We may be accused of negativity when we criticise the spending review: public spending is still forecast to fall to 36.4% of national income by 2020-21, and the Chancellor insists he is determined to be run a budget surplus and begin paying down Britain’s debt. These are grand ambitions that we endorse and hope to see come to fruition. However, having reflected on the spending review and autumn statement we cannot help but feel this is a house built on sand.
Overall government spending will increase in real terms by 0.8% from 2015-16 to 2019-20, two thirds of the intended departmental cuts have been cancelled and, disappointingly, the government is set to break its own welfare cap.
The state is still spending too much.
The chancellor intends to spend more every year than he had originally stated, he is hiking taxes to help make up for it, and this is all based on savings made from previous cuts and current economic growth forecasts.
Basically, the strategy relies heavily upon current economic conditions continuing or improving; a gamble that poses a risk to our economic security.
We have been lucky that the OBR forecasts improved tax receipts, lower interest rates and reduced costs for servicing the national debt. The chancellor intends to ride this luck by relying on growth projections and economic smooth sailing, and using the unexpected spare funds to spend more and cancel planned austerity measures.
Official forecasts are so often wrong, our economic recovery is very fragile and could collapse in the event of a downturn. Even minor negative adjustments to growth could see the budget deficit rising once again and tax receipts could be lower than expected as has happened many times before.
The greatest shame is that after the collapse of the opposition, the government has become cautious. The chancellor has one eye on the leadership race, and the party seems content to sail a steady ship to an easy election win. This was a great opportunity for ambitious policy and radical ideas, for reshaping the state and reinvigorating the country. We should not waste this opportunity, for it may not come again for quite some time.
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