Shrinking Shears
So let's see if we've got this right.
The defence budget - intitially slated for a 25% cut - is now apparently only going to lose 7-8%.
The schools budget - intitially slated to share in education's 25% cut - is now to be preserved at current spending levels in real terms.
The quango bonfire turned out to be a damp barbecue.
There's £7bn extra cash to fund early years help for poor kids. And in all likelihood further "good news" spending commitments to come out between now and Wednesday.
Plus of course, the huge NHS budget is ringfenced to keep all Labour's planned growth, as is the overseas aid budget.
All told, that's starting to sound like an awful lot of backsliding in the cuts department. Are these cuts actually going to come anywhere near what we need?
Let's remind ourselves of the big picture.
Back in his June Budget, George announced that total public spending (TME) would be brought down from this year's 47.3% of GDP to 39.8% by 2015-16. That's a cut of 7.5 percentage points of GDP, which is massive. It's a substantially bigger reduction than the 4 percentage points Thatcher/Howe achieved in the five years after the early 80's recession. And in fact the only time anything like that has ever been achieved in peacetime was during the Lawson boom in the late 80s - a repeat of which does not look altogether likely over the next 5 years.
But here's the really striking thing, despite the sharp projected fall in spending as a percentage of GDP, George's budget didn't incorporate any actual overall spending cut at all. In fact, total spending in 2015-16 was projected to be 9% higher than this year.
In reality, all George was doing was to hold the growth of spending below the projected growth of GDP. Indeed, Tyler's fag packet says that had he frozen spending, then by 2015-16 projected growth in GDP would have reduced the spending percentage to a mere 36.6% of GDP, rather than the 39.8% he's actually planning.
OK it's true, a freeze in cash spending would almost certainly entail a cut in real spending, given the projected rise in prices. But as Tim Morgan shows in a useful new paper for the Centre for Policy Studies, even taking account of projected inflation, George's overall spending plans (the so-called "spending envelope") will still only deliver a minimal real-terms cut. In fact, Morgan calculates that even after five years of supposedly hard pounding, spending in real terms will still only have retreated back to last year's level:
Let's just pause to reflect on this.
What we're saying is that public spending - even in real inflation-adjusted terms - is not planned to fall by very much at all. In terms of reducing its share of national income, most of the heavy lifting is done by the projected growth in that income. Growth that is put at an average 2.7% pa over the next five years.
Hmmm.
Sound familiar?
It's almost like that Shadow Chancellor who used to go on about sharing the proceeds of growth. The one who kept on about it right up until the moment the economy fell over that cliff.
What we really need to understand is that if we don't get 2.7% pa growth over the next 5 years, things could get rather awkward. Not only would the current plan not deliver anything like the 7.5 percentage point drop in spending's GDP share, the lower growth would itself push spending higher via its effect on welfare payments.
Conclusion?
Despite all the screams and waving of bloody stumps we'll be subjected to this week, these cuts overall are pretty modest (and see this by George Trefgarne). The real trouble is that for transparently obvious political reasons, George and Cam have ringfenced a number of chunky areas like the NHS, thus making the pain in other areas that much greater.
From what we hear, a lot of that pain will now fall on welfare payments. Which is fine, inasmuch as it accounts for more than a quarter of all public spending, it has grown hugely under Labour, and working age benefits have to be cut to incentivise work.
But what worries us is that the detail of these welfare cuts does not seem to have been thought through. As we saw with the Child Benefit announcement, it's one thing to agree a change during a late-night sofa session with Dave and George, but it's quite another to force through implementation when the practical details haven't been sorted. There is a very real risk of backsliding.
Everybody knows cutting is difficult. Everybody knew it was going to be difficult this time.
But given that the overall cuts total is considerably less ambitious than the BBC and the rest of the left would have you believe, let's just hope that George has got some hard detail to announce on Wednesday.
PS The late volte face on defence spending sounds like another worrying example of sofa government. Mr Cam apparently intervened personally to over-rule the Treasury and soften the impending cuts. Not only was Cam nobbled by the Defence Chiefs - who naturally want no defence cuts - but it seems very likely he got a personal ear-bashing from Hillary. No doubt she would have told him that while she herself is a great Anglophile and defender of the Special Relationship, she's surrounded by people who have never forgiven the War of 1812, and who are sick of propping us up militarily. Unless Cam rescinded part of the cuts, he could kiss goodbye to joint press conferences with St O on the red carpet, plus those shiny new nukes we've ordered. But let's recall that after the US, we are NATO's second highest defence spender (well, OK, Greece is higher, but we hardly want to go there). According to the official NATO stats, we currently spend 2.7% of GDP on defence (2009), double Germany's 1.4%. Even France - La Gloire herself - only spends 2.1%. So WTF? Why should we continue to shoulder a higher burden, when others are allowed to get away with much less? Tyler yields to nobody in his admiration for the dedication and courage of our services, but there's something seriously out of whack here. Over the entire 65 years since WW2, British taxpayers have shouldered a wholly disproportionate burden in defence of the West. As Ted Bromund's very helpful long-term chart shows (see this blog), for most of the post-War period we spent between 5% and 10% on defence - money the Germans, say, were able to invest in wealth producing infrastrucure and capital equipment:
Sofa spending decisions are no substitute for a fundamental reappraisal of why exactly we're doing all this.