After crunching the Treasury’s numbers the Office for Budget Responsibility claimed that the Chancellor’s plan would lead to a ‘rollercoaster profile’ of public spending, with drastic cuts in the next two years allowing for a splurge in spend the year after. The squeeze on departmental budgets, the OBR warned, will be ‘much more severe than anything we have seen to date’. The Chancellor has rejected the OBR’s characterisation of his future spending plans. He argues that the bulk of cuts will not, as the OBR says, come from departmental budgets but from a £12bn reduction in welfare spending. This, together with more aggressive measures against tax avoidance, will deliver a ‘more balanced approach’ to spending cuts that would match the pace seen in the current Government and still deliver the promised surplus by 2020. This disagreement stems from the fact that – as we have previously noted – the OBR treats different kinds of Government spending plan in different ways. When calculating its economic forecast, the OBR starts with two figures: one is the Treasury’s total spending assumption, which can be split up into three components: departmental spending, or DEL, which is set by Government; Annual Managed Expenditure, or AME, […]

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