The Budget and Public Services: it really is worse than we thought

Spending on public services is set to reduce by 25% in real terms by 2014-15 (apart from Health and International Development). One quarter of all other public services could go – that is the equivalent of around a fifth of all public sector staff or well over a million jobs.

(Incidentally, it is difficult to see how the Office of Budget Responsibility’s forecast for jobs reflects the scale of these cuts, especially as economic growth is sluggish.)

But the real impact is going to be not on public jobs – important as they are – as on the services that people get. The poorer you are, the more dependent you are on public services and provision. The more money you have, the more you have options to provide for yourself if you need to and public services fail to deliver. This doesn’t show up in any of the economic analysis of the impact of the Budget on the population, because public services aren’t priced. The effect on many vulnerable people will be devastating.

Some services will probably be even higher than 25%, as the Chancellor indicated some other areas (education, defence) may be partially ‘protected’.

But even in ‘protected’ areas there are massive challenges – in health a more or less static budget (in real terms) over 4 years will require £20bn-worth of productivity savings, in a service which has seen declining productivity in recent years and is also faced by a massively disruptive re-organisation.

There is now no doubt whatsoever that the aim of this Government is not just about deficit reduction – they are out to fundamentally change the balance between public and private – this is about shifting from the (alleged) Big State to the Big Market. On these forecasts (and remember, until they are actually turned into spending plans in the 20th October Comprehensive Spending Review, they are just forecasts) public spending as a proportion of GDP will go below the magical 40% figure in 2015-16 (39.8%) but, and this is crucial, it would keep going down. This is the Thatcher dream of ‘rolling back the state’ enacted, if it is.

In a sense this Budget was the easy bit on public spending – any idiot can pencil in an average reduction of 25% in departmental budgets, it is just a paper exercise at this stage. Between now and October 20th Whitehall will be in perpetual turmoil trying to figure out how to turn this commitment into actual cuts in real services. Even some Tories, like Michael Portillo the former Chief Secretary to the Treasury (i.e. cutter-in-chief), thinks these sort of numbers are impossible. It will be interesting to see what happens to the coalition as it sinks in just how brutal this CSR is going to be.

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