Arguably the most keenly-watched topic addressed by last week's Budget 2010 was that of tackling the UK's budget deficit, which Chancellor Alistair Darling said is expected to come in at £167 billion for the current financial year (lower than the £178 billion forecast in the Pre-Budget Report 2009). This is where the toughest choices will have to be taken, with potential implications for pay awards, unemployment and the UK's nascent economic recovery. But it is also the area on which both Labour and the Conservatives seem most hesitant to set out their respective stalls
Darling identified three main "elements" for tackling the budget deficit: tax; public spending cuts; and economic growth.
IRS pay and benefits editor Sarah Welfare's excellent overview of the key points of the Budget 2010 summarises what is to be done on the first "element", tax.
Moving to the third "element", the Chancellor's GDP growth forecasts were largely unchanged from those in the Pre-Budget Report 2009: only the 2011 forecast was revised down, to bring it into line with the Bank of England's central projection of GDP growth between 3% and 3.5%.
But it is the second "element" - public spending cuts - that is likely to prove the most controversial and engender the most far-reaching change. With the election imminent, detail on the extent of planned cuts was notable by its absence, although Darling provided further detail on £20 billion of already-known public sector efficiency savings. However, as was widely expected, the planned comprehensive spending review - which will be critical to deciding where public spending cuts will fall over the three-year period from 2011, and which Darling promised in the Budget 2010 speech will be "the toughest for decades" - will not take place until after the election. The day after the Budget 2010, Darling went further in an interview with the BBC, stating that Labour's planned public spending cuts "will be tougher and deeper" than those imposed by Margaret Thatcher in the 1980s.
The main opposition party also refuses to go into specific detail as to where the axe might fall on public spending. At the time of writing at least, it appears likely that it will take an election win to coax out firm details of Conservative plans for public spending cuts.
Writing in the Financial Times, George Parker comments (external website):
IRS pay and benefits editor Sarah Welfare's excellent overview of the key points of the Budget 2010 summarises what is to be done on the first "element", tax.
Moving to the third "element", the Chancellor's GDP growth forecasts were largely unchanged from those in the Pre-Budget Report 2009: only the 2011 forecast was revised down, to bring it into line with the Bank of England's central projection of GDP growth between 3% and 3.5%.
But it is the second "element" - public spending cuts - that is likely to prove the most controversial and engender the most far-reaching change. With the election imminent, detail on the extent of planned cuts was notable by its absence, although Darling provided further detail on £20 billion of already-known public sector efficiency savings. However, as was widely expected, the planned comprehensive spending review - which will be critical to deciding where public spending cuts will fall over the three-year period from 2011, and which Darling promised in the Budget 2010 speech will be "the toughest for decades" - will not take place until after the election. The day after the Budget 2010, Darling went further in an interview with the BBC, stating that Labour's planned public spending cuts "will be tougher and deeper" than those imposed by Margaret Thatcher in the 1980s.
The main opposition party also refuses to go into specific detail as to where the axe might fall on public spending. At the time of writing at least, it appears likely that it will take an election win to coax out firm details of Conservative plans for public spending cuts.
Writing in the Financial Times, George Parker comments (external website):
The tough decisions on public spending will be taken in the autumn. Neither Mr Darling nor Mr Osborne have any intention of flashing the blade before the election.And Monday's televised "Chancellor debate" provided little further detail (external website), the BBC reports:
Chancellor Alistair Darling, shadow chancellor George Osborne and the Liberal Democrat Vince Cable all accepted spending cuts on the way would be deeper than anything under Margaret Thatcher's government.But [...] anyone hoping to learn something new about where spending cuts will come would have been left disappointed.But while the exact nature and extent of public spending cuts are not likely to be revealed until some time after the election, public sector HR chiefs are strongly advised to tackle inefficiencies in the services they deliver right away, Personnel Today reports.
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Comments (2)
Given that 2011 is only 9 months away, it feels a little optimistic of the Govt and BOE to be predicting 3 - 3.5% growth! On the back of the worst GDP figures in most of our lifetimes i think this is highly unlikely and, if i may say so, irresponsible.
We all want things to improve, but making predictions like this when the track record of predictions from the Govt and the BOE have been so far off reality makes them look completely incompetent.
Oh yes, i forgot. They are... ;)
Posted by Gareth Jones | March 31, 2010 1:35 PM
Posted on March 31, 2010 13:35
Thanks very much indeed for the comment, Gareth!
Although it of course remains to be seen how GDP growth data for this year pan out (and the subsequent revisions to the data mean the final GDP 'result' for 2010 as a whole won't be set in stone until 2013 or thenabouts), it is quite possible that the BoE projections could ultimately prove a tad optimistic.
Yesterday's revised GDP data for Q4 2009 were feeble (http://www.xperthr.co.uk/blogs/employment-intelligence/2010/03/economic-recovery-in-2010-gdp.html), and would appear to have been at least partly propped up by public spending (http://www.guardian.co.uk/business/2010/mar/30/gdp-up-public-spending-car-scrappage).
After the election, whichever party (or possible coalition of parties, in the event of a hung parliament) finds itself in power will face unignorable economic realities and tough decisions on public spending that can be put off no further. I think this might count as what William Burroughs called a "Naked Lunch" moment ("a frozen moment when everyone sees what is on the end of every fork").
It's going to be very interesting to see how things pan out. And yes, I agree that "we all want things to improve", and that it would be tremendous if the BoE's GDP growth projection proved correct.
Kind regards
Michael
Posted by Michael Carty
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March 31, 2010 5:19 PM
Posted on March 31, 2010 17:19