Did Rachel Reeves set Labour on a path to ending austerity, and making up for the lack of public investment over the last fourteen years? In this post I will follow the format of my pre-budget post, splitting the discussion into three sections: public investment, current public spending and taxes. I’ve also added an extra, rather annoyed section on fiscal rules, and a summary.
Public investment
The chart below compares the net public investment plans Reeves inherited from the last government, with her Budget plans she gave to the OBR.
Under the Conservatives public investment as a share of GDP was projected to fall steadily from current levels of around 2.5% to 1.7%. The assumptions that Reeves has given the OBR imply, to the first approximation, public investment staying flat at 2.5% of GDP. That is an improvement, but a relatively modest one, given the lack of public investment over the last fourteen years.
Current public spending
Current spending is everything that isn’t gross public investment. The chart below compares pre and post-Budget assumptions given to the OBR.
Here we have a similar story. The Conservatives had pencilled in further cuts to the public sector compared to current (23/4) levels, while Reeves has assumed the share of public spending in GDP will be, to the first approximation, pretty flat through the next five years at around the current level of 40%. So no additional austerity compared to where we are now, but no attempt to return spending to the levels needed to restore the public services to the state they were in just before austerity began in 2010. In particular, with health services around the world absorbing an ever growing
