The difference between a Labour and Conservative government could mean an additional £20 billion of public spending cuts using figures published in today's Budget.
The difference between a Labour and Conservative government could mean an additional £20 billion of public spending cuts using figures published in today’s Budget. Although David Cameron did not set out today exactly how the Conservative’s economic policy would differ from Labour’s, signals from shadow business secretary Ken Clarke last week suggest that public spending cuts in the next parliament could be drastic if the Tories win.
Annex C of the Budget sets out the public finances including Labour’s commitment to “discretionary action” worth:
“£57 billion in 2013-14, including £19 billion of tax measures and £38 billion in measures to slow the rate of spending growth.”
Analysis by Left Foot Forward shows that if the Tories wish to bring the Treaty Deficit down to 3 per cent by 2014-15, as Ken Clarke suggested last week, it would mean taking an additional £21 billion (1.2 per cent) out of the economy in 2013-14. This would mean a fiscal consolidation of £78 billion in total.
Since the Conservatives have set out that they would prefer spending cuts to make up 80 per cent of their fiscal consolidation, this implies spending cuts of £62 billion with tax increases responsible for £16 billion as the Chart above shows.
Table C2 of the Budget shows that the ‘Treaty Deficit’ will be 5.3 per cent in 2013-14 and 4.2 per cent by 2014-15. If the Tories wanted to hit the EU’s target of 3 per cent by 2014-15 it would mean reducing the deficit by a further 1.2 per cent or £21 billion in each year, at the projected nominal GDP of £1720 billion set out in Table C1.
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