Billions more cut from benefits bill
A sad moment for economics journalism today, as yet another independent economic expert familiar with the Channel 4 News sofa was absorbed into the coalition matrix.
Martins Wolf and Weale, Will Hutton, and today Robert Chote from the Institute for Fiscal Studies nominated by the chancellor to serve as head of the Office of Budget Responsibility. All alternate poles of economic thought hoovered into the Big Tent, bar David Blanchflower.
The impact was almost immediate.
When George Osborne announced that the spending review would see further cuts of “several billions” to the benefit bill, your correspondent had to reach for his own calculator rather than that of Mr Chote. Inside Whitehall the suggestion is that at least £4bn will be chopped from the benefit bill by 2014/15. That is on top of the £11bn announced in the budget.
That is the first confirmation of further benefit cuts. It has the impact of lessening the burden of cuts to government departments. The average cut to non-protected departments such as schools, universities, transport, housing etc, would have been 25 per cent. Today’s benefit cuts could bring that down to 23 per cent by my calculations – significant though not transformative.
As the ‘star chambers’ of cabinet ministers meet to discuss and review departmental spending cuts, it provides some wiggle room that could mean the difference between a 35 per cent and a 30 per cent cut.
As for Mr Chote, I am intrigued about his view of the black hole in the public finances. The severity of the cuts agenda is predicated upon an assumption about the size of the black hole in the public finances – the so-called structural deficit – that Robert Chote might not agree with.
The chancellor and the deputy prime minister set a lot of stall in the assumption about the structural deficit to make the case that “it’s worse than we thought”. Plausibly, he could calculate that it is smaller, as such maths is art as well as science. Or, he could dismiss entirely the notion of calculating the structural deficit with any precision.
Shouldn’t we know this before the spending review?