The Chancellor has announced substantial increases in spending in his first Conservative budget, compared to the plans he published in March under the coalition, before the election.
Until today, spending was scheduled to stay roughly flat over the next three years, falling slightly from £743 billion this year to £740 billion next year and then rising to £744 billion in 2017-18. George Osborne today announced that spending will instead rise to £754 billion next year (£14 billion higher than he planned in March) followed by £768 billion in 2017-18 (£24 billion higher).
This move is disappointing, presumably carried out to smooth the increase in spending to spending announced in March to 2019-20 plans. These were set at £780 billion in the December Autumn Statement last year, or 35.2 per cent of GDP. In March, Mr Osborne announced a big rise to £797 billion which he has once again increased, this time to £804 billion.
The problem with the big jump in the March plans wasn't that planned expenditure was too low in the years before, it was the big jump in 2019-20. The Chancellor increased his planned spending from 35.2 per cent of the economy in 2019-20 to 36.0 per cent in his March budget and again to 36.3 per cent today. This was already too high to start with and needed to be cut, not increased by a whole percentage point.
Without serious, tough spending decisions that will reduce spending down to below a third of GDP, we will never be able to deliver the comprehensive tax reform that the 2020 Tax Commission set out in The Single Income Tax. Mr Osborne should be finding ways to cut spending further and faster to make meaningful tax reform a reality, not row back from already timid plans.
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