IFS: Tory cuts may total 33% by 2019

Submitted by AWL on 28 April, 2015 - 5:14 Author: Anne Field

The four biggest parties in the next parliament – Labour, Tories, SNP and Lib-Dems – are all intending to continue to implement austerity policies after 7th May.

Where they differ is in relation to the size of the cuts they intend making, the timetable for implementing those cuts, and the extent to which their election manifestos clarify the cuts which they intend making.

This was the verdict of a detailed number-crunching analysis published on 23 April by the Institute for Fiscal Studies (IFS): “Post-Election Austerity: Parties’ Plans Compared”.

(The IFS report refrains from making any political judgements about the parties’ proposals. In fact, the report takes it as read that more austerity is needed. It measures the parties’ proposals against that criterion, but does not challenge the criterion itself.)

All four parties are committed to cutting borrowing as a proportion of national income over lifetime of the next parliament.

The Tories plan to cut it by 5.2% by 2019, and the Lib Dems by 3.9% by 2018. Neither Labour nor the SNP have given an explicit figure for cuts in borrowing. But other commitments in their manifestos would suggest a cut of 3.6% by Labour by 2019, and a cut of the same amount by the SNP by 2020.

All four parties are also committed to reducing the ratio of debt to national income – currently 80% – over the lifetime of the next parliament.

The Tories plan to cut it to 72%. Labour, the SNP and the Lib Dems plan to cut it over the same period to around 77%, 78% and 75% respectively.

The fact that all four parties have taken cuts in borrowing and debt as their starting point means that they are all confronted with the same question: where to make the cuts in spending which are needed to reduce borrowing and debt.

But all four parties are also committed to “tax giveaways”. If the “tax giveaways” are not balanced by “tax takeaways”, then the need for cuts will be even greater.

All the parties have also given a commitment to protect or increase spending in certain areas. But if those commitments were honoured, then this would mean deeper cuts elsewhere.

Unsurprisingly, the report found that the Tories were planning on making the biggest cuts in departmental spending: an overall cut of 7.1% by 2019, reducing such spending to its lowest level in real terms since 2003.

But the Tories, on paper, are committed to protecting or increasing spending on aid, education and the NHS. This means that other departmental spending would need to be cut by 17.9% by 2019.

This would be on top of the 18% cuts in spending implemented by the last parliament, amounting to a total cut of 33% between 2010 and 2019.

Apart from promising the biggest cuts of all, the Tories – who denounce Labour for making spending commitments which cannot be afforded – have not explained how they will pay for their promises on aid, education and, in particular, the NHS.

Certainly not by increased taxation: Tory “tax giveaways” exceed their “tax takeaways” by 0.1% of national income. This imbalance would require further cuts.

And even where the Tories have given a specific figure for a spending cut – such as cutting social security spending by 0.6% of national income – they have not explained where the axe will fall. The social security cuts they have detailed will cut spending by only 10% of that amount.

Although, as the IFS report points out, Labour’s manifesto is vague about its target, its timescale and its policies for cutting borrowing and debt, Labour is also clearly intending to make cuts as well.

Those cuts are nowhere near as bad as the Tories’ cuts – hence the expression “austerity-lite”. And Labour’s policies also include reducing the “need” to make cuts by increasing tax revenues, such as the bankers’ bonus tax and increasing the higher rate of tax for top earners.

But Labour is already committed to implementing the Con-Dem cuts scheduled for the financial year 2015/16 and to making unquantified cuts in “unprotected” departments (i.e. any department other than aid, health and education).

By the IFS report’s calculations, cuts in the budgets of “unprotected” departments would amount to £1.2 billions (0.7%). As a proportion of national income, this equates to a cut of 1.1%

And although total public spending under Labour would increase in real terms between 2015 and 2020, as a share of national income it would fall by around 2.4%.

Like Labour, the Lib Dems are criticised by the IFS report for the vagueness of their policies to cut borrowing and debt. But some of the planned Lib Dem cuts are already clear.

They are committed to cutting £12 billions from departmental spending by 2018, equating to an annual cut of 3.4% ­between 2015 and 2018. But because the cuts are to be made only in “unprotected” departments, this amounts to an annual cut of 9% in the budgets of those departments.

Another £3 billions is to be “saved” from unspecified cuts in social security spending. Overall, under the Lib Dem proposals, public spending as a proportion of national income would fall by 3% between 2015 and 2018.

The IFS report also points out that the Lib Dem policies might result in even deeper cuts, on the basis that their proposals for reducing tax avoidance and evasion are “highly uncertain” and would be unlikely to result in the income factored into the Lib Dem spending plans.

But easily the most damning section of the IFS report is the analysis of the SNP’s fiscal plans.

Not because they are proposing the biggest cuts (they’re not) or because their proposals are the least explicit (they’re not) but because of the gap between the SNP’s anti-austerity rhetoric and their actual pro-austerity policies:

“The implication of the plans they have spelt out in their manifesto is that the period of austerity would be longer than under the other three parties. … Their plans as stated imply less austerity than any of the other parties over the first four years of the parliament, but more in the final year.”

“The implied increase in debt between 2015/16 and 2016/17 would be in breach of the SNP’s manifesto statement that they would see ‘public sector net debt falling in every year as a share of national income’.”

“The SNP plans for slower growth in public spending in 2019/20 than planned by any of the other three parties would result in them having a lower level of total spending than planned by Labour. … This is despite their manifesto stating ‘We reject the current trajectory of spending, proposed by the UK government and the limited alternative proposed by the Labour Party.’”

“For the SNP, a four year freeze in departmental spending outside the NHS and aid (from 2015/16 to 2019/20) would not be quite enough to deliver the spending plans set out in their manifesto.

“Instead they would need to cut ‘unprotected’ departmental spending in real terms by 2.5% (£6 billion) over the four years from 2015–16 to 2019–20. These were not mentioned in the SNP manifesto.”

“The SNP’s recent rhetoric when announcing their fiscal plans states that they would be less austere and, in particular, cut spending by less than the main Westminster parties. … There is a considerable disconnect between this rhetoric and their stated plans for total spending, which imply a bigger cut to spending by 2019/20 than Labour’s plans.”

It is also worth noting that whereas Labour, the Tories and the Lib-Dems all define “protected spending” as aid, education and health, the SNP define only aid and health as “protected spending”.

Because the IFS report is concerned with fiscal calculations rather than political calculations, it does not address the question of why the SNP is proposing a longer timescale for its anti-austerity policies than other parties. The answer is simple.

The other parties want to “frontload” the cuts so that they are implemented before the run-in to a 2020 general election. The SNP, on the other hand, is more concerned with the Holyrood elections in 2016. It therefore wants to masquerade as “the anti-austerity party” in the run-in to that election.

The IFS report lamely concludes: “Unfortunately, the electorate is at best armed with only an incomplete picture of what they can expect from any of these four parties.”

The picture may be “incomplete”. But it is certainly clear enough to recognise that all the major parties are committed to austerity in one form or another and to one degree or another.

Of the four parties whose manifestos are analysed in the IFS report, Labour is the most “austerity-lite”. But that kind of “lesser-evilism” is not the reason to vote Labour.

Although not all unions are affiliated to the Labour Party, and that includes some of the larger ones such as the Public and Commercial Services union, PCS, Labour continues to be the only party in Britain organisationally linked to the trade union movement and officially backed as a party by trade unions.

(The RMT is represented on the Trade Union and Socialist Coalition Steering Committee but is not affiliated as an organisation. In the general election the RMT is backing 45 Labour candidates, 37 TUSC candidates and six Green candidates. And one of the RMT representatives listed on the TUSC website as a member of its Steering Committee – RMT President Peter Pinkney – is standing as a candidate for the Greens.)

A vote for Labour would be a vote for the party which fourteen trade unions with nearly three million members are affiliated to. That linkage between the party and the unions makes it easier for affiliated unions – if they organise to do so – to challenge the pro-austerity policies of a future Labour government.

This does not mean squabbling about how fast or how slow cuts should be imposed, or squabbling about which departments should or should not be “protected”. Apart from cuts in defence, and Trident in particular, the socialist answer to austerity is: No cuts.

Instead, the labour movement answer to austerity should be demanding of a future Labour government policies such as taking the banks into public ownership, writing off PFI debts, a wealth tax, and tax hikes for the rich and big business.

The IFS report underlines the need for a campaign such as the Socialist Campaign for a Labour Victory: campaigning for a vote for Labour while also campaigning for the trade unions to challenge the austerity measures of whichever party forms the next government.

• More information about the SCLV here

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