Don’t believe the right: the cuts will hurt

City AM's Editor, Allister Heath, argues that Osborne's cuts are small by historic comparison. His argument doesnt stack up and the facts speak for themselves.

City AM’s Editor, Allister Heath, had another crack yesterday at the right-wing talking point that the cuts won’t really hurt. This line has been tried before by John Redwood MP and Spectator editor Fraser Nelson. But rather than arguing that the cuts are non-existent (Redwood) or “soft” (Nelson), Heath took the line that they were small by historic comparison. The argument still fails to stack up.

Heath’s uses new data released by the Office for Budget Responsibility (Table 2.32) to argue that Chancellors Nigel Lawson and Ken Clarke and even Labour’s Denis Healey were greater cutters in a single year than Osborne.

He is, of course, technically correct. But in doing so he conflates two parts of public spending – the “costs of recession” caused by rising debt interest and welfare payments and the discretionary spending which pays for our public services. Thankfully, the IFS made precisely this distinction in their post-Budget analysis. The graph below shows what public spending looks like when those non-discretionary items are taken out.

The IFS analysis shows the “longest, and deepest sustained, period of cuts to public service spending since (at least) WW2”. It’s also worth noting some of the vagaries of Heath’s previous examples:

– Under Denis Healey in 1977-78, inflation was rampant and volatile meaning that the public spending settlement (which was set in cash terms) could result in either a real terms cut or rise depending on the level of inflation that year;

– Under Nigel Lawson in the late-1980s, Heath admits that “the reductions were painless as they were caused by a slump in unemployment benefits” – a complete reversal of the current situation where unemployment benefits are rising;

– The late-1990s boom also meant that overall spending cuts did not impact public spending to the same extent because of the corresponding reduction in welfare costs

Perhaps Heath should heed the advice of Conservative Home’s Tim Montgomerie who wrote last October that:

“I still think the argument being made by these centre right commentators is the wrong argument and is in danger of making the Right look out-of-touch with the real world. The cuts will amount to “just a scratch”, was the headline above Lawson’s piece (£). The fiscal retrenchment may not be as blood-curdling as some cartoonists portray but it is going to hurt – at least for a few years – and it is going to hurt some people a lot.”

There are many groups who will testify on this point in the coming years. Heath et al can try as much numerical sophistry as they like but it won’t blunt the real impact of the cuts in the real economy.

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