Have the cuts in public expenditure, announced since

2010 by the UK government, achieved their goals?

Critically analyse their consequences in the public
sector.

This paper will focus on the consequences of the 2010 public expenditure cuts. The first
section briefly summarizes the public expenditure cuts on each public department and their
goals. The second section looks at the results of these changes and analyses if they met their
objectives.

The Goals
Firstly, we will look at the objectives of these austerity measures. Oxfam (2013) argues that
the goal was to reduce the UK deficit and to raise the level of confidence and growth in the
economy. This view is sustained by Peter Taylor (2011) “2010 Emergency Budget, is to deal
decisively with our country’s record debts ... and to set the country on the course of
recovery”, thus lower debt levels, market-led growth and lower public spending are the main
objectives. According to Rowena Crawford et. all (2011) the government’s plan will reduce
the public spending from 47.4% of GDP in 2009-10 to 39.3% by 2015-16. Philip Booth
(2010) points out that these measures will bring on average 19% cut per government
department and 500 000 lost jobs. The NHS will be protected and will even have an increase
in its budget.

Measures
Scale: The period 2010-2015 is forecasted to be the tightest period since the Second World
War (Rowena Crawford et. all, 2011). IMF argues that out of 29 industrial countries UK is
third in the decrease in spending as a share of GDP. The total programme has a value of
£110.3 bn in tax increases and spending cuts (Peter Taylor, 2011).

Speed: According to Peter Taylor (2011) the government aims to reduce the deficit from
8.4% of GDP in 2009 to 0.4% of GDP in four years. OECD proposed fourteen years for this
process and the Labour party argued that nine years will be sufficient. All these different
figures resulted in a debate on how the private sector will react to such a big reduction in
public spending.

Composition: Philip Booth (2010) argues that on 21st Oct the Coalition Government
presented the spending cuts on the public sector of £81 billion over 4 years. Tim Horton and
Howard Reed (2010) gave a more complex description of the £81 billion public spending
cuts. Spending programmes’ budgets will be reduced with £48 billion, welfare payments cuts
will equal £18 billion, a £10 billion reduction in debt interest payments and £5 billion is to
offset the inflation between 2010 and 2015. 57.4% of the whole package represents the cuts
on public sector, 27.2% tax increase and 15.3% benefits reduction (Rowena Crawford et. all,
2011).

Distributional Impact: (Figure 1)

(Rowena Crawford et. all, 2011)

Departmental programme expenditure will be reduced with 11.7% by 2015 from 2010 level.
Rowena Crawford (2011) argues that the departments which will suffer the largest cuts are
CLG: Communities and the Department for Environment, Food and Rural Affairs. The
Ministry of Justice, Home Office and local authority will also suffer deep reduction in their
budgets. The NHS will be protected and will even record increases in the budget in each year.
If these will happen the NHS will continue its trend of taking up an increasing percentage of
the public service spending. According to Rowena Crawford (2011) 66% of the cuts to the
Department of Education’s budget represent cuts to capital spending. The resource budget
will only be reduced by 4%, thus educational resources per pupil is almost unaffected. The
reduction in the budget will be achieved by postponing or abandoning building and
refurbishing programmes. The same distribution of cuts for the Department of Education is
given by Peter Taylor (2011); hence education maintains 96% of its budget in cash terms.
Haddad (2012) argues that these austerity measures will result in less health care, less social
care and in a loss of public services like care homes, school crossing patrols, youth clubs and
counselling support.
Cuts translated into spending department budget totals after inflation adjustments of 3% per
year. (Figure 2)

(Nadeem Walayat, 2010)

RESULTS / CONSEQUENCES
This section will analyze the effect of these austerity measures on the public sector, as stated
above the objectives of these cuts are: reduce debt, increase employment and bring
confidence into the economy.

UNEMPLYOMENT

According to Oxfam (2013) unemployment reached 7.9% in 2012 and 7.8% in 2013, average
working hours per week has fallen by 5.5% since 2010. Permanent jobs are increasingly
harder to find due to public spending cuts. Women unemployment increased significantly
because the majority of jobs from the public sector are occupied by them, this aspect is also
mentioned by Haddad (2012) who argues that the public sector employment level has
decreased. Female unemployment reached 1.08 million in 2013 and the bottom 10% of the
population lost 38% of their net income in the period 2010-13. Unison (2012) provides a
summary of the effects on employment caused by the cuts on public spending. Since these
measures have been put in practice 625 public service jobs per day have been lost and it is
estimated that the total number of jobs lost will be 800,000. Youth unemployment (16 to 24
years old) has reached 1 million and female unemployment has passed the 1 million figure.
As women represent the majority of public workers and because only 20% of the plan has
been accomplished we can expect the unemployment level to rise even higher. Although
unemployment in the economy is above 2.5 million the government sustain that these figures
will be offset by the creation of jobs in the private sector. Unison (2012) argues that the south
east region is where the majority of jobs are created but the drawback is that these jobs are
part time or temporary, thus this will cause underemployment. The number of people who
work on a part time job or a temporary job and look to switch for full time is over 2 million
(Unison, 2012).

CONFIDENCE

Tim Horton and Howard Reed (2010) argue that these cuts will not increase confidence, thus
an issue will arise from this lack of awareness of the public services value. Firstly, people
will conclude that the public services are not so necessary; hence they will be discontent with
the level of taxation. If this happens Tim Horton et. all (2010) argues that a “tax resistance”
will appear from the people and a new image on how they view tax and public sector will be
built. Confidence in the government will only be reduced. Haddad (2012) sustains that
because the government austerity measures are based on cuts on public services spending; the
poorest tenth of the population are affected 13 times more than the top 10%. These cuts in
combination with the economic stagnation resulted in substantial hardship on the bottom 10-
20% of population in terms of income. This view is sustained by Rowena Crawford et. all
(2011), the poorest households are hit considerably more by these measures, hence these cuts
are regressive. Unison (2012) argues that although only 20% of the planned cuts by the
government have been achieved so far we can already see the negative effects on the public
sector. Services like libraries, care services, police stations, children’s centres have already
been closed and affected the communities which need them. These cuts alter the social
environment of these communities. According to Oxfam (2013) these measures only reduced
the confidence of the people in the ability of the government to revive the economy, and
brought economic stagnation, falling incomes, higher levels of unemployment and higher
costs of living.

Distributional Impact of Spending Cuts, percentage of Net Income (Figure 3)

(Tim Horton and Howard Reed, 2010)

DEBT

Nadeem Walayat (2010) predicts that these spending cuts will not stop a 50% increase in UK
debt level over the next 4 years. Oxfam (2013) support this view, although the deficit has
been reduced the spending cuts brought close to zero increases in growth rate and an increase
in debt level from 56.6% of GDP in 2009 to 90% of GDP (£1.39 trillion) in 2013.

NET RESULTS + TAX CUT

Nadeem Walayat (2010) argues that all public spending cuts will be offset by the increase in
the NHS’s budget. He sustains that NHS is inefficient and should be reorganized. We look at
tax cuts because this also means a reduction in public spending. Rowena Crawford et. all.
(2011) argue that the £3.7 billion in tax cuts would have been used on public services. As we
can see in figure 3 the low-income households are the ones affected the most by these
measures, hence by cutting taxes the government also reduces the public spending further
harming the bottom 20-30% of the population. Rowena Crawford et. all (2011) argues that
these people would have been better off if these tax cuts would have been used to support the
public sector. A harder question to answer is how these families are affected by the whole
package, tax cuts, benefits reduction and public spending cuts. It is harder to calculate the
exact effect of the public spending cuts because it is difficult to approximate which services
are preferred and how much these families use them. Robert Chote, the IFS director also
sustains that although it is hard to exactly calculate the effects it is certain that these measures
affect much more the low-income households than the richer households. According to
Rowena Crawford et. all (2011) the annual average cut on public spending for the poorest
10% of the people in UK is £1,344 per person which equals 20.5% of their net income. In the
case of the richest 10% of households the reduction in public spending equals £1,135 per
person or (1.6% of their net income). This clearly shows that the poorest households lose
after these austerity measures.

CONCLUSION
To conclude, these public spending cuts are unfair and highly regressive, the burden of these
measures is on the poorest 20-30% of the population. In addition to this evidence shows that
apart from a reduction in the deficit level unemployment and debt have increase while people
have started to lose confidence in the economy and in the government.
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