Watching the Chancellor today delivering the results of his deliberations on the future of government spending was, I found, a complex experience.
At one level, the whole thing was a piece of political theatre, his rhetoric configured almost entirely by the setting. It was impossible, for example, for him simply to tell us which budgets would be cut, and when. He had, instead, to make regular remarks about the previous government, to press key political buttons by mentioning some issues rather than others, and he had to highlight the new and/or protected spending the bright light from which would, he hoped, obscure our vision of the darker parts of his presentation.
He had, too, to pull at least one rabbit from the hat, and this he did – as is traditional – at the very end. In the days when I spent rather more of my time attending directly to formal economic matters, I was obliged to monitor pronouncements from the Chancellor more closely than I have tended in recent years, indeed I regularly gave ‘Post-Budget Business Breakfast Briefings’ and media interviews and the like. I developed quite a line on the character of the Chancellor’s rabbits, and concluded that, by and large, they were an extremely bad idea. All too often, a Chancellor’s rabbit consisted of a political flourish in he would announce that some key tax rate or major piece of government spending would change in a surprisingly dramatic fashion. This would secure the cheers of the massed MPs, and thus fulfil the oratorical purpose, but would invariably constitute some sort of ‘shock’ to the economic system the consequences of which would become apparent during the following few months or years in the form of an unsustainable boom or an unnecessarily severe recession. Boring Budgets were, in my view, infinitely preferable, even if impenetrable, because they effectively smoothed expectations and enabled everyone to plan in a considered fashion.
Osborne’s rabbit was of a slightly different character, however. He closed his speech by telling us that, so effective had all his careful and detailed analysis been, so precise were his calculations about the debt servicing costs, so strategically insightful was the distribution of his cuts, that the average cut in departmental budgets was not, in fact, the widely trailed “25%”, nor even the Opposition’s suggested “20%” but a remarkable “19%”.
Hurrah! The cuts are not as bad as we had feared! By conducting the review according to his three overarching principles – of reform, fairness and growth – the Chancellor has managed, he explained, to save us from the truly terrible calamity for which the spin had prepared us. The cuts will only be 19%.
Hang on. Let’s zoom in a bit. (It’s always difficult to get too much detail at this stage: normal practice is to release a plethora of detailed technical appendices in the hours and days after pronouncements of this kind, and it is in these that the devil truly resides.) The Chancellor explained that Defra’s budget – in which, needless to say, those of us concerned with sustainable development are particularly interested – would fall by 8% per annum for each of the next four years. Within this, he went on, spending on flood defences in particular would be bolstered.
Defra’s total budget for the current year (2010/11) is approximately £3.46bn. Cuts of the level set out by the Chancellor mean that by the end of the spending period – i.e. in the year 2014/15 – this figure will have fallen to £2.5bn, in real terms. That’s close to a 30% decline – and if spending on flood protection is protected, then that means everything else will be taking an even bigger hit. That’s a lot of issues – waste, forestry, water, animal health, agriculture – that will have dramatically reduced resources. That’s a lot of ‘environment’ with a lot less money looking after it.
Some ‘green’ issues received a more positive mention during the Chancellor’s speech: the development of the “new green economy” and the creation of “green jobs” were given strong billing, backed up by announcements of a billion pounds to be spent on CCS technology and a billion pounds available for the new ‘Green Investment Bank’. DECC’s budget is being cut be less than Defra’s (‘only’ 5% per annum) with capital investment prioritised within that. The Chancellor also used the word ‘sustainable’ five times – though, it has to be said, on no occasion did he use the word other than to mean ‘capable of being continued’…
There will no doubt be a great deal of commentary on the detail over the hours and days ahead, and from a whole host of perspectives. I was struck that the Chancellor mentioned the new Office of Budget Responsibility a couple of times, stressing its independence. Independence is given great credence these days, since it can be used as a defence against an accusation of bias, and in a culture in which so many of us distrust so many of the sources of information that are available the ability to pronounce a freedom from bias may be a valuable thing. It is very difficult to know, however, whether a source is really as independent as it claims, or whether it is, in fact, representing a particular interest.
This morning, for example, I received an email notifying me that GLA Economics – an entity that publishes information and analysis on economic matters pertaining to the capital – had this morning published “Private sector recovery during fiscal retrenchment”. This paper explains that the cuts are nothing to be afraid of and that a “resurgence of [private sector] investment and trade as well as consumption” will see us through. “Encouraging and maintaining such growth” it explains, “is the best route out of the problems we face”.
This might be true, or it might not – but I can’t help feeling that it is remarkably similar to the argument being put forward by the current Chancellor, who is, as we know, of a similar political persuasion to London’s current Mayor. Is this an ‘independent’ analysis of the situation or not?
I am mindful of this question, finally, because of one quite astonishing thing that the Chancellor said. I noted it, verbatim, because during the course of the past year I have been collaborating with a number of individuals and organisations in London to challenge some of the assumptions underpinning the Mayor’s proposals for a new London Plan. We have, in particular, been trying to argue that some features of the London economy are inimical to the development of a socially just and environmentally sustainable London, and in developing that argument we had on more than one occasion asked ourselves the question: Should we attack the City? Not in any physical sense, obviously: but we had been wondering to what extent it would be sensible or useful to air an argument that said something like:
For too long we have been chronically dependent on a single, narrow and distorting sector of our economy, and many issues – extreme disparity in incomes, a drain on skills for other sectors, a willingness to sacrifice community interests on the altar of the needs of international finance, and so on – can only be tackled if we begin to wean ourselves off our dependence on financial services and the various services that depend on that sector for their livelihood
And at about 1.15 today the Chancellor George Osborne said, with considerable passion, that we have to end our “decade-long dependence on one sector of the economy in one part of the country.”
I wonder what Boris made of that?