Wednesday, October 20, 2010
George's mysterious medicine
Posted by David Smith at 04:00 PM
Category: Thoughts and responses

It is interesting that 10 billion of the planned 81 billion of spending cuts in the comprehensive review are from savings on debt interest. Interesting too that by squeezing an additional 7.5 billion out of welfare the chancellor has managed to reduce the planned real cuts in non-ringfenced departments to 19%.

There's plenty of detail on those welfare savings, and George Osborne was able to announce quite a lot of spending lollipops in his speech. Otherwise, however, the detail of where the cuts will come is mostly still awaited. The spending review is here.

One shift. welcomed by business, was that capital spending is being cut by 2 billion less than was signalled at the time of the June budget, though that appears to have reflected the difficulty of getting out of existing contracts than a fundamental change of heart. Even so, Osborne was able to announce a series of public capital projects that will be going ahead, including hospitals, road and rail improvement schemes and, perhaps most significantly, London's Crossrail project.

The Treasury, with an innovative distributional analysis, worked hard to demonstrate that, even when the welfare cuts are factored in, the pain of the cuts extends well up the income scale and even that higher income groups suffer more. That's just about plausible when Labour's tax hikes are factored in but much harder to argue on spending alone.