Liz Truss sparked a lot of interest today when she said she was “absolutely” not planning to cut public spending.
The Prime Minister stuck by a promise she made in July, when she said: “I’m very clear I’m not planning public spending reductions.”
Her “no austerity” vow raised eyebrows - because the IFS think tank has warned there’s a massive £60bn black hole in her plans.
Critics believe she has three options - U-turn and cut spending, U-turn on tax cuts, or keep going and drive the economy off a cliff.
But some of the answers may lie in the detail - and if so, it’s bad news for cash-strapped councils, hospitals and schools.
You see, Liz Truss ’s promise not to cut public spending was quite carefully worded, and there is hidden detail within it.
We look at some of the reasons it wasn’t quite a guarantee that there will be no cuts at all.
What did Liz Truss say?
Asked if she’d stick to her July pledge that “I’m not planning public spending reductions”, she replied: “Absolutely.”
She said at PMQs : “We have almost £1 trillion of public spending, and we were spending £700 billion back in 2010.
“We will make sure that, over the medium term, the debt is falling, and we will do that not by cutting public spending but by making sure we spend public money well.”
Does this mean no cuts to any public services or departments?
Erm, no, not necessarily.
Asked if there was an “absolute guarantee” of no spending cuts, the PM’s spokesman said: “Public spending will continue to rise.”
This wording is important.
Raising public spending overall is very different from refusing to cut anything from public spending.
That’s especially true right now. Because so much cash is being pumped into subsidising energy bills - £60bn in six months - government spending could still rise overall, even if it’s cut by a few billion here and a few billion there.
Asked if some departments could still face a cut, No10 replied: “We are clear that there will need to be difficult decisions taken given some of the global challenges we're facing.
“I appreciate the interest but I'm not going to get drawn into what those might look like."
Chief Secretary to the Treasury Chris Philp later warned there will be “iron discipline” and “spending restraint”.
How much will spending rise overall?
Here’s the really tricky bit.
Even the promise to raise public spending overall could have a catch to it.
Chief Secretary to the Treasury Chris Philp told MPs spending will rise “in real terms” over three years.
Normally, “real terms” means with inflation - which is currently running at about 10%.
But Treasury sources said he actually meant spending will rise by a different, lower measure called the GDP deflator.
According to the IFS think tank, the GDP deflator measure is currently about 3.7%.
If Whitehall budgets went up by 3.7% they would still be overtaken by rising prices, meaning they have to make those “difficult decisions” Downing Street has been talking about.
When will all this be resolved?
Hopefully on October 31, the date of Chancellor Kwasi Kwarteng ’s Halloween “fiscal plan”.
That’s when he’ll unveil all the details of how he’s going to make his tax cuts add up without crashing the economy (even more).
Some Tory MPs are genuinely fearful of whether he can do this without U-turning on tax cuts, and without slashing public services.
Treasury Committee chairman Mel Stride, a Tory MP, warned: “There are many - myself included - who believe it is quite possible that he will simply have to come forward with a further rowing back on the tax announcements he made on 23 September.”
