Pictured here far left, our fate is now in the hands of the ideologically far right George Osborne.
As we approach today’s Comprehensive Spending Review let’s just briefly reflect on how and why we got here in the first place…
I’m no economist, but it’s true to say that under Blair & Brown public spending has risen consistently as a percentage of GDP since 2000 (New Labour committed to Conservative spending plans for two years following the 1997 election). But it’s also true to say that New Labour won three successive mandates based on its commitment to improve key public services: primarily health and education.
Following years of decline under the Conservatives, most commentators would accept that this was largely achieved. Our hospitals are in better shape and the NHS itself consistently wins praise from service users at the thick end. The sight of the unwell and the infirm blocking corridors in hospital beds has all but been eradicated. The infrastructure of our schools has been vastly improved and the standards of teaching and education delivered, with more kids equipped with basic numeracy and literacy skills, and more school leavers than ever going on to further their education.
As with all areas of government policy you can argue the statistical toss, but anecdotally I’d challenge anyone to tell me that schools and hospitals were in better shape 10 years ago.
In addition, huge amounts of money have been delivered to lower income families by way of the minimum wage, improved benefits and the introduction of (albeit complex) tax credits.
Yes there are inefficiencies, and yes there is doubtless management fat across the public sector that can be trimmed or, better still, rendered. But the increase in public spending (and therefore debt) largely happened for good reason and with a mandate from the British electorate.
Fast-forward to today. Today we have a spiralling deficit that everybody agrees has to be dealt with. But incredibly the key contributor to this debt (and catalyst of the entire economic crisis) appears to be all but forgotten. It’s thought that since the credit crunch the much lauded ‘British Taxpayer’ has bailed out the banks to the tune of 850 BILLION QUID[i]. That’s more than the £671bn total Government spending in the financial year 2009-2010. It pained me at the time, but I believed we had no choice but to prop up the banks or else face economic (and social) meltdown. But having done so, surely we have a right and indeed a responsibility to claw it back. Seeing banks and their bankers immediately return to huge profit and reinstate their bounty bonuses is sickening for all to see.
Fast-forward to today. Today we have a ConDem coalition government led by a Chancellor with no political mandate. A Chancellor that’s so out of touch with the British people that he belonged to the notoriously excessive Bullingdon Club. A Chancellor described by the FT as “metropolitan and socially liberal, hawkish on foreign policy with links to Washington neo-conservatives and ideologically committed to cutting the state.” A Chancellor that’s poised to deliver the biggest attack on spending and public services since the 1920s.
So let’s see what happens. Let’s see how hard he’s going to cut and who he’s going to target. Will the wealthy be asked to pay a little more tax? Will the banks be held to account? I think we already know the answers. But let’s watch this space…
[i] How to spend £850bn bailing out the banks… and £107.1m on financial advice
£76bn To purchase shares in RBS and Lloyds Banking Group
£200bn Indemnify Bank of England against losses incurred in providing over £200bn of liquidity support
£250bn Guarantee wholesale borrowing by banks to strengthen liquidity in the banking system
£40bn Provide loans and other funding to Bradford & Bingley and the Financial Services Compensation Scheme
£280bn Agree in principle to provide insurance for selection of bank assets
£32.9m Slaughter & May – Commercial legal advice
£15.4m Credit Suisse – Financial advice on a range of measures, including Bank Recapitalisation and the Asset Protection Scheme
£11.3m PricewaterhouseCoopers – Advice on APS
£8.7m Ernst & Young – Due diligence on APS, Northern Rock
£7.7m KPMG – Due diligence on APS
£7.4m Blackrock – Valuation advice on APS
£5.3m Deutsche Bank – Financial advice on a range of measures
£5m Citi Financial – Advice on Aps
£4.9m BDO Stoy Hayward – Valuation of Northern Rock
£4.5m Goldman Sachs – Financial advice on Northern Rock
£1.5m Morgan Stanley – Financial advice on Bradford & Bingley
£2.5m Other advisers – Financial advice on a range of measures and proposals to revive Britain’s ailing economy