Brown's Secret File

Only watch if you want to scream

Aside from confirming the bleedin' obvious - that we are currently ruled by a barefaced liar - what else does the leaked HM Treasury file tell us? In particular, what does it say about the extent and shape of Brown's planned spending cuts?

Here's the critical spreadsheet, dated 21 April and fully consistent with the less detailed projections published with the Budget. Which is a crucial point. These figures are not some blue-sky scenario doodling - they reflect the Budget decisions actually made by Brown's government (click on image to enlarge):

Key points:

• Cuts - Just as the IFS worked out months ago, the budget incorporated big cuts in Departmental Expenditure Limits (DEL). DEL constitutes well over half our total public spending, including most of what we spend on the NHS, education, defence, and law and order. From 2009-10 to 2013-14, the Budget imposed a total cut across these programmes of 9.3% in real (inflation adjusted) terms. Not that you'd have guessed that from the lies spun by Brown and his wicked gang.
• Social security - after a projected 8.3% real increase this year, the Budget assumed further growth of just 6.3% over the whole of the next four years. With unemployment already up by 1 million since the downturn began, that is implausibly low... unless of course, the spending projection incorporates some undeclared cut in benefit rates.
• Debt interest - projected to more than double in real terms by 2013-14, reaching £64bn (this year's figure is put at "just" £27bn). As a percentage of GDP, it soars from just under 2% this year to 3.5% in two years time. Even so, the projection looks optimistic because not only will debt increase faster than the budget assumed, but also the average interest rate on that debt is most unlikely to decline, as we now know the Budget assumed (an assumed decline from 5% in 2008-9 to 4.6% in 2013-14).

So what should we conclude?

First, we've been lied to. Again.

Second, cutting departmental spending budgets by 9.3% will not be enough. We reckon spending on social security and debt interest will significantly overrun the HMT projections, implying the need for further cuts in departmental spending limits. Moreover, the Budget target to halve the deficit is insufficiently ambitious - the financial markets will not allow us to persist with a structural deficit of 5% of GDP indefinitely.

As St Vince told us only yesterday, a more realistic cuts target would be £80bn pa. Which, if it came entirely from departmental spending limits, would imply a cut of more like - gulp - 20%, more than double what Brown has been planning. Of course, departmental budgets could be spared some of that, but only if social security benefit rates got cut instead (hence the gathering pressure to cut "middle class welfare" such as Child Benefit).

But there is some good news: at least now we are starting to have a public debate about what to cut, rather than a yes/no slanging match about who's going to cut and who isn't.

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