Wednesday, 28 January 2015

What do 'the cuts' really mean?

It's easy to bandy words around about 'the cuts'. Everyone thinks they know what they mean. A bit of belt-tightening here; a snip here; a cut there. Job done, right?

Well, no. Not at all. Less than half of our cuts are complete, if we keep on down this road (above). Which, given that the Conservatives have now caught up with Labour's numbers, and are now ahead in the majority of the most recent opinion polls, we probably will.

It might be important at this stage to zero in on the reality of what that means. It's all very well suggesting, as Prime Minister David Cameron tends to do, that 'we've all had to make sacrifices' (notice the past tense), but the actual shape of those 'sacrifices' is yet really to come into focus. We can put a figure on the likely cuts to public spending outside protected departments (overseas aid, health and schools) - about 26% across the Parliament, since you ask - but the enormity of the implications doesn't sink in from just that bold number.

Well, here's a bit more reality. It's £60bn, and perhaps a million public sector jobs. That's the first dose of your austerity icebucket challenge for you. Bracing, isn't it? Though what that means in terms of policy is still a bit opaque, and no politician in an election campaign will tell you.

We can turn here to a sector that we know well - Higher Education. Let's investigate the implications here of a 26% cut between 2015 and 2020, that comes on top of a lot of salami-slicing (and one big student fees reform) in the last Parliament. The vast majority of the budget spent by the Department for Business, Innovation and Skills (BIS) goes into universities - just under £8bn out of about £13bn. So we need to lose just over a quarter of that £8bn - £2bn, over five years. That's doable - just, probably. Just. But the menu might make you feel a bit sick. It might mean, for a few tasters:

  • Abolishing the Arts and Humanities and Economic and Social Research Councils;
  • Very large cuts to the Quality Related research income (currently about £1.6bn) that is distributed on the basis of results from the Research Excellence Framework - perhaps only funding 4* (out of four stars) work, or restricting the money to Science, Technology, Engineering and Maths alone;
  • Ending European and international space research collaborations;
  • Abolishing the coalition's relatively generous grants scheme, and restricting all student assistance to loans;
  • Bringing back the cap on student numbers.

So, basically, one of the most successful parts of the UK economy - its science and research base, and its non-EU teaching income - would become a punchbag for the sake of a couple of billion quid. Well, forgive us if we don't cheer. And before you say 'well, we'll get the money elsewhere', you have to say where: fewer policemen? Fewer elderly care visits? Fewer buses and trams? To govern is to choose, as they say.

Things might be even worse for universities if there is a Labour government, because it is persistently rumoured that an Ed Miliband government will seek to lower the fees cap, currently set at £9,000, to £6,000. That's another £2.5bn down the drain, which a Labour government would have to make up from taxes. Vice Chancellors don't think much of that promise (£) - predictably - though they might hope for far fewer research and science cuts from a Labour government, so this might be all swings and roundabouts.

And bear in mind that these spending departments may have to take even deeper cuts than we've outlined here. There is basically no way on this planet that the Chancellor is going to cut £12bn out of the welfare budget (as he keeps saying, including in an embarrassing Newsnight interview with Evan Davis) without enormous pain for working families. Most of our benefits spending is on pensioners, and the Prime Minister has just signalled very clearly that he is not going to do anything to harm the interests of the section of society most likely actually to vote. The greatest share of the rest is made up of working age tax credits to price people into work - a key part of the Government's plans to 'make work pay'. Disability benefits reform is already in disarray, and the likelihood is that if a slimmed-down and streamlined version of Universal Credit is ever going to get off the ground, that's going to need more cash too, not less.

There is enormous room for doubt whether any of this will actually happen. It appears to be a kind of fantasy economics, and as we've noted here many, many times, it comes at a historical moment when we would expect state spending to rise, on an ageing population and on infrastructure at a time of lower interest rates, not fall.

But if such madness was actually to transpire? Non-protected departments - police, non-frontline defence and procurement, transport, the courts, local authority social services, universities, research, Further Education - will cease to be 'public services' in the way that we've recognised since 1945.

They will get absolutely eviscerated, hammered, gutted, marmalised, smashed and shredded. You can choose the word that suits you, really.