Sunday, 24 October 2010

The 'cuts' that mean public spending soars


Britain's £800m a year to India helps to pay for its space programme,

writes Christopher Booker. 23 Oct 2010

Spending review: The 'cuts' that mean public spending soars

Britain's £800m a year to India helps to pay for its space programme, writes Christopher Booker.

India's space program
Amazing what we can still afford: Britain's £800 million a year to India funds its space program

The most overworked word of the week was obviously “cuts” (although the ineffable “fair” was never far behind). George Osborne may have been hailed by one newspaper front page as the “man who rolled back the state” as he “reverses 60 years of recklessly rising public spending” – but of course last week’s supposed curb on state expenditure was nothing of the kind.

As page 17 of the Treasury statement made clear, far from cutting Government spending, Mr Osborne’s own projections show that over the next four years it will continue remorselessly upwards, by larger jumps each year, from £696 billion to £739 billion. For all the dramatic talk of 25 or even 35 per cent cuts in the spending of some departments, such as the Foreign Office and the Home Office, these are more than offset by massive percentage increases in those areas of spending which top the list.

The one which has rightly drawn most flak is the colossal 47 per cent jump in our spending on overseas aid, due to rise from £7.8 billion to £11.5 billion. This includes, for instance, a further rise in the £800 million a year we already donate to India, one of the world’s fastest growing economies. This will be spent, inter alia, on promoting gender equality, assisting the Indians with their space programme, and of course on climate change (such as the £10 million free gift the Department For International Development is making to Dr Rajendra Pachauri’s Teri research institute).

This includes, however, only a part of the £2.9 billion that will be spent, along with the Department for Energy and Climate Change (DECC), as part of an EU scheme “to help developing countries pursue low-carbon growth and adapt to climate change”, which is a hefty part of the 27 per cent rise in the DECC budget over the next four years. A good case could be made that almost all spending on overseas aid and climate change is money chucked down the drain. (My favourite politically correct DFID project was building a Ferris wheel for the female inhabitants of the Afghan town of Lashkar Gah.)

Another item – which, intriguingly, Mr Osborne completely omitted from his statement, though it would be fourth on the list of fast-rising items of public expenditure – is the £16 billion a year we already contribute to “EU institutions”. This will be boosted by the EU Parliament’s decision, last week, that the EU Budget should rise by a further 6 per cent.

But all these increases are dwarfed by what is now by far the greatest drain on taxpayers’ money – the skyrocketing interest we pay on the debt run up as the cost of Gordon Brown’s years of reckless overspending. The Taxpayers’ Alliance asked a former Treasury and City economist to produce a graph showing how the interest on our public debt will rise over the next four years, including not just interest on the National Debt itself, but also what we shall have to pay for such items as unfunded public sector pensions and the Public Finance Initiative.

Although this too is omitted from Mr Osborne’s spending review, the TPA graph shows interest on our debt rising over the next four years from around £130 billion a year to £190 billion, making it by far the largest single item of public expenditure. Even at today’s low interest rates, servicing this debt would then be costing us the equivalent of £60 a week for each household in the land. But, if rising inflation eventually necessitates a doubling or trebling of rates, the cost in a few years’ time could be unthinkable.

It is not implausible to project that simply paying interest on our debt might cost as much as our entire current annual government spending. That will be the true price of Gordon Brown’s crazed boast in 1998 that he intended to all but double Government spending within 10 years – and why he will be remembered as the most disastrous manager of the public finances in our history.

  • Amid all this gloom at least there is one piece of good news. When Edward Heath died, he left Arundells, his grand retirement home in Salisbury Cathedral Close, as a monument to his life and work. But so few people visited this dead museum to the man who took us into Europe that it will this week be closing its doors to the public for the last time. The beautiful house is now to be sold, thus returning it to the land of the living.