Mark Sinclair's Blog: 26 May 2010 - Deficit Day 22 June
26 May 2010
Mark Sinclair is boss of leasing firm Alphabet
It obviously suits new Governments to blame their predecessors for getting the country into a mess, especially when the new boys are about to take an axe to public spending.
So the note left by Liam Byrne, the departing Chief Secretary of the Treasury, for his successor was a pure gift for David Laws and his boss George Osborne. "I'm afraid there's no money," it read. "Kind regards - and good luck!"
Naturally, the new Treasury team made the most of this PR opportunity, last week, as they began to soften up the electorate for the years of spending cuts that lie ahead.
On Monday of this week we learned the outline of where this year's £6bn tranche of spending cuts will fall. Next month, on Tuesday 22nd June (to avoid clashing with England vs. Slovenia on the traditional Wednesday budget day), the Emergency Budget will map out the longer-term prospects for the UK's debt-burdened economy.
The use of the word 'emergency' is interesting. Dictionaries define emergencies as 'sudden, unforeseen crises', whereas Britain's debt crisis is more of a long, unfolding one that's been building up for a long time.
A 'Crisis Budget' would have been more accurate. A crisis is the moment of truth; when things come to a head; when the patient either begins to recover or sinks into a deeper malaise.
Canada is often held up as the epitome of crisis budgeting. On the verge of going bust in 1993, it slashed spending and reduced its deficit to zero in three years. But among the casualties was transport spending, which was cut by 50%.
What would that mean for the UK?
Compared to the rest of UK central Government spending, transport is something of a tiddler: £13 billion out of £488 billion in 2010, of which around £4.5 billion goes on roads and £7 billion in subsidies to the railways and London Underground. Local public transport services are mainly supported by local authorities, which are partly funded by central Government grants, of course.
Slashing central transport spending by 50% over two years would deliver around 10% of the £60 billion of cuts that the Chancellor is said to be looking for. Needless to say, though, cuts on that scale would have a massive impact on rail services and the road network and the workers and fleet drivers who depend on them.
Having said that, the transport budget has doubled in real terms since 2000. It has also increased as a share of GDP. Those spending increases were partly to prepare for the enormous growth in road, rail and air traffic that the Department for Transport is forecasting for the next two decades. But, in an increasingly energy-constrained world, predictions of a 43% growth in road traffic and a 178% increase in flying over the next two decades may prove to be decidedly optimistic.
It will be interesting to see whether our newly-frugal Government revises its traffic growth forecasts - and if so, by how much.