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Next year's short term Spending Review will leave some big decisions for 2015.
It’s looked likely for a while, but it’s now been confirmed by Danny Alexander at the Liberal Democrat party conference that next year’s Spending Review is going to be a mini Review. Spending details will be agreed up to 2015/16 only, leaving some very tough choices to be fought over during the next election in 2015.
The chances of holding a three year Spending Review that covered so much of the early years after the next general election have diminished as the downturn drags on and the austerity programme continues to extend. David Cameron started flagging as early as this summer that the next Spending Review would be short rather than medium term.
It makes political sense for the Conservatives and Liberal Democrats, thinking about how best to differentiate themselves in the general election, that they don’t lock themselves into spending commitments – or rather significant spending cuts – that constrain their ability to fight the election as independent parties.
This means that, just as in the last election, the key battleground for voters is likely to be around austerity. And the fighting is likely to begin even before hustings – even a mini Spending Review to 2015/16 is going to require an additional £16bn of spending cuts (about 1.5 percent of total managed expenditure), including some welfare cuts. The Lib Dems have already been setting out their ‘red lines’, as Nick Robinson highlights here. Danny Alexander has set out that the Lib Dems will be against benefit freezes and £10bn of cuts to the welfare budget and will demand higher taxes on the wealthy – but they haven’t ruled out cuts to universal benefits such as Winter Fuel Allowance.
IPPR has put together some fascinating slides – well worth 5 minutes of your time – setting out the tough choices facing political parties in what will now be the next two Spending Reviews. A summary slide highlights that:
Beyond the tough choices and political jostling, a mini Spending Review also has big implications for longer term investment in our local economies. Will local authorities be able to commit to partnerships with private sector investors with so much uncertainty about what policies will be around post March 2016? With so much upheaval over important issues like planning, risk aversion may rule over innovation.
This is in addition to spending cuts to date targeting capital rather than revenue spending. Centre for Cities’ recent review of how local authority spending has changed shows a similar pattern, and that funding is shifting to statutory rather than discretionary services – meaning that economic development is losing out. That means that some of the policy areas that will do most good to our economy in the short and longer term, such as investing in infrastructure, which Centre for Cities’ researchshows is essential for growth, are the areas being cut by national and local government alike, in response to budget and legal pressures.
There are no easy answers to the conundrum of reducing spending, kickstarting economic growth and transforming the way we deliver public services. But as the mini Spending Review kicks off, there’s a chance to start feeding in thinking about some of the ways we might cope with lengthy austerity. We’ll be doing more work on this and would welcome your ideas and comments about what’s most useful to focus on.
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