Osborne's cuts 'modest'
Friday, 15 October 2010 12:00 AM
By Peter Wozniak
The vast spending cuts to be revealed next week by the chancellor constitute "a shower, not a hurricane", a report has argued.
Tim Morgan, of the brokerage firm Tulett Prebon, wrote the comments in a pamphlet for the Centre for Policy Studies think tank.
Mr Morgan argued that the cuts package unveiled in the emergency Budget in June, far from drastically trimming the state, will only bring public spending back down to 2009 levels, while the spending review was described as 'modest'.
"That the cuts are modest is easy to demonstrate, given the sheer scale of the expansion in government outlays over the last decade," he wrote.
"This level of cuts is therefore neither excessive, nor 'savage'. But it is imperative. For the alternatives are all far worse."
By the end of this parliament, the coalition plans to eliminate the entirety of the structural deficit, primarily through an aggressive programme of spending cuts.
Mr Morgan claims that the modesty of the cuts is a result of huge government profligacy during Gordon Brown's tenure as chancellor and then prime minister.
Had spending increased in line with inflation during Labour's term in office, public expenditure would have risen to £450 billion by 2009/10. In fact the figure was £669 billion.
In the pamphlet Mr Morgan also argues that the gloom surrounding the approaching spending cuts is unwarranted, though he admits that they "will hurt. Jobs will be lost. But deep inroads into front-line services are not necessary.
"Government job losses can largely be confined to rolling back the excessive growth in administration which has accompanied the spending binge of the last decade."
Jill Kirby, the thinktank's director, echoed Mr Morgan's sentiments, saying: "As public and media anxiety builds in anticipation of the comprehensive spending review, it's important to keep a sense of proportion.
"Returning to fiscal reality after the Labour government's huge spending spree is clearly necessary, but the overall fall in real terms spending will be modest.
"By concentrating on reductions in administration - a category of expenditure which ballooned under Labour - the fall-out from the CSR need not be dramatic."
Cutting bureaucracy has been a key theme of the coalition government so far, though a report by PwC earlier this week suggested those public sector job losses could have disastrous knock-on effects in the private sector - which the coalition hopes will lead the recovery.
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