Monday, 9 July 2012

Whitehall underspends: even more room for manoeuvre


 The news that Whitehall underspent by more than £3bn last year (above) - helping to bring up a great big total of nearly £7bn more cuts than forecast - has brought one shocking realisation to the fore: the Chancellor's hands are not tied.

Remember, you heard it here first. But you say it also in the fuel tax debacle that saw a junior Minister hung out to dry by her bosses, sent out to explan where they could magically suddenly find hundreds of millions of pounds from to placate a campaign in The Sun.

To be honest, underspends are normal. Ask yourself this: would you rather tell your bosses that you'd spent 99% of the budget, or 101%? Yes, me too. And when you're spending billions and billions, like the health service, that's going to add up to a lot of money very quickly. Underspends have long been endemnic, as I showed myself in one of the chapters of my first book. Whitehall also finds it difficult to react quickly to changing circumstances - so what we're seeing now is a reaction to the 'cut everything' fervour of late 2010, rather than the more nuanced position taken by Ministers over the last few months.

But it does provide some breathing space in 'core' departmental budgets, apart from the so-called 'automatic' budgets that go up and down with the economy (social security, for instance). It's a lot of money that could be used, rather than being clawed back by the Treasury. Very little will stay with departments - basically, a billion and a half that they've already agreed.

More could be done with that cash, right now.

£3bn-£4bn in immediate spending wouldn't break the bank. As the Institute for Fiscal Studies pointed out when publishing this data, the economic risks facing us are 'on the downside'. If the eurozone crisis goes on much longer, or gets much worse, the economy will be in big trouble. All bets will be off (though I would say that will require less austerity, not more). For now, though, no-one thinks we should go on a great big spending spree. But letting out the Chancellor's austerity rainment makes sense. Today. Or, preferably, yesterday.

Instead, we go on and on with the austerity - hammering Britain's poorest regions with the 'localisation' and 'standardisation', of business and council taxes, creating perverse incentives in the National Health Service and elsewhere (ask for cash towards the end of the tax year - you're more likely to get it), and adding immeasurably to the general gloom of an economy that still seems to be slowing.

But there are alternatives. There always are.

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