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Why Liz Truss’ ‘no cuts’ promise isn’t what it seems

Liz Truss told Parliament today that she will “absolutely” stand by her campaign promise not to cut spending on public services.

But there’s good reason to believe her claim isn’t what it appears to be.

The pledge has raised eyebrows because the Prime Minister is set to borrow £45billion to cut taxes, mostly on wealthier households.

And yet her government is expected to announce a debt reduction plan to appease financial markets reeling from their unfunded tax cuts.

How can the Prime Minister make such a promise? Where’s the dexterity?

A notice came immediately after the Commons session. Asked about PMQs by reporters in Westminster, Ms Truss’s spokeswoman warned, although she will of course live up to the promise, there will be “difficult decisions” about spending.

This rang alarm bells because the tone was very different from the Prime Minister’s in the Chamber 30 minutes earlier

Moving further, the spokesman crucially declined to say whether spending commitments made in the government’s existing spending plan would be upgraded in line with inflation.

This is crucial because inflation is currently around 10 percent.

So a 10 percent increase is required to stand still, and no increase in allocations would mean a 10 percent cut in departments.

So when Truss says she won’t cut public spending, she means what economists call “cash terms,” ​​not “real terms.”

You can probably guess from the names that the latter matters — especially when inflation is so high and the gap between the two is so wide.

In a scenario where cash spending on public services is not increased by 10 percent, they will incur higher costs due to rising prices, but their funding will not increase accordingly. So the money doesn’t go that far.

There are other reasons to be skeptical as well. Due to demographic factors such as an aging population and simple population growth, some particularly expensive services such as the NHS and social care require a real scale up in terms just to provide the same level of care to a larger number of people using the service.

So even if a real increase is promised in some areas, this can lead to a reduction in funds per patient.

All this explains why the Prime Minister is happy that there will be no cuts in public spending. That doesn’t mean austerity won’t happen.

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