Budget 2020: Is this really the end of austerity?

Reports of the death of austerity, like that of Mark Twain, have been greatly exaggerated in recent years.

Theresa May tried to read its last rites in 2017. Her chancellor Philip Hammond posed as undertaker.

There was even talk of the demise of the policy of spending cuts when George Osborne, its architect, was still in 11 Downing Street.

All exaggerated of course. The cuts continued, particularly on the welfare budget.

But now could it actually, finally, be true?

Has the fresh-faced Rishi Sunak delivered the terminal blow to this colossally controversial policy which like some horror film monster keeps coming back from the grave?

The Treasury had briefed as much before the fiscal statement.

And two facts highlighted by the Office for Budget Responsibility (OBR), the Treasury’s impeccably independent fiscal forecaster, seemed to indicate that it was actually true.

First, public service spending per person in inflation adjusted cash terms, under the new spending departmental envelope outlined by Sunak, is now set to be back up by 2025 to where it was in 2010.

This is indeed a significant moment. It’s also a big jump on the spending plans announced last March. A “striking turnaround” is how the OBR describes it.

But that’s nothing compared to per capita investment spending – things like road, rail and housing and other physical infrastructure. Thanks to Boris Johnson and Rishi Sunak’s “infrastructure revolution” that’s set to be higher than it was in 2010 by the middle of the decade.

But beware overly narrow definitions of austerity.

First of all, public service spending – funding for police, schools, the NHS etc – is not the only area of state spending that have suffered under austerity.

There have also been major cuts in welfare spending, thanks to savings from a real-terms benefit freeze and deep cuts imposed on recipients with more than two children.

Those cuts may have worked their way through the system, but they have not been reversed and there are no hints of a desire to do so from this government.

Second, remember that what the shape of the state has changed a lot in recent years. Health has grown as share of spending bigger thanks to our ageing population profile, effectively squeezing out lots of other areas of state activity.

Overall public services spending might be returning to pre-austerity levels, but it’s most unlikely to mean that all Whitehall departments will be back to where they were in 2010.

Finally, the OBR presented another piece of information that rather pricked the impression of austerity death. Presenting public service spending per capita as a share of GDP shows a third of the cuts still in place by 2025.

Measuring public service spending relative to the size of the overall economy is probably a more appropriate metric than doing so in cash terms.

The upshot? It’s probably still premature to declare the policy deceased. But if one wants to accentuate the positive, it has, decidedly, run out of puff.