Think tank reaction
agendaNi reviews how the spending review was received by the UK’s main think tanks.
“By cutting spending by 77 per cent and raising taxes by only 23 per cent, a larger burden will fall on those who rely most on public services,” according to the Institute for Public Policy Research (IPPR).
It warned that “by cutting so far and so fast the Chancellor is putting the economic recovery at risk” and added that “while relative protection has been given to investment in transport and science, overall infrastructure spending is still being sharply cut, particularly on social housing and regeneration.”
The think-tank, which has Labour affiliations, notes that there is good news for school funding and for nursery education for disadvantaged two year olds in England; these sums can however be transferred to Northern Ireland through the Barnett formula.
The IPPR concluded that the Chancellor’s spending cuts and benefit and tax credit changes are regressive. “The whole exercise in reducing the deficit can only be described as fair towards the less well off because it includes the last Labour Government’s tax rises which were targeted on the more affluent.”
Carl Emmerson, Acting Director of the Institute of Fiscal Studies (IFS), similarly said: “Our analysis continues to show that, with the notable exception of the richest 2 per cent, the tax and benefit components of the fiscal consolidation are, overall, being implemented in a regressive way. But this is not to say that it is unfair: fairness will always be in the eye of the beholder.”
In a statement that was reprimanded by Nick Clegg, Emmerson stated that the £7 billion in welfare cuts will fall largely on working age individuals and £1.8 billion would come from members of public service pensions “who as a result of this measue, combined with a previous Labour announcement, will see their contributions rise by an average of more than 3 per cent of their salaries.
He said the cuts will be “the deepest since World War Two.”
Tom Clougherty, from the Adam Smith Institute, which was one of Margaret Thatcher’s favourites, gave a positive response. “I’m delighted that the Chancellor has stuck to his guns and laid out plans to eliminate the structural deficit by the end of the Parliament. Politically, this may be difficult, but economically, it is absolutely vital,” he said.
“It is important to remember though that severe as some of these specific cuts are, the overall impact of the spending review is modest. Health spending [in England] is protected, while areas like social security and debt interest payments – which the review’s cuts will not affect – are set to surge.
“It is vital that the Government goes on from here to carry out a radical, comprehensive reform of the public sector, since only that will make cuts sustainable in the long term.”
The Centre for Social Justice, a Conservative leaning think-tank, was broadly supportive, but said it wasn’t fair when it comes to child benefit reforms.
“Broadly, this is a brave and necessary reforming agenda and one that the CSJ welcomes. We must now look at the detail, however, to see how this will be delivered. This is particularly true for family policy. It remains to be seen how the Government will make good the Prime Minister’s commitment to make Britain the most family friendly country in Europe,” said Executive Director Gavin Poole.
The UK’s extensive cuts are also causing debate in the US, where Obama has put $78 billion into the economy. The Wall Street Journal said: “David Cameron deserves credit for bucking the neo-Keynesian consensus and pulling Britain back from the brink.” However a commentator on CBS News described the approach as “a high-stakes roll of the economic dice.”
