Mehdi's Morning Memo: Austerity, Austerity And More Austerity

Britain's Chancellor of the Exchequer George Osborne approaches a cash machine at a brank of Lloyds TSB bank in central London on June 19, 2013. AFP PHOTO / POOL / LUKE MACGREGOR (Photo credit should read LUKE MACGREGOR,LUKE MACGREGOR/AFP/Getty Images)
Britain's Chancellor of the Exchequer George Osborne approaches a cash machine at a brank of Lloyds TSB bank in central London on June 19, 2013. AFP PHOTO / POOL / LUKE MACGREGOR (Photo credit should read LUKE MACGREGOR,LUKE MACGREGOR/AFP/Getty Images)

I'll keep it brief this morning as there's really only one thing you need to know on Wednesday 26 June 2013 - it's Spending Review Day!


This was the day the chancellor hadn't originally planned for; George Osborne had assumed austerity would be coming to a close in 2015. The budget would be balanced. Tax cuts would be on offer. Growth would be back.

Remember: the UK economy was supposed to have grown by 6% by now, compared to the anaemic 1.1% we've seen over the past three years. Over the same period, Germany has grown by 2.9% and stimulus-friendly America by 4.9%.

This is now, officially, the slowest and longest UK economic recovery for over a century.

The deficit is up, year on year. The national debt continues to rise. The chancellor will be borrowing £96bn come 2015. Thus, today's long-awaited Spending Review is all about prolonging the pain of spending cuts and tax rises beyond the next election; of extending Osborne's 'Age of Austerity'.

From the Huffington Post:

"Chancellor George Osborne will today draw up the battle lines for the next general election as he sets out his final spending plans before the country goes to the polls in 2015.

"The Spending Review for 2015/16 - the first year of the next parliament - is expected to slice £11.5 billion off the day-to-day budgets of Whitehall departments, extending the age of austerity the beyond the general election.

"But Mr Osborne is also expected to confirm that billions of pounds of additional investment are to be directed into major infrastructure projects to boost growth over the years to the end of the decade, with details to be set out by Treasury Chief Secretary Danny Alexander tomorrow.

"'While the British economy is leaving intensive care; now we need to secure that recovery,' he is expected to say. 'We're saving money on welfare and waste to invest in the roads and railways, schooling and science our economy needs to succeed in the future. I know that times are still not easy for families. But we have a clear economic plan. We've stuck to it. It is working. And I'm determined to go on delivering it.'"

Some on the right claim the impact and extent of austerity is exaggerated. They're mistaken. "The scale of the cuts is really astonishing," the Institute for Fiscal Studies's Paul Johnson told the Today programme this morning, warning that the cuts were historically precedented and would need matching tax rises at some stage in the next parliament.

The FT's Chris Giles notes how "Britain is almost halfway through a planned eight-year austerity programme, which encompasses real spending cuts unprecedented in postwar history. Because more money has to be found each year for debt servicing, government departments are being squeezed. While the last spending review in 2010 spanned four years from 2011-12 to 2014-15, this review is for one year only, the period immediately after the next general election."

Meanwhile, contrary to earlier reports, the spooks will the "the biggest winners" of today's Spending Review, according to the Telegraph splash:

"MI6, MI5 and Government Communications Headquarters (GCHQ) will see an inflation–busting increase in their combined £1.9 billion budget, underlining the Government's concern over the growing terrorist threat following the Woolwich attack.

"Police spending on counter–terrorism will also be protected and will rise in line with inflation.

"The percentage increase in the budgets of the intelligence agencies – – at more than three per cent in addition to inflation – – will be the largest of any item of government spending including the NHS, schools and international development."

If spooks, with the constant hyping of the terror threat, are the winners - who are the losers? The Mirror's Jason Beattie says Osborne will "set out plans to slash spending – by leaning on hard-up town halls... Tory chairman Grant Shapps let slip local councils will be hit hardest with cuts of 10% – on top of the 33% they have already lost under the Coalition.

"The Local Government Association said this could put children’s centres, museums, street lighting and subsidised bus fares at risk, as councils are forced to find another £30million of savings on average."

What will Labour do? Lie down and accept all the Osborne cuts? That seems to have been the suggestion from the party leadership in recent days. However, the Guardian's Patrick Wintour reports:

"Despite Labour's recent changes in policy, potentially large economic and political divisions will still be apparent. On spending, growth, welfare and the causes of recession, Balls and Osborne have plenty on which to disagree.

"Balls has accepted current spending and borrowing figures announced for 2015-16 as his "starting point", but has not made any commitment on capital investment, saying there is a case in two years' time for still investing more on roads and infrastructure... Balls has also not yet said that he will accept the mix of 80% spending cuts and 20% tax rises set out in the coalition deficit reduction plan. He has for instance said he favours a mansion tax, something the Conservatives oppose.

"Nor has Balls accepted as fixed the departmental totals due to be announced today for 2015-16. That means the ringfencing of health, schools and international development might be opposed by Labour - politically contentious but possibly inevitable since spending in the three departments, will represent half of total government spending by 2015-16."

Wintour concludes: "Osborne will be hoping that this is the last day he talks about cuts. From Thursday, he intends, the coalition story will only be about recovery, healing and growth."

My bet is that it won't be...


From today's Sun/YouGov poll:

Labour 40

Conservatives 32

Ukip 11

Lib Dems 11

That would give Labour a majority of 92.


Daniel Finkelstein, writing in the Times, says: "Osborne must stick to his Scalextric model."

Mary Riddell, writing in the Telegraph, says: "Are the two Eds another Attlee and Cripps – or just Tory clones?"

Simon Jenkins, writing in the Guardian, says: "Politicians who demand inquiries should be taken out and shot."

Got something you want to share? Please send any stories/tips/quotes/pix/plugs/gossip to Mehdi Hasan (mehdi.hasan@huffingtonpost.com) or Ned Simons (ned.simons@huffingtonpost.com). You can also follow us on Twitter: @mehdirhasan, @nedsimons and @huffpostukpol

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