Britain’s major parties are beginning to set out their visions for the future ahead of the country’s General Election next year. Within all the areas of disagreement, one surprising area of profound political consensus has emerged — accepting the need to balance the budget.
The Office for Budget Responsibility — respected on both sides of the aisle — estimates that in order to keep the budget balanced, spending on unprotected government departments could fall by as much as 45% in real terms from 2010-11 levels through 2018-19:
The impact of austerity — the policy of balancing the budget every year, come what may — on the Southern European economies of Greece, Spain, Portugal, and Italy, included persistent high unemployment and deep economic slumps. So this sounds like an odd point on which all parties agree. Indeed under the Coalition government’s own austerity program, Britain took years to recapture its pre-crisis level of output and the country remains far below where it would have been if pre-crisis trend growth had continued.
Nevertheless, all three major parties in Westminster have agreed to balance the budget if elected to government in 2015. As two papers released over the weekend show, those commitments could require even deeper spending cuts and/or tax hikes than anything seen so far after the next election. As the Institute for Fiscal Studies puts it (emphasis added):
For all the main UK parties, based on the latest official forecasts for the economy and public finances, achieving their fiscal targets will require further tax increases, or cuts to welfare spending or public services in the next parliament. None of the parties have yet provided the electorate with full details of these tough choices.
The choices are stark. If spending on the National Health Service, pensions, schools and international aide remain protected — as voters tend to demand — the implied cuts necessary to other departments would have to be impossibly large.
For example, the Resolution Foundation suggests that using cuts alone to meet announced budget targets would imply “highly implausible” cuts of two-fifths to the Defence department and as much as 50% of the Home Office budget.
The reality is that for the budget targets to be hit without crippling public services a combination of further spending cuts and significant tax increases (and not just tax hikes on the wealthy) will be necessary. None of the parties currently committing to “fiscal responsibility” are yet confessing this to the electorate.
As the excellent blogger Flip Chart Rick points out in his latest post, the UK political establishment appears to have set up residence in the center of this Venn diagram:
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