The point about employment is particularly exemplified by 1 of the signitaries of that letter in the Telegraph yesterday. Because, at the same time as the head of Boots is saying the private sector can make up for public sector job losses, Boots is laying people off at its Nottingham and Feltham bases.

The answer is, not very. An independent Bank of England has presided over an average inflation rate of 3%. The OBR forecasts an average 3.4% inflation over the period to 2014/15. So, the cuts will be deep in real terms, as the cumulative rise in prices is projected to be over 18%.

But Redowood has wandered to the outer shores of sanity in his claims about per capita spending growth, as he seems to think the population is static. It isn’t. It tends to grow about 0.4% per year, so again real cuts in per capita spending andservices. The population is also ageing, which would require increased spending even if the both prices and the population were static. So again, real cuts in the provision of services, not less than 15% in real terms.

Just like, er…George Osborne says.

Yes and no. It’s the official inflation target. So for his purposes it’s not arbitrary. It’s only arbitrary in the context of determining what the target should be. (Why is 2% better than 2.03%?)

What is arbitrary is pointing to the current CPI figure and implying it’ll be frozen at that level for 5 years.

“When the economy is growing and living standards are rising, why should spending on health, education and other public services not increase accordingly?”

The public sector doesn’t have a right to help itself to people’s increasing producitivity. It’s there to provide services, surely? Surely the point isn’t to use up resources?

“Put another way, public spending is going to contribute the bulk of deficit reduction.”

Put yet another way, public spending will rise by approx £50bn and they’ll take almost £200bn more from us in taxes compared to what they do now. £200bn is not ‘tiny’.

“Meanwhile, fewer jobs means fewer opportunities for new entrants to the labour market and a bleak outlook for new graduates and school leavers.”

Business expects to employment to rise. It stands to reason that lower taxes (than the alternative) will mean lower unemployment due to a smaller tax wedge. Let’s revisit this post in 5 years.

“He neglects to mention that unemployment was over 3 million from March 1983 to May 1987. “
Unemployment now is over 6 million, including “incapacity” benefit claimants etc.

1. Inflation. The deflator which Nick Pearce used is from the Treasury. This is the correct deflator to use to compare government spending in real terms. Inflation is higher than the target so a higher deflator needs to be used. Defending Redwood for using 2% because it’s the BoE’s inflation target makes about as much sense as going to the US and asking for a $2 exchange rate because that’s what it was three years ago.

2. Presuming we want public sector wages to rise in line with living standards and that public sector inflation is higher than elsewhere, the %GDP is the right measure.

Will

not if they are slashed to nought and we allow people to work rather than parking them for life in front of jeremy kyle.

Further, spending didn’t fall as a proportion of GDP until 1986/87- as driving up unemployment swells the welfare bill no matter how much benefit entitlements are slashed.