Current UK cuts to public spending ‘one of the longest in a century’

Wednesday, 28 June 2017

Fiscal squeeze politics

In the wake of calls for an end to austerity research finds current UK cuts to public spending has been ‘one of the longest in a century’.

Making headlines today (28 June) Labour are seeking an amendment to the Queens Speech calling for the 1 per cent public sector pay cap and cuts to the police and emergency services to end.

This comes as the British Social Attitudes Survey also out today shows nearly half of Britons think the government should raise taxes and increase spending.

New research by Dr Rozana Himaz, Senior Lecturer in Economics at Oxford Brookes University has highlighted a striking historical comparison of the change in the length and depth of cuts to public spending over the past 100 years.

In collaboration with Professor Christopher Hood, Gladstone Professor of Government Emeritus and Emeritus Fellow, from the University of Oxford, this research is the subject of a new book, A Century of Fiscal Squeeze Politics published earlier this month (1 June).

Since 2010, the UK has already experienced one of the longest periods of public spending restraint over the last century. However, year-to-year cuts in public spending were notably less deep than after both World Wars and the ‘Geddes Axe’ cuts of the 1920s.

The term ‘austerity’ is widely used to describe the UK government’s tax raising and public spending policies since 2008-09. However, in their book, Dr Rozana Himaz and Professor Christopher Hood examine successive fiscal squeezes between 1900 and 2015, showing how different the politics of fiscal squeeze and austerity is today from what it was at other periods over the century.

Our work opens up a new way of conceptualising and measuring episodes of austerity and its political losses, cost and effort.

Dr Rozana Himaz, Senior Lecturer in Economics, Oxford Brookes University

Their research identifies a long-term shift from what they term a ‘surgery without anaesthetics’ approach (deep, but short-lived episodes of spending restraint or tax increases) in the earlier part of the period towards a ‘boiling frogs’ approach (episodes in which the pain is spread out over a longer period) seen in more recent decades.

Large tax hikes which pushed up revenue both in constant-price terms and relative to gross domestic product (GDP) were commonly used by earlier governments often as a prelude to a spending squeeze. However, according to this new research, they have not played such significant part in the most recent period of austerity. Whether this means that big revenue increases have gone for good as an option for fiscal squeeze is not clear.

Dr Rozana Himaz, from the Department of Accounting, Finance and Economics at Oxford Brookes University said: “Our work opens up a new way of conceptualising and measuring episodes of austerity and its political losses, cost and effort. The approach helps solve certain puzzles such as why voter 'punishment' of governments that impose austerity policies seems to be so erratic."   

Professor Christopher Hood, All Souls College, University of Oxford said: “What is most distinctive about UK's most recent fiscal squeeze is that it has not featured a 'hard' revenue squeeze of tax rises, while comprising one of the largest spending squeezes in the century. This outcome raises the interesting question about whether the structure of modern state spending makes it harder than before to put the breaks on."

A Century of Fiscal Squeeze Politics is published by Oxford University Press (OUP) and available to purchase online.

Dr Rozana Himaz and Professor Christopher Hood have written about their research in the OUPblog.

For more information, please contact Dr Rozana Himaz rhimaz@brookes.ac.uk or call 01865 482929.