The Government Spending Review and the Third Way
Walter Stanners
Press comment on the Government's Spending Review largely followed the
lines indicated by the Chancellor's speech. Philip Stephens in the
Financial Times of July 15 found evidence that the political script had
been rewritten, that we now had a "routemap" of the Third Way. As it
happens, I tend to agree with Stephens, if the totality of Brown's
public attitudes are taken into account, but the bare figures of the
Review hardly support the rhetoric with hard evidence. My table below
uses nothing but data from tables A1, A2 and A6 of the Review. All it
does is divide the numbers to get expenditure in terms of the percentage
of GDP. In order not to clutter it up, I give only the first and last
years, the current year being used as a base for the index. The first
year is deep in Tory history, the last is in the shining future. The
last column is added to give scale. The indices, if shown in full, vary
fairly smoothly with the years, so my three years hide no statistical
tricks.
Year 1993-4 1998-9 2001-2 2001-2
% of GDP, indexed £bn
Total govt expenditure 110 100 102 390
Social Security transfers 109 100 99 109
Education 113 100 109 48
Health 104 100 108 46
Interest 90 100 84 27
Scotland & Wales 119 100 101 23
Local Authorities 76 100 106 19
Environment 169 100 111 12
Trade & Industry 206 100 104 4
Soc Sec (Admin) 153 100 105 4
International 125 100 121 3
Other 112 100 102 95
The first line confirms that the government is going to spend without
markedly raising the spending level, which will remain substantially
below that of 1993. The second shows that social security spending is
being held below Tory levels. Planned spending on education, in spite
of the hype is, as the Institute of Fiscal Studies pointed out, well
within the normal political swings and roundabouts. Health spending is
going up, but perhaps more modestly than was made to appear. Spending
on Scotland and international development, both picked out as "winners"
in press comment, are seen to fall, in fact, below Conservative
precedent.
The "smoke and mirrors" effect is quite noticeable in the indices for
2001-2. A glance down the column gives the impression that the overall
index can hardly be 102, but the money-weighted average is indeed so.
The saving in interest payments alone is enough to pay for the increase
in education.
Generally, the picture which powerfully emerges is that in most areas of
expenditure, the first two years of Labour have been years of severe
expenditure squeeze, measured by the standards of the previous
government, although conveniently presented in terms of "sticking to
Tory spending limits". This squeeze is being only "prudently"
alleviated in the next three years. Table A6 of the Review (historical
series) shows, indeed, that the expenditure level planned for the annus
mirabilis of 2001-2, as a fraction of GDP, was exceeded in all but three
years since 1970.
The degree of political wizardry which the government has consistently
shown (aided no doubt by luck) works both ways. If next-to-nothing can
be presented plausibly as a small revolution, or at least, a signpost to
the Third Way, what is the deeper plan? It is there that some of us
may, with little but rhetoric to go on, entertain hopes or
apprehensions.
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