world : Where does SNP claim of £18bn cuts under Labour come from?

Thursday 13 June 2024 08:45 AM

Nafeza 2 world - Where does SNP claim of £18bn cuts under Labour come from? - BBC News

The SNP's Westminster leader Stephen Flynn is pressing the point home in a letter to Mr Sarwar, saying: "Either you are so out of the loop with your Westminster leaders that you don't understand their plans, or you are deliberately misleading voters to avoid admitting where the axe will fall."

So where does that £18bn figure come from, and what is the context for it?

The SNP leader says the claim rests on the published views of independent experts on public spending, including the Institute for Fiscal Studies (IFS).

The figure he quotes appears in an IFS document assessing the state of public finance, taking on board Conservatives' fiscal rules, before the election was called.

There are several such rules, but the main constraint accepted by Conservative, Labour and Liberal Democrats is that government debt should be falling as a share of national economic output in the fifth year of each forecast.

Each year, this target automatically moves off into the middle distance, meaning Chancellors never have to meet it. Yet agreeing on the rules for fiscal discipline, this constraint explains a lot about the debate in this election campaign.

'Under-shooting the figures'

The IFS stated on 16 April: "Current policy plans imply real-terms cuts to public investment of 2.6% per year over the next parliament. Avoiding those would require increasing spending by £18bn in 2029–30.

It goes on: "Spending on public services is set to grow by 1% per year in real terms over the next parliament, under current government policy. But ‘protecting’ the NHS, schools, childcare and defence budgets will mean that most departments will face real-terms cuts averaging 3% per year. To avoid those would require around £20bn of extra spending in 2029–30."

So the £18bn figure appears to be about capital spending. The £20bn figure is for current or day-to-day spending. Perhaps Mr Swinney is under-shooting the figures the IFS has published.

But note the year for this level of cut - five years from now. There could be a build-up to that point, but a lot can happen to knock plans off course, or to improve the public finances. And there is no clarity to Treasury spending plans beyond this year.

Writing on 25 May, the top team at the IFS updated its thinking: "How big those cuts are depends on what happens to the ‘protected’ areas (such as health and defence), among other things.

"The whole point is, there are no published plans beyond this year, meaning that we do not know. A reasonable estimate is that unprotected budgets face cuts of between 1.9% and 3.5% per year (or between £10 and £20bn by 2028–29).

"Notably, this is before accounting for recent announced increases in defence spending. The precise figures are less important than the fact that there are cuts on the way with absolutely zero sense from the main parties about where those might fall."

Image source, PA Media
Image caption,

John Swinney and his finance secretary Shona Robison may have issues with the Westminster block grant to deal with

The SNP leader also cites the Institute for Government (IfG) Based in London with its main focus on Whitehall, it provides a gloomy context for this Westminster election campaign.

"Spending plans from April 2025 onwards for public services are very tight. Sticking to these – given existing commitments to fund the NHS workforce plan, increase defence spending, maintain overseas aid and expand free childcare – implies other areas of spending being cut by 2.6% a year in real-terms between 2024/25 and 2028/29."

So the Institute for Government brings the timing of that squeeze forward by a year. It reckons that, in England, it is the justice system that will be squeezed hardest, while the NHS gets some protection and school rolls are on course to fall.

If that is passed on through the block grant from the UK Treasury to Holyrood, it would be for Scottish ministers to set their priorities, or to seek more funds using the tax powers they have.

The IfG goes on: "Implementing these spending plans would mean only limited improvement for most services, and a further decline in the criminal justice system. This means they are likely to prove politically impossible to deliver, with whoever forms the next government forced to provide emergency funding, as has been done serially in recent years, in an attempt to maintain service levels."

Squeeze on budgets

So there is a context to the SNP's claims about both Labour and the Conservatives.

Sticking to fiscal rules is, on current assumptions, going to lead to more tightening of spend. But experience tells us that such plans are rarely followed through.

While a squeeze on budgets over the past 14 years has been tough for public services, it has not been as tough as initially intended.

From year to year, under political pressure from inside and outside the House of Commons, Treasury ministers ease off on the plans they had.

Events - a pandemic, a cost-of-living crisis, higher interest rates, war in Ukraine - came along in the last five years, and manifesto promises had to yield to new realities.

When the government rubber hits the road, there may be a smell of burning, but not just from slamming on the brakes.

And what is the alternative? Interviewed by the BBC's Nick Robinson, Mr Swinney said that austerity can be avoided by Westminster raising tax the way the Scottish government has done.

However, higher personal taxes have a nasty habit of cutting back growth, because people have less to spend. UK tax is already at the highest point in seven decades, and most parties are agreed - with the exception of some in the Greens - that the UK needs more growth.

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