Is Nick Clegg right to downplay scale of spending cuts?
21 September, 2010 - 18:21 -- Full Fact team
Deputy Prime Minister Nick Clegg yesterday used his speech to the Liberal Democrat Conference to urge his party to see through the Government's deficit reduction plan. Some commentators however took issue at his portrayal of the size of the planned cuts, accusing him of using a 'sleight of hand'. Is this fair?
Nick Clegg yesterday used his maiden speech to the Liberal Democrat Party Conference as Deputy Prime Minister to urge his party to ‘stick with him’ as he implemented the Coalition’s programme for Government.
Yet as the Lib Dem Leader jetted off to America to address the UN this morning, debate in the conference hall was still raging about one aspect of his keynote speech; namely the contentious issue of cuts.
Reports from Liverpool have suggested many Lib Dem members are uneasy with the speed and scope of the deficit reduction plans, with one delegate calling the policy an “ill-timed and excessive reduction in public expenditure and investment.”
The claim
Mr Clegg on the other hand used his Conference address to paint a different picture. He said that “even when all the cuts have happened, we will still be spending 41 per cent of our national income – the same amount we were spending in 2006.”
The figure was immediately called into question by some sections of the media. Left Foot Forward Editor Will Straw noted that “it falls again to 39.8 per cent in 2015-16 according to the Treasury”, whilst Guardian columnist Polly Toynbee this morning called it a “sleight of hand” by Mr Clegg.
This was, Ms Toynbee claimed, because he “omitted to add, minus 6 per cent [from present spending levels], making cuts deeper than ever before.”
So is the 41 per cent quoted by Mr Clegg legitimate, and what, if anything, does it tell us about the fiscal forecast for the next five years?
Analysis
As the Treasury spending forecasts reveal, all three interlocutors are correct to use the figures they do.
At the time of the next scheduled general election in 2015, total managed expenditure in the public sector is expected to be 40.9 per cent of GDP, just shy of the 41 per cent mentioned by Mr Clegg, but well within the acceptable bounds for rounding.
But as Will Straw points out, 2015 doesn’t necessarily represent the point after which “all the cuts have happened”, as Government spending is forecast to continue falling by the Treasury, hitting 38.9 per cent in 2016.
Furthermore, Polly Toynbee is correct to identify a 6 per cent fall in the forecasts for public spending over the course of the Parliament not alluded to by Mr Clegg. Last year public spending was approximately 47.7 per cent of GDP, 6.8 percentage points higher than it is due to be in 2015.
But these figures do not support Ms Toynbee’s assertion that this represents the Government “making cuts deeper than any before.”
Using Treasury figures dating back to 1965, one can see that over a similar five year period between 1983-4 and 1988-9, Government spending as a proportion of GDP fell from 47.8 per cent to 38.9 per cent, a fall of 8.9 points.
But how useful are these figures for gauging cuts in public spending in the first place?
According to a spokesperson for the Institute for Fiscal Studies, not necessarily all that much.
They told us that whilst calculating public spending in relation to GDP allows changes in values in real terms to be accounted for, it also means that the data reacts to changes in the UK’s economic health.
A look at the time series data, for example, shows that the measure tends to rise at times of financial difficulty and recession, remaining high during the 1970s, rising in the early 1990s and peaking again following the start of the recession two years ago.
Conclusion
Nick Clegg, Will Straw and Polly Toynbee all make valid points about the projected levels of public spending as a share of GDP, backed up by Treasury figures.
However what this tells us about the scale of the planned cuts is less clear. Certainly there are historical precedents within the last 50 years of similar declines in public spending, however the exact economic circumstances of each fall makes any direct comparison complicated.
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