The Impact of Spending Cuts on the UK Voluntary and Community Sector - Term Paper Example

? UK Government Announced Expenditure Cuts- Consequences for Public Services Table of Contents Introduction 3 Discussion 4 A. Expenditure Cuts 4 B. Consequences for Public Services 7 C. Weighing In 8 References 10 Introduction This paper discusses the implications of the announced budget cuts by the UK government for public services. The debate has raged with regard to whether those expenditure cuts, as part of a program on austerity that is already underway, is the best way for the UK to pull itself out an economic quagmire, and the debate has deep philosophical roots, with the opposing side arguing that the best way for the economy to go is not to cut on expenditure, but to go the other way, and for government to spend more, in order for it to help in stimulating the economy back to robust and consistent long-term growth. This, as the general population has already in part voiced an opinion via the results of recent polls that have punished those in power for the spending cuts that were already instituted, via voters electing into office those who are opposed to the current government and its programs of austerity and expenditure cuts. Already the impacts of such expenditure cuts, moreover, have included sharp reductions in the payments made by government towards welfare, as well as deep cuts in the roster of employees in the public sector. The latter arguably may have both camps in the debate arguing about how such deep cuts in the employee count in the public sector impacts the provision of public services in the UK. Moreover, reduced spending for welfare directly strikes at the heart of what government intends to provide its citizens in terms of public services tied to welfare, as they pertain for instance to those who are unemployed, and as they pertain to the provision of vital health services especially for those sectors of British society unable to cover for their own healthcare needs without the benefit of welfare services provided by the UK government. The debate has the government vowing to press on with the programmed expenditure cuts, on the one hand, and those opposed to it continuing to press government for it to reverse course and spend more (Stringer 2012; Ramesh 2012; Chote et al. 2010; The Associated Press 2010; Hoban 2010; Phelps et al. 2010; Kane and Allen 2011). Discussion A. Expenditure Cuts At the time that the expenditure cuts were announced in 2010, they were deemed to be, taken together, the largest such cuts to be instituted in the expenditures of the UK government since the second world war, with the scale of the cuts cutting through vital public services, including welfare, and envisioned to pare down the government workforce by half a million civil servants, en route to balancing the budget, from yearly deficit estimated at 156 billion pounds in 2009. Then chief of Treasury George Osborne, referring to the magnitude of the public sector spending deficit, called the UK a “debt supertanker”, depicting the deficit problem in gargantuan imagery, in order to stress the point that the deficit situation was urgent, damaging, and threatening to the future viability of government, and therefore necessitated the cutbacks in expenditure. The short of it was that government deemed the then state of affairs of government spending as unsustainable in the long term. The non-sustainability of spending meant that government had to step in and try to rein in the spending. That was the gist of the plan, and government envisioned the cuts to be undertaken over a period of half a decade, gradually cutting back on spending through all of the government's different functions, departments, and agencies, with the goal of reversing the deficit spending and putting the government finances on an even keel, as a way of securing its long-term viability. The cuts in spending was estimated to reach 83 billion pounds by 2015, with the rest of the funding to wipe out the deficit to come from increases in taxation (The Associated Press 2010; Stringer 2012). Aside from the cuts in public sector employment, the expenditure cuts also aimed to raise the age of retirement, while also shrinking payments for welfare. Various programs of government were put to a stop. The royal family budget was also programmed to shrink by 14 percent over the planning period. Government agencies were to take a hit, with the budget for the police being shrunk by 4 percent annually, and the Justice department budget to be shrunk by 6 percent annually over the period as well. Payments for child benefits will be cut for about 1.4 million households starting from 2013. The age for pensions was to be raised to 66 years for all genders (The Associated Press 2010). Fast forward to 2012, and not only has the Prime Minister Cameron vowed to follow through with the spending cuts through the planning period, but also that the Treasury chief Osborne confirmed that the austerity measures would push through to 2015, with an additional two years of further cuts already being mulled, to enable the UK government to save an additional 81 billion pounds from the UK budget by 2017 (Stringer 2012). The scale of the cuts, meanwhile, underscore the fact that to balance the budget over the planning period and the additional two years of additional cuts already being contemplated, the government relies more heavily on the spending cuts than on new taxes, as evidenced by ratios that peg the difference in the sourcing of new funds to balance the budget at 77 to 23, with 77 percent of fund sources to balance the budget coming from spending cuts, and just 23 percent of all fund sources to come from new taxes over this five-year planning period. Beyond that, additional spending cuts announced by Osborne indicate that spending cuts will likewise make up the sizable portion of fund sources to balance the budget for the two years leading to 2017 (Kane and Allen 2011, p. 9; Stringer 2012). The rationale for the reductions in government spending can be traced back to the studies made by the Treasury department dating back to 2008, regarding projections on the amount of new funds that the government had to source in order to sustain the then-status quo of spending and planned spending for the next decade or so. The event that precipitated the disruption in the budget balance, to take a step back, was the financial crisis that gripped first the United States and then Europe and the UK starting in 2007, which prompted the UK government to bail out distressed institutions and pump money into the economy as a way to stimulate it in the short term. By 2009, on the other hand, it was clear to policy makers that without cuts in spending, without long-term measures to rein in the budget, the UK was facing a snowballing debt problem, with more debt necessary to fund expenditures going out of control, which threatened in turn to place the government under deeper and deeper debt. The chart below details this impending reality, and what would have happened without the cuts in government expenditure (Chote et al. 2010, p. 4): Graph Source: Chote et al. 2010. p. 4 In the plot above, the green bars represent the additional debts that the UK government would have had to incur in order to fund spending as it was projected in 2009 moving forward, without the expenditure cuts. It was a snowballing reality that needed to be checked. The cuts in expenditure, the government argued, was a necessary thing to do for the government to survive (Chote et al 2010, p. 4; Hoban 2010, p. 1-5). B. Consequences for Public Services As discussed earlier in this paper, the consequences for public services are severe, with welfare payments taking a hit, and in at least one instance, in the case of welfare payments going to child benefits being cut for more than 1.4 million UK households, a severe blow indeed. The reductions in spending across all departments, from the police to the Justice departments, reflect the shrinking in the scope and maybe the effectiveness of provided public services as well. The programmed shrinking of the UK public sector workforce by half a million jobs through 2015 likewise threatens to affect downwards the quality and extent of provided public services by the UK government moving forward (Stringer 2012; Ramesh 2012; Chote et al. 2010; The Associated Press 2010; Hoban 2010; Phelps et al. 2010; Kane and Allen 2011). While the above consequences for public sector services are well-discussed and and documented in the official literature, as shown above, there are alternative views that point to other consequences relating to the provision of public services by the government to the general UK public, as they pertain for instance to certain highly vulnerable groups, such as people with disabilities, minority groups, and women. One such alternative set of views is being espoused by the so-called Equality and Human Rights Commission or EHRC, which points out that government, while having the legal mandate and the economic reasoning for the expenditure cuts, fails to consider the equality implications of such spending cuts, which the EHRC deems as an oversight that makes the government in the wrong, so to speak, when it comes to honoring the equality provisions of the law with regard to expenditure cuts and other vital government actions. The six areas of public services that were particularly found wanting for failure by government to consider equality impacts were living allowances for people with disability; support for employment; benefits accruing to children; legal assistance; the so-called premium for pupils; and the so-called council tax. The decision to stop benefit payments to children, in particular, translate to minority households being hit in greater intensity, while the cut in the education maintenance allowance likewise translates to poorer children being particularly hard hit by cutbacks in such aspects of public services provision by the UK government (Ramesh 2012). C. Weighing In Elsewhere in the literature the notion of the quality of public services being offered by the UK government prior to and after the enactment of austerity measures and the cutbacks in government spending is explored. The reasoning is that an investigation into public sector quality would then lead to discussions on the efficiency of public services prior to the cuts, and how, in effect, the spending cuts may not give the total picture as far as the effectivity and quality of the public services are concerned. Put another way, while public services quality is a concern, and may logically follow as being negatively hit by cuts in public spending, there is merit in looking at just how efficiently government was utilizing public money allocated for such public services in the first place. It is noteworthy, taking a step back, that healthcare and education made up the largest share of the total pie for expenditures for public services by the UK government historically, and moving forward with the cuts, one can imagine that those two aspects of public services would also be the sectors that would be hardest hit (Phelps et al. 2010, pp. 95-97). The discussion above seems to confirm this. On the other hand, literature that examines the efficiency of the provision of public services points us in the direction of just how, for instance, public services can be enhanced even in the face of the cuts in expenditure by government for such services (Stringer 2012; Ramesh 2012; Chote et al. 2010; The Associated Press 2010; Hoban 2010; Phelps et al. 2010; Kane and Allen 2011). References Chote, R. et al. 2010, Britain's fiscal squeeze: the choices ahead, IFS Briefing Note BN87/Economic and Social Research Council. Hoban, M. 2010, Budget 2010, Her Majesty's Treasury. Kane, D. and Allen, J. August 2011, Counting the Cuts: The impact of spending cuts on the UK voluntary and community sector, National Council for Voluntary Organisations NCVO, Retrieved 13 May 2012 from http://www.msnbc.msn.com/id/39754325/ns/world_news-europe/t/uk-faces-sharpest-spending-cuts-wwii/ Phelps, M. et al. October 2010, Total public service output, inputs and productivity, Economic & Labour Market Review/Office for National Statistics. Ramesh, P. 2012, Treasury failed to test fairness of spending cuts, equality watchdog finds, The Guardian Online, Retrieved 13 May 2012 from http://www.guardian.co.uk/society/2012/may/14/treasury-censured-spending-cuts-equality Stringer, D. 2012, Cameron: UK Must Stand by Spending Cuts, Time Magazine. Retrieved 13 May 2012 from http://www.time.com/time/world/article/0,8599,2114206,00.html The Associated Press 2010, UK faces sharpest spending cuts since WWII, Europe MSNBC.com, Retrieved 13 May 2012 from http://www.msnbc.msn.com/id/39754325/ns/world_news-europe/t/uk-faces-sharpest-spending-cuts-wwii/ Read More