Have they got this right?

The job losses in the public sector will result from the 25% inflation-adjusted reduction in Whitehall spending over the next five years,

I\’\’m not sure they have.

The 25% cuts are nominal cuts. Cuts from the planned future spending as upgraded for inflation, expansion of government, population growth and so on.

An \”inflation-adjusted\” reduction would be a reduction in cash terms wouldn\’t it? And we\’re not actually having one of those. Cash spending will still rise.

So I think the Guardian has got this entirely the wrong way around. The 25% cuts are NOT inflation adjusted, rather than being inflation adjusted.

Or have I got confused here?

Hmm, Larry Elliott tells me I\’m wrong via email:

No the real terms cut is 25 pc. The nominal reduction is much smaller, a point made quite forcefully by Reform and the Institute for Economic Affairs

Clearly I need to think about this a little more, silly Timmy. For I fear that Larry is right and Timmy wrong here.

6 thoughts on “Have they got this right?”

  1. Brian, follower of Deornoth

    Apparently we are cutting spending from £697bn now to £750bn in five years time.

    Tim adds: yes, that’s nominal, in real terms that’s a cut. Elliott’s point and my mistake.

  2. Well, don’t think too much, because a “25% inflation adjusted reduction” is just a clumsy term here (adjusted to factor inflation in, or out ?)

    They shouldhave said ‘a cut in real terms of 25%’ relative to whatever baseline this is measured against, as in Elliot’s email. Much clearer.

  3. I work that out to be roughly over 7% a year.
    7%/year for 5 years is 40% compound. Which takes £679bn up to £977bn. Then a 25% cut takes us down to about £733bn.

    Over 7% inflation!

  4. Did you just create this whole blog post so that you can show our chum Richard Murphy how to graciously accept that one has made an error?

    Tim adds: Tsk, such cynicism.

    I’d like to be thought that bright and manipulative but sadly, no. Just an Oopsie Moment.

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