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Contents
Introduction................................................................................................... 3
The Tories failure since 2010 ...................................................................... 5
The Tories spending plans .......................................................................... 8
The Real Tory plans: back to the 1930s with 70 billion of cuts .................. 9
Tory 70 billion cuts: what they really mean .............................................. 15
Tory 70 billion cuts: impact on departments ............................................. 19
Labours fairer and more balanced approach............................................. 24
The Tory choice.......................................................................................... 25
Tory VAT bombshell ................................................................................ 25
The Tory risk to the NHS ......................................................................... 26
Conclusion.................................................................................................. 29
Introduction
The Tories risky and extreme plans are a threat to our public services and living
standards. Working people cannot afford five more years of the Tories.
New analysis reveals the true implications of the Tories extreme spending plans for the
next Parliament:
The Tories claim that their spending plans will mean 30 billion of cuts in the next
Parliament, but the truth is that their plans are for more than double that - 70
billon of cuts
These examples show that the Tories plans are extreme, unprecedented and
close to impossible to deliver, even for this Chancellor. Therefore, the Tories
plans risk cutting currently-protected areas, including the NHS
The Tories now have a choice. They can either admit that their plans are so extreme
that they could only be delivered by raising VAT or cutting the NHS, or commit to
delivering these unprecedented, deeply destructive, and close to impossible cuts to
other services.
Tory spending plans
In 2010 the Tories planned to balance the books by 2015 and David Cameron claimed
that he was elected to deliver rising living standards for all. They failed to deliver these
central pledges. Real wages are down by more than 1,600 a year and this failure to
raise living standards means the Government is set to borrow over 200 billion more
than planned in 2010.
The Tories plans for the next Parliament now go much further than balancing the books
and would instead take spending as a share of GDP back to levels last seen in the
1930s.
They claim their plans would involve just 30 billion of spending cuts, but this is not true.
Independent experts have already said that the Tories plans mean over 50 billion of
cuts to public services and that they entail cuts on a colossal scale and pose a
legitimate question as to whether they amount to a fundamental reimagining of the role
of the state.
Full impact of the Tories planned cuts
Labours new analysis of the Tories spending plans shows that their plans in fact mean
they would need to make cuts of 70 billion over the next Parliament more than
double what the Tories claim. Their spending plans are:
More extreme than this Parliament: bigger cuts in the next four years than the
last five years. The UK is not even half way through the cuts needed to deliver
the Tories plan.
The most extreme in post-war history: a bigger fall in day-to-day public services
spending as a share of GDP than in any four-year period since demobilisation at
the end of the Second World War.
The most extreme internationally: the largest consolidation planned among
advanced economies, according to the IMF.
The Tories claim that they will make 12 billion of welfare savings to reduce the extent
of cuts to public services. Their failure to control welfare spending since 2010 makes
this claim implausible, and they have not set out how these savings can be delivered.
Even when taking these savings in to account, however, their plans would still mean
day-to-day spending on public services cut by 58 billion. These cuts would be
undeliverable, whether allocated on the same basis as in this Parliament or evenly
distributed amongst unprotected departments:
Given the total cuts to spending in the next Parliament are even deeper than
those in this Parliament, the Tories could repeat the 2.5 per cent rise in VAT
made in 2010.
The Tories want people to think they will ring-fence NHS spending, but, just like they
broken promise not to reorganise the NHS in this Parliament, the Tories cannot be
trusted to keep their promise to protect it in the next.
Countries with similar size states to the 35 per cent targeted by the Tories have
lower public health spending and require higher private funding of healthcare
than is consistent with the NHS as we know it.
The Tories now have a choice. They can either admit that their plans would lead
to the NHS being cut, or commit to delivering these unprecedented, deeply
destructive and close to impossible cuts to other services.
David Cameron later claimed that he was elected to deliver rising living standards for
all, not just rewards for those in high finance.
When I think back to the last election, this was the change that people most wanted to see.
Economic growth that meant rising living standards for all, not just rewards for those in high
finance.
David Cameron, Daily Telegraph, 7 May 2012
The reality is that wages after inflation are down by more than 1,600i a year since
2010, families have lost 1,127ii a year on average as a result of tax and benefit
changes introduced by the Tory-led Government, and this is set to be the first
Parliament since the 1920s that people are worse off at the end of the Parliament than
they were at the beginning.iii
Meanwhile, the gap between UK productivity per hour worked and the rest of the G7
grew to 17 per cent in 2013, the widest productivity gap since 1992.iv Since 2010 the
UKs export performance has been 16th in the G20 and 22nd out of 28 EU countries.v
And in 2013, the UK had the second lowest rate of business investment as a share of
GDP among the 24 OECD countries for which there was available data.vi
The Tories failure on living standards has led to a failure to meet deficit reduction
targets. Rising living standards are fundamental to our ability to deliver strong public
finances and deal with the UKs deficit.
In 2010 David Cameron pledged that his Government would balance the books by
2015.
In five years time, we will have balanced the books.
David Cameron, speech to CBI, 25 October 2010,
https://www.gov.uk/government/speeches/pms-speech-on-creating-a-new-economic-dynamism
But they have failed. The experience of the current Parliament has shown us that low
and stagnating pay has resulted in weaker than expected tax revenues, which has
meant the Government has failed to meet its commitment to balance the books by the
end of the Parliament.
Instead, the deficit is currently forecast to be 75.9 billion in 2015-16vii while public
sector net debt as a proportion of GDP is not set to begin to fall until 2016-17, breaking
the Governments original supplementary target.viii The Tory-led Government is now set
to borrow over 200 billion more than planned in 2010.
When people have lower wages and are unable to get the work hours they need, tax
receipts are lower, tax credits and benefit payments are higher and borrowing is higher.
Income tax and National Insurance receipts across the Parliament are set to fall short of
their 2010 expectations by more than 95 billion.
Despite stronger growth in the last year the latest forecasts from the Office for Budget
Responsibility painted a worsening picture for income tax and NICs receipts in the next
Parliament. In December it revised down its March forecasts for receipts by 52.9 billion
cumulatively across the forecast period. 37.2 billion of this has been attributed to
weaker average wages with the OBR describing subdued earnings growth as the key
driver in the lower forecast for PAYE and NIC receipts.ix
Key changes to the income tax and NICs forecast since March
billion
2014-15 2015-16 2016-17 2017-18 2018-19
March forecast
276.5
291.8
315.3
333.3
351.4
December
271.9
283.6
303.9
319.7
336.2
forecast
Change
-4.5
-8.2
-11.4
-13.6
-15.2
Of which:
Average earnings -2.8
-7.2
-9.3
-8.9
-9.0
TOTAL
-52.9
-37.2
OBR, Economic and Fiscal Outlook, March 2014, Table 4.10, p.119
The impact of living standards on the deficit is not just felt via tax receipts. For all
George Osbornes claims to be able to cut welfare spending, the Tories have failed to
get the welfare bill under control in this Parliament. As the Institute for Fiscal Studies
has said, benefit spending in 2015-16 is set to be virtually unchanged in real terms
since 2010-11x. In fact, the Tory-led Government is set to spend more than 25 billion
more on social security than planned in 2010.xi
Much of this can be attributed to a failure to deliver welfare reforms. The Tories 12.8
billion flagship Universal Credit is nothing short of a farce. 130 million of taxpayers
money has already been written off or written down and, while Iain Duncan Smith once
promised that more than a million people would be claiming Universal Credit by April
2014,xii the actual figure is just over 31,000.xiii At the current rate of progress, it will take
1,605 years to roll out Universal Credit. Thats the year 3618.
There is also evidence that an increasing reliance on low-paid work and stagnating
wages mean that more working people are relying on social security, particularly
housing benefit and in-work tax credits. The number of people needing to claim housing
benefit while in work has risen by over 400,000 between May 2010 and May 2014.xiv
That means that the Government has spent around 1.8 billion more than planned on
housing benefit for people in work over the life of this Parliament.xv
They claim that their plans mean a further 30 billion of deficit reduction.
Well, what Ive said it theres around 30 billion of consolidation required.
George Osborne, Newsnight, 22 January 2015
We've said there's another 30 billion of adjustments that needs to be made
David Cameron, Andrew Marr Show, 4 January 2015
The Tories have said that 5 billion of the 30 billion will come from tax avoidance and
tax evasion measures, 12 billion will come from cutting welfare and 13 billion will
come from cutting departmental spending along the same lines as what weve
achieved in the last five years.
We've said five of the 30 billion comes from continuing the war against tax evasion and tax
avoidance, that leaves 25 billion, of which 12 billion should be reductions in welfare spending and
we've already given some answers there, and the remaining 13 billion, that comes from, from
continuing for two more years, the reductions and efficiencies in departmental spending, in
government departments, along the same lines as what we've achieved in the last five years.
David Cameron, Andrew Marr Show, 4 January 2015
As Robert Chote, Chair of the OBR, has explained, George Osbornes decision (or
chosen assumption by the Government) to cut public spending to 1930s levels is what
allows the Tories to plan for a surplus of over 20 billion in 2019-20.
With the forecast rolling on another year in this Autumn Statement, we now project a total budget
surplus of more than 20 billion in 2019-20, the final year of the next Parliament. This relies on
the Governments chosen assumption for the path of total public spending beyond the end of the
current spending review in 2015-16. This assumption now takes total public spending to its lowest
share of GDP in 80 years.
Robert Chote, December 2014 briefing, 3 December 2014,
http://budgetresponsibility.org.uk/wordpress/docs/Dec_2014_speakingnote-5web23.pdf
The independent Institute for Fiscal Studies has reiterated this point saying that the
Government is now planning cuts on a colossal scale, which would take total
government spending to its lowest level as a proportion of national income since before
the last war.
How do we get to this sunlit upland in which we have a budget surplus? Spending cuts on a
colossal scale is how, taking total government spending to its lowest level as a proportion of
national income since before the last war.
Paul Johnson, IFS, introductory remarks, 4 December 2014,
http://www.ifs.org.uk/uploads/publications/budgets/as2014/as2014_johnson.pdf
10
As the IFS has said, the plans set out by George Osborne require cuts that mean the
public are justified in asking whether they amount to a fundamental reimagining of the
role of the state.
One cannot just look at the scale of implied cuts going forward and say they are unachievable.
But it is surely incumbent upon anyone set on taking the size of the state to its smallest in many
generations to tell us what that means. How will these cuts be implemented? What will local
government, the defence force, the transport system, look like in this world? Is this a fundamental
reimagining of the role of the state?
Paul Johnson, Institute for Fiscal Studies, Autumn Statement briefing, 4 December 2014,
http://www.ifs.org.uk/uploads/publications/budgets/as2014/as2014_johnson.pdf
11
We will set out the exact details in each Budget. As long as you have got a clear plan and a clear
pathway, you dont have to wait until Britain is back in the black before you make progress with
these tax reductions. But Im not announcing now what will happen in each Budget. Ill leave that
to the Chancellor.
David Cameron, The Guardian, 3 October 2014,
http://www.theguardian.com/politics/2014/oct/03/david-cameron-tax-cut-election
On a cautious assumption that these tax cuts were delivered in the final full year of the
Parliament, 2019-20, they would cost 9.9 billion a year according to independent
experts at the House of Commons library almost 3 billion more than the Tories claim
they would.
The Tories are yet to say how they will fund these pledged tax cuts. This is despite the
fact that in Opposition the Tories were scathing about unfunded tax cuts, describing
them as a tax con.
In November 2008 David Cameron said that you cant talk about tax reduction unless
you can show how it is paid for, the public arent stupid.
In each case we have funded the tax reduction and the message that Gordon Brown has got to
respond is well how are you going to fund you tax reductions because you are right what we are
saying ours are tax cuts, at the moment what he is talking about is a tax con. Thats the defence,
you cant talk about tax reduction unless you can show how it is paid for, the public arent stupid.
David Cameron, Today Programme, 11 November 2008
David Cameron also told a press conference that the British people arent fools and
that if you pretend as a politician you can wave some tax cuts at them and not tell them
how theyre going to be funded they just wont believe you.
I think the British people are wise, I dont think they are fools, I think that you know if you pretend
as a politician you can wave some tax cuts at them and not tell them how theyre going to be
funded they just wont believe you. Its tax cons that have got the Prime Minister in so much
trouble in the past. Proper tax cuts youve got to say where there money is coming from.
David Cameron, press conference, 11 November 2008
On the same day George Osborne said that if the Government could not explain how a
tax cut was going to be paid for it was a complete tax con, and all of us are going to
have to pay with higher taxes later.
Well if he doesnt explain how it is going to be paid for then it isnt a tax cut, it is a complete tax
con, and all of us are going to have to pay with higher taxes later.
George Osborne, GMTV, 11 November 2008
12
70 billion: background
The Tories have said that they will have a 23 billion surplus by 2019-20 and that they
will introduce tax cuts in the next Parliament, but have not set out how they will be
funded.
Taking these together and assuming the Tories stick to their plan and achieve the
surplus on the timeframe they have set out, the true extent of cuts the Tories can be
revealed.
The table below shows how David Camerons claims of 30 billion of cuts in the next
parliament are false, and that the Tories 1930s spending plans would in fact require
them to make 70 billion of cuts over the four years from 2015-16 to 2019-20.
The following steps have been taken in the calculation.xx
Step 1: 30 billion
The total cut to public spending the Tories claim they are going to make after the
election is 30 billion.
Step 2: 37 billion
The Tories claim, however, is not for the whole Parliament, but for the first two years
only. If we look at their own spending forecasts over the next four years, covering the
period from 2015-16 to 2019-20, that takes the Tories cut to public spending to 37
billion.
Step 3: 55 billion
But this only covers overall spending. Spending on pensions and social security is
forecast to risexxi and this means bigger spending cuts are required to meet the Tories
overall spending reduction. This takes the Tories cuts to 55 billion.
Step 4: 59 billon
But capital spending is also set to rise.xxii Therefore, to meet the Tories spending plans
they need to make even bigger cuts to day-to-day spending. Taking this in to account
takes the figure to 59 billon.
This figure is confirmed by the IFS in their 2015 Green Budget.xxiii
13
Step 5: 60 billion
The Tories are committed to increasing spending on Overseas Development Assistance
(ODA). This increase would mean that the cut to unprotected areas increases to 60
billion. This is because ODA spending must rise slightly faster than inflation in order to
stay constant at 0.7 percent of Gross National Income.
Step 6: 70 billon
These plans so far are all spending plans set out by the current Government. Over and
above this, the Tories also claim that they will make tax cuts. These are unfunded.
We have assumed they are introduced in the final full year of the next Parliament in
2019-20. If introduced then they would cost 10 billion a year, according to the House of
Commons Library. The Tories have said these tax cuts would be achieved with cuts to
public spending. This would therefore take the total cuts the Tories would need to make
to day-to-day spending to 70 billon.
30bn
Tory claim on
their total public
spending cuts
after the election.
37bn
Tory plans for the
Parliament, not just the
first two years.
55bn
Adding in
forecast
rising welfare
spending.
59bn
60bn
Adding in
forecast
rising capital
spending.
Tory plans
factoring in
protections to
schools, the
NHS and ODA.
70bn
25bn
30bn
35bn
40bn
45bn
50bn
55bn
60bn
65bn
70bn
15
16
Historic context
The OBR has outlined that the Governments forecast spending plans represent the
greatest contraction since the Second World War.
Relative to the size of the economy, nominal government consumption is forecast to fall from
20.2 per cent of GDP in 2013 to 14.7 per cent of GDP at the end of the forecast period, the
lowest level on record in consistent national income data back to 1948 and the lowest since
1938 using the Bank of Englands historical dataset (Chart 3.36) The four successive yearon-year reductions in nominal government consumption during the next parliament implied by
the Governments policy assumption for total spending beyond 2015-16 would be the first
since the Second World War.
Office of Budget Responsibility, Economic and Fiscal Outlook, December 2014, p.80
Furthermore, the Tories plans represent a greater consolidation across the next
Parliament than in any Parliament since at least the Second World War.
17
Source: Bank of England, Three Centuries of Data; Office for Budget Responsibility, Economic
and Fiscal Outlook, December 2014; House of Commons Library analysis
International comparisons
The IFS has shown that the Tories plans for the next Parliament would mean the
largest fiscal consolidation between 2015 and 2019 of any of the 32 advanced
economies.
Source: Institute for Fiscal Studies, Green Budget 2015, Table 1.3, p.28
18
This projection even underestimates the scale of the Tories planned spending cuts
since it pre-dates the Governments 2014 Autumn Statement. As the IFS has pointed
out, the IMF figures forecasts actually miss out some of the austerity now planned in
the UK as they were compiled in October 2014 and therefore do not include the
announcement in December 2014 that the Government has pencilled in a further
squeeze on public spending in 2019-20.xxv
Sir Howard Davies, a former MPC member, said the Government would find it
very hard to achieve the cuts forecast.
I suspect a Conservative government would find it very hard in practice to achieve the cuts
forecast in the Autumn Statement, which are a statement of political aspiration rather than a
workable plan.
Sir Howard Davies, The Financial Times, 1 January 2014,
http://www.theguardian.com/society/2014/nov/30/george-osborne-billions-extra-nhs-funding
Dame Kate Barker, a former MPC member, says the plans could have
unwelcome consequences for public services.
Yes, as the public spending plans look very hard to deliver. Yes, it does matter as the
present plans could have unwelcome consequences for a range of public services,
especially those delivered by local authorities.
Dame Kate Barker, The Financial Times, 1 January 2014,
http://www.theguardian.com/society/2014/nov/30/george-osborne-billions-extra-nhs-funding
John van Reenen, director of the Centre for Economic Performance at the
London School of Economics has spoken of an ideological choice behind the
unnecessarily harsh plans.
Second, current plans for deficit reduction through 2020 the Chancellor is proposing are
unnecessarily harsh. The implied cuts in unprotected DEL spending (transport, justice, local
government, etc) are on the order of 26%, even greater than they have been over the
previous 5 years. The shrinking of the state to this size is an ideological choice.
John van Reenen, The Financial Times, 1 January 2014,
http://www.theguardian.com/society/2014/nov/30/george-osborne-billions-extra-nhs-funding
19
The Department for Transport budget would drop to -3.1 billion, which would
abolish publicly funded maintenance of our national road and half of our rail
routes would no longer operate.
The Foreign and Commonwealth Office budget would drop to -0.8 billion,
closing down all our embassies and consulates around the world and our
presence in international organizations like the United Nations.
The Department for Work and Pensions budget would drop to -7.8 billion,
meaning closing all jobcentres, ending back-to-work programmes and
disability benefit testing.
The Department for Communities and Local Government budget would drop
to 2.2 billion, all but ending all central government funding for local
government.
The Ministry of Justice budget would drop to 1.5 billion, which would all but
end funding for prisons, legal aid and courts.
2.4bn
9.4%
Reduction
needed in
next
Parliament if
on same
basis
-5.5bn
1.2bn
3.4%
-2.0bn
-0.8bn
6.6bn
13.7bn
6.7bn
24.7%
19.7%
9.1%
-14.4bn
-11.5bn
-5.3bn
-7.8bn
2.2bn
1.5bn
Share of
reduction this
Parliament
2019-20
resource
budget (201920 prices)
-3.1bn
20
If 58 billion of cuts were distributed evenly across all budgets which are not
protected (excluding schools, the NHS and ODA budgets) it would mean a cut of
35 per cent over four years for all non-protected departments. This would lead to
the smallest police force since comparable records began, the smallest army
since Cromwell, and over a third of the older people receiving social care losing
their entitlement to it.
Below is an area-by-area analysis of the Tories spending plans for 35 per cent cuts for
some non-protected areas.
Impact on defence
In Opposition the Tories promised to boost UK defence forces. They consistently called
for a larger Army, calling specifically for three additional battalions.xxvi They stated that
any cuts to the Royal Navy would be a betrayal of our heritage and downright
irresponsible in a dangerous age.xxvii
Now, the Army is seeing a reserve recruitment crisis rather than the major increase that
was meant to fill the gap left by full time troop reductions and there are capability gaps
at a time when the threats our country faces are growing.
In the next Parliament the Tories plans would be equivalent to:
34,500 fewer soldiers in the Army. This would take the overall size of the Army
down to 56,600.
60,800 fewer personnel in the Armed Forces, taking the overall size of the Armed
forces down to 98,900.
The smallest Army since Cromwell and the smallest Armed Forces since 1750.
These extreme cuts to the Army and Armed Forces would fundamentally impact on the
UKs ability to project power around the world at a time when we face multiple threats of
increasing complexity.
The UKs capability to undertake peace keeping or preventative military action would be
severely limited, while a smaller overall force would in turn shrink the size of our Special
Forces, which are more important than ever to our national security. This would also
raise serious questions about our ability to meet existing operational commitments.
Methodology
We have available data for the size of the Army and Armed Forces up until 2013-14.xxviii
21
In this parliament, a 16 per cent real reduction in the MOD resource budget led to a fall
in the Army of 15,200 and a fall in the Armed Forces of 26,700. On this basis, a 35 per
cent reduction in the MOD resource budget will result in a fall in troop numbers of
34,500 in Army personnel and 60,800 in overall Armed Forces personnel.
This would take the size of the Army down to 56,600 (the smallest since Cromwell)xxix ,
and the size of the overall Armed Forces down to 98,800 (the smallest since 1750).xxx
Impact on police
Before the election, David Cameron promised to protect the frontline.
"What I can tell you is any cabinet minister, if I win the election, who comes to me and says:
Here are my plans and they involve frontline reductions, theyll be sent straight back to their
department to go away and think again."
David Cameron, The Andrew Marr Show, 2 May 2010
His promise lies in tatters. There are now almost 17,000xxxi fewer police officers
protecting our streets and communities than in 2010.
In the next Parliament the Tories plans would be equivalent to:
Losing nearly 30,000 officers, the equivalent of losing almost the entire Metropolitan
police force, will mean the Tories would have cut police numbers by a third (from
144,000 to 96,500) between 2010 and 2020.
This would take the overall numbers of police on the streets well below 100,000 and
well below the levels of the late 1970s (the earliest available comparable data), when
there were 110,000 officersxxxii .
In 2010 the ratio of officers per 1,000 population was 2.6. These cuts would mean the
police force was heading towards a ratio of officers per 1,000 population of 1.7, close to
the ratio of 1.5 in the 1930sxxxiii .
This comes at a time when more serious and violent crimes including child abuse, rape
and domestic violence are being reported, the terror threat has grown, and there has
been a massive increase in online crime. Now is not the time to risk this kind of Tory
attack on frontline policing.
Methodology
In this parliament, a 19 per cent real terms cut to the police budget let to a reduction in
police officers of almost 17,000.xxxiv On the same basis, a 35 per cent reduction would
lead to a reduction in police officers of 29,900. This is confirmed by the House of
Commons library.
In 2010 the ratio of officers per 1,000 population was 2.6. These cuts would mean the
police force was heading towards a ratio of officers per 1,000 population of 1.7, close to
the ratio of 1.5 in the 1930s.
22
In Government, the Tories have made deep cuts to local authority budgets which have
resulted in 3.5 billion being taken out of adult social care budgets at the same time
as they have chosen to waste 3 billion on a top down reorganisation of the NHS.
ADASS President David Pearson said: This is the third year of continuing cash reductions and
the fifth year of real terms reductions in spending. Since 2010 spending on social care has fallen
by 12 per cent at a time when the number of those looking for support has increased by 14 per
cent. This has forced departments to make savings of 26 per cent in their budgets the
equivalent of 3.53 billion over the last four years. Nothing can be starker than the truth these
figures point to.
Association of Directors of Adults Social Services (ADASS), 2 July 2014,
http://www.adass.org.uk/social-care-services-unsustainable-adass/
In addition, since 2009/10 the number of older people receiving home-delivered meals
has more than halved a fall of 59 per cent.
Some of the most significant falls were in meals (59 per cent reduction or 54,795 fewer
individuals) and day care (35 per cent reduction or 36,480 individuals). Only the number of older
people receiving direct payments appeared to increase and even then only by 10,250 (an
increase of 20 per cent in the two years between 2010/11 and 2012/131).
The Health Foundation Trust and Nuffield Trust, March 2014, Focus On: Social care for older
people Reductions in adult social services for older people in England, p. 7
Pressures on the social care sector are having a knock-on effect in the NHS, ramping
up the pressure on services already suffering from four years of Tory neglect and
mismanagement. Increasing numbers of frail elderly people are ending up trapped in
more expensive hospital beds when they dont need to be delayed discharges due to
a lack of social care in the home are at record levels. More elderly people are turning to
A&E because they are unable to access the care and support they require.
With the cuts that have taken place in this Parliament, the number of old people in
social care has already fallen by 210,000 since 2010-11. It is therefore safe to assume
that given that the cuts in the next Parliament are even deeper, they would have to be
delivered through further restrictions on eligibility.
In the next Parliament the Tories plans would be equivalent to:
260,000 fewer older people would be receiving social care a third of all older
people receiving care. This would take the number of people receiving care down
to 480,000.
23
These extreme cuts would see eligibility to care services further restricted, meaning
hundreds of thousands of vulnerable older people missing out, even though they might
struggle with daily living activities such as getting washed or dressed, or making a meal.
Already there have been dramatic reductions in the number of those getting support
with conditions such as a physical disability, frailty, mental health problem or visual
impairments. These extreme plans risk many more with these conditions not being able
to access care.
Methodology
We have available data for social care numbers up until 2013-14.xxxv
If we assume that in 2014-15 and 2015-16 the 65+ social care caseload falls at the
same rate as it has from 2010-11 to 2013-14 (seven per cent a year), we can assume
that in 2015-16 the caseload will be 740,000.
In this Parliament there have been reductions in the number of those getting support
with conditions such as physical disability, frailty, mental health problem or visual
impairments, as well as access to certain services like home care, day care, meals on
wheels and home adaptations.
With these reductions which have taken place in this parliament, the number of old
people in social care has already fallen by 210,000 since 2010-11.
It is therefore safe to assume that given that the cuts in the next parliament are even
deeper, they would have to be delivered through further restrictions on eligibility.
We have worked out that a 35 per cent reduction in resource budgets for unprotected
areas of spending, like social care, could lead to a third of old people losing their social
care 260,000 people. This would take the overall number of old people in social care
to 480,000.
24
Balance the books and cut the deficit every year with a surplus on the current
budget and falling national debt as soon as possible in the next Parliament.
Reverse the cut to the top rate of tax so the highest one per cent of earners pay
a little more to help get the deficit down.
Stop paying the Winter Fuel Allowance to the richest five per cent of pensioners
and cap child benefit rises at one per cent for two years.
Close loopholes that cost the Exchequer billions of pounds a year, increasing the
transparency and rigour of the tax system.
Have no proposals in our manifesto for any new spending paid for by additional
borrowing.
Introduce a tax on high value properties over 2 million to help raise 2.5 billion a
year for an NHS Time to Care Fund as part of our plan to save and transform the
NHS.
25
They then raised VAT to 20 per cent just two months later in the June 2010 Budget. The
result has been an additional cost to families of 1,800 since 2010xxxvi .
The Tories have refused to rule out a VAT rise in the next Parliament, with George
Osborne simply again saying the Tories dont have any plans to exactly what they
said in 2010.
Andrew Marr:
I dont want to be entirely Mr Grumpy, but looking ahead at the eyewatering scale of the deficit reduction still to be done, I must ask you
some direct questions. First of all, are you going to raise VAT?
George Osborne:
Well we dont have any plans to
Andrew Marr Show, 30 November 2014,
http://news.bbc.co.uk/1/shared/bsp/hi/pdfs/30111402.pdf
The Tories have a history of denying plans to increase VAT and then doing exactly
that. And given the extremity of their spending plans for the next Parliament, the Tories
could do the same again.
And George Osborne has said that if taxes were to rise as part of a deficit reduction
plan, raising VAT would be his first choice.
"But when you've got a very large budget deficit and you've in the middle of a European sovereign
debt crisis - and you've decided that at least part of dealing with the deficit has to come from tax
rises - then I think VAT presents itself as the choice."
George Osborne, BBC News, 4th January 2011, http://www.bbc.co.uk/news/business-12110945
26
In the case of the UK, the Tory plans imply a consolidation of 3.8 percent of
Resource DEL as a share of GDP between 2015-16 and 2019-20. Across the
OECD, there have been seven countries which have carried out such a
consolidation in history for which we have available health spending data.
If replicated in the UK, using the average experience of these past consolidations
as an example of what might happen, NHS spending would be cut by 10 billion
in real terms by 2019-20.
27
The Tories plans would cut public spending to a 35 per cent share of GDP, but analysis
of other countries health systems with a similar level of public expenditure shows that
the Tories want to cut spending on services to levels seen in countries where up to half
of their health service is privately funded, which could result in huge cuts to health
funding.
In Mexico, Chile and Korea, where state spending is below 35 per cent,
approximately 50 per cent of national healthcare is privately funded. Even in
Australia, where state spending is just over 35 per cent, almost one third of
healthcare is privately funded. This compares to the current level of 16 per cent
in the UK.
For OECD countries with public spending below 35 per cent of GDP in 2012, the
average for health spending funded by public sources was just 55 per cent. If the
UK were to fall to having public health spending at 55 per cent of health spending
rather than 84 per cent, this would represent a huge reduction across
government funding sources.xxxvii
International evidence also shows that states of the size the Tories are aiming for have
increased charging within their healthcare systems.
Out of pocket expenditure is the healthcare for which people are charged, whether
publicly or privately provided. WHO data shows that each OECD country with total
government expenditure at 35 per cent share of GDP or below (2012 figures) has
greater charging as a share of overall national health spending than in the UK.
The UK has government expenditure at over 40 per cent of GDP and out-ofpocket expenditure at 10 per cent of total expenditure on health. Switzerland has
government expenditure at 33 per cent of GDP and out-of-pocket expenditure at
28 per cent of total expenditure on health. Mexico has government expenditure at
27 per cent of GDP and out-of-pocket expenditure accounts for almost half of
total expenditure on health. xxxviii
All countries with public spending levels at 35 per cent or less as a share of GDP
have greater out-of-pocket expenditure per household than the OECD
average.xxxix
This underlines the danger of the Tories spending plans, which would take public
spending to 35 per cent of GDP, highlighting how such deep cuts will make the NHS
unrecognisable.
28
But of the additional 2 billion pledged by George Osborne in the Autumn Statement,
750 million is from the existing Department of Health budget for 2015/16.
Speaking on the Marr show, Osborne confirmed Sunday newspaper reports that he would be
putting an extra 2 bilion a year into the NHS, starting from April next year. Government sources
subsequently confirmed that 750m of that was coming from internal health department savings
essentially moving money from [the back office] to the NHS front line while the rest would
come from underspends in other government departments.
The Guardian, 30 November 2014, http://www.theguardian.com/society/2014/nov/30/georgeosborne-billions-extra-nhs-funding
Of the remaining money, this has been allocated from the Governments Reserve and is
for 2015-16 only.
NHS funding from the Reserve, reflected in 2015-16 spending numbers
Autumn Statement 2014, p.64,
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/382327/44695_Acc
essible.pdf
In future years, therefore, the Tories central health funding pledge is unfunded.
29
Conclusion
The Tories now have a choice. They can either admit that their 1930s spending plans
are so extreme that they could only be delivered by cutting the NHS, or commit to
delivering unprecedented, deeply destructive, and close to impossible cuts to other
services.
The Tories spending plans mean 70 billion of cuts. This means cuts that are:
More extreme than this Parliament: bigger cuts in the next four years than the
last five years. The UK is not even half way through the cuts needed to deliver
the Tories plan.
The most extreme in post-war history: a bigger fall in spending as a share of
GDP than in any four-year period since demobilisation at the end of the Second
World War.
The most extreme internationally: the largest consolidation planned among
advanced economies, according to the IMF.
The impact of these plans would be extreme cuts to other services:
The smallest police force since the late 1970s (the earliest available comparable
data).
The consequences of Tory spending plans for public services are so extreme as to
make them almost impossible to achieve. Therefore, in order to deliver George
Osbornes plans for a large overall budget surplus, the risk is that there would be cuts to
currently-protected areas including the NHS, and tax rises, for example another rise in
VAT.
Given the total cuts to spending in the next Parliament are even deeper than
those in this Parliament, the Tories could repeat the 2.5 per cent rise in VAT
made in 2010.
The Tories must now make a choice. They must either commit to these cuts, or
admit that they plan to cut the NHS and raise VAT.
30
Notes
i
Office for National Statistics, Annual Survey of Hours and Earnings 2014
ii
Institute for Fiscal Studies, The Effect of the Coalitions Tax and Benefit Changes on Household Incomes and Work
Incentives, January 2015, p.9
iii
iv
Office for National Statistics, International Comparisons of Productivity - Final Estimates, 2013, 20 February 2015
vi
vii
Office for Budget Responsibility, Economic and Fiscal Outlook, December 2014, Table 1.2
viii
Office for Budget Responsibility, Economic and Fiscal Outlook, December 2014, p.20
ix
Office for Budget Responsibility, Economic and Fiscal Outlook, December 2014, p.118-119
Institute for Fiscal Studies, Benefit Spending and Reforms: The Coalition Governments Record, January 2015, p.1
xi
House of Commons Library analysis of Department for Work and Pensions, Benefit expenditure and caseload
tables 2014
xii
Department for Work and Pensions, press release, 1 November 2011, https://www.gov.uk/government/news/iainduncan-smith-sets-out-next-steps-for-moving-claimants-onto-universal-credit
xiii
Department for Work and Pensions, Universal Credit statistics, 18 February 2015,
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/404207/universal-credit-statistical-firstrelease-feb-15.pdf
xiv
xv
House of Commons Library analysis of Department for Work and Pensions, Benefit expenditure and caseload
tables 2014
xvi
xvii
Cingano, F. (2014), Trends in Income Inequality and its Impact on Economic Growth, OECD Social, Employment
and Migration Working Papers, No. 163, OECD Publishing. http://dx.doi.org/10.1787/5jxrjncwxv6j-en
xviii
xix
xx
xxi
Office for Budget Responsibility, Economic and Fiscal Outlook, December 2014, Table 4.22
xxii
Office for Budget Responsibility, Economic and Fiscal Outlook, December 2014, Table 4.22, p.139
xxiii
The IFS set out that planned departmental spending on a resource basis will cumulatively fall by 17.3%. The
Autumn Statement document sets out that resource departmental spending in 2015-16 will be 316.8 billion. A 17.3
per cent real cut would mean a reduction of around 59 billion in 2019-20 prices.
xxiv
The tax gap between taxes owned and taxes paid the tax gap has gone up under David Cameron, to 34
billion in 2012-13.
HM Revenue and Customs, Measuring tax gaps 2014 edition: tax gap estimates for 2012-13 (Page 8, figure 1.1), 16
October, 2014 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/364009/4382_Measuring_Tax_Gaps_2
014_IW_v4B_accessible_20141014.pdf
Tax collected by the Governments anti-avoidance measures against companies is going to be 90 per cent lower than
those introduced by Labour.
Financial Times, 4 February, 2015
xxv
Institute for Fiscal Studies, Green Budget 2015, February 2015, p.29
31
xxvi
xxvii
xxviii
xxxiii
xxxiv
xxxv
Community Care Statistics, Social Services Activity, England - 2013-14, Final release, December 09, 2014, Annex
J: Tables and Charts, Table 3: Packages of care
http://www.hscic.gov.uk/catalogue/PUB16133/comm-care-stat-act-eng-2013-14-fin-anxj.xls
xxxvi
Hansard,
written
answer,
5
July
2010,
Column
99W,
http://www.publications.parliament.uk/pa/cm201011/cmhansrd/cm100705/text/100705w0004.htm#10070542000230
xxxvii
Figures taken from OECD Health Statistics http://stats.oecd.org/index.aspx?DataSetCode=HEALTH_STAT
xxxviii
xxxix
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