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Is Alexander ushering in Austerity Squared?

23 April 2012

12:15 PM

23 April 2012

12:15 PM

23rd April, 2012 — mark it down in your calendars, CoffeeHousers.
For, after weeks of froth and fury about tax, today’s the day when the government focused on spending cuts again. In a speech
to the Institute for Fiscal Studies, Danny Alexander has announced what are, in theory, a couple of new restraints on spending. First, government departments will have to share information about
their spending with the Treasury on a monthly basis, and let Osborne & Co. pore over it. And, second, they will also have to find extra capacity in their existing budgets for unforeseen
expenditure, rather than just relying on the Treasury’s central reserve.

Alexander described these measures as ‘another signal of our unwavering determination to deliver the fiscal consolidation we promised’. Which is a long way of saying that the Treasury
expects every department to do its duty. While it’s true that the departmental spending cuts are broadly on course and on time, it’s also true that the bulk of them are yet to be delivered.
The process could still collapse into a flabby mess. What the Treasury will fear is a repeat of the ‘efficiency drives’ conducted under New Labour: cuts are identified, five year plans
scheduled, numbers published, speeches spoken — and then nothing happens. After all, the spending cuts encoded into the Budget are little more than aspirations. Until they are actually
implemented, then the Exchequer shouldn’t really count on them at all.

And you know what a failure to deliver the planned cuts would mean, don’t you? Yep, deficit reduction would slow, the debt could keep on rising as a percentage of GDP, our AAA credit rating might
be threatened, and so on. Hence why Alexander is eager to lay down the law today. Indeed, I wonder whether his announcements represent the first stage of Austerity Squared, the prospect of which I
wrote about last year. Either way, we’re back to the cuts. Normal service
has been resumed.

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