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Smoke and mirrors in the cuts debate

    The quality of the debate around spending cuts has been tarnished by excessive scare-mongering on the one hand, and clever statistics on the other.

    If you believe groups like 'False Economy' you will regard cuts as resulting in decimated public services - whilst some Conservative MPs and commentators have pointed to increased levels of spending throughout the Parliament as evidence that there is no such thing as cuts. The truth - as with most things in life -  is somewhere in between.

    It is totally legitimate and correct to point out that in nominal terms total government expenditure will continue to increase throughout this Parliament. Even in real terms, public expenditure will only fall back to levels seen in 2008-09. Likewise, overall government spending as a proportion of GDP will roughly fall back to 2004-05 levels. These statistics are often held up as evidence that public services are safe - phrases like "I don't remember public services being that terrible in 2008-09" have been commonplace in the public debate. But this doesn't tell the whole story.

    Substantial cuts are and will have to be made in some departments, due to the ringfencing of the NHS and International Aid budgets and the increasing interest payment charges resulting from heightened national debt levels. A common confusion here is the relationship between the deficit and debt. Although the government has taken steps to close the deficit, the level of the national debt will continue to increase over the first four years of the Parliament - requiring higher interest payments and meaning less of the money it has available will be left over to spend on public services.

    There needs to be more honesty in this debate. Overall real public spending will only fall gently, but higher interest payments and budget ring-fencing will mean government budgets do need substantial cutting. Advocates of fiscal consolidation would be better placed making the argument that not cutting now would increase the national debt further and simply delay an even tighter squeeze in public services in the future. The sooner the deficit is eliminated, the sooner the accelerating interest payments are halted. This is an important point - the public who are protesting at cuts presumably do not just desire high public spending per se, but rather the public services it should be used to supply. They must be made aware that not controlling the deficit in this Parliament will mean that more taxpayer or borrowed money will be required in the future to service unproductive debt interest payments.

    Ryan joined the Centre for Policy Studies in January 2011, having previously worked for a year at the economic consultancy firm Frontier Economics.

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