hilarious video of John Redwood slipping into an Alan Partridge persona (of sorts) because he is doing a ‘webcast’:

But Flip Chart Fairytales has posted an incisive analysis of this claim, arguing that while the “state-shrinkage seems fairly modest, taking us back to somewhere between the early and mid-2000s” this is a misleading picture for a number of reasons:

Firstly, the population isn’t the same as it was in the mid 2000s. It contains a lot more old people who receive state pensions and associated benefits. Furthermore, this ageing population makes greater demands on public services like health and social care.

Secondly, the labour market is weak. Average wages are set to remain low for the next few years. People in low pay, zero hours contracts and precarious self-employment don’t deliver much tax revenue and a lot of them rely on benefits. Over the next few years, despite modest economic growth, in-work benefits and pensions will keep up the pressure on welfare spending.

The result of this increased pressure on public finances is a shift in state spending away from public services and towards welfare and debt repayments.

It’s really worth reading the whole thing in full. The takeaway point is that “while overall public spending reduces by 3.9 percent between 2010-11 and 2018-19, per capita day-to-day spending on public services falls by around 28 percent over the same period”. Furthermore, the likelihood that budgets will be protected for certain departments amplifies the weight with which the axe will fall on others:

As you look into the detail of public service spending, what starts off looking like a fairly small cut gets much bigger. If these spending plans are carried through to 2019, some parts of the state will not so much shrink as disappear completely.

It will need someone with more time than me to dig out the data and work out when a government last spent as little as £3,899 per head, at today’s prices, on day-to-day public services. My guess, just looking at the IFS graphs, is that it must have been some time in the 1990s, when we had a much younger society placing less demand on services like health and social care.

Of course, these are only plans. It may be that economic growth delivers higher revenues, or the next government increases borrowing and taxes. It may be that the spending cuts won’t be as severe. That said, taxes would have to rise significantly to prevent any further cuts after 2015.

Whatever the headline figures might say, though, state provision is shrinking and is set to continue to do so until 2019. Fiscal, economic and demographic factors magnify what looks like a modest spending cut to a point where the squeeze on some parts of the public sector becomes severe. According to the government’s published plans, a 3.9 percent overall spending cut will become a 28 percent public service cut. This is the brutal arithmetic of public spending.

*I used to love arguing about politics. Now I find it tiring and depressing. It means I sometimes get really pissy if someone infers from my presence on a demonstration that I wish to ‘sell’ my views to them. I’m not really sure what that transition is about.

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