Budget 2015: wellbeing rhetoric hides the truth

In 2010 David Cameron promised to "start measuring our progress as a country, not just by how our economy is growing, but by how our lives are improving." Unfortunately, as dealing with the deficit became the defining mission of his Government, that promise seemed to fall by the wayside. This week, in George Osborne's Budget speech, we glimpsed its return.

Trumpeting rising living standards in the UK, Osborne referred not to GDP but to household disposable incomes. That is one of a bevy of measures that the Office for National Statistics have developed over the course of this Parliament to track the living standards of UK citizens. The measures supplement traditional statistics, such as GDP, and paint a fuller picture of the nation's health. Hearing the Chancellor highlight the measures that truly matter is progress.

It has been some time since the Government has publicly championed wellbeing as a measure of success. In 2010, they were faced with a deficit at levels not previously seen outside war. The sovereign debt crisis in the EU then demonstrated that market confidence in a nation's debt can be a fragile thing and, understandably, the Chancellor set to reassuring debt markets. He developed a singular focus on deficit reduction that would become his defining ambition.

That focus had costs: the best current estimates are that austerity cost the UK about one percentage point of GDP growth each year from 2010 to 2013. It is commonly known that GDP rose slowly, less commonly known that GDP per head rose even slower, and hardly known at all that the disposable income of the nation remains stagnant to this day. Osborne sacrificed short-term incomes for deficit reduction because that seemed the priority in 2010. In 2015, with UK borrowing rates still extremely low, the situation is different. Debt vigilantes are no longer the currency of conversation and Osborne's rhetoric has changed to reflect that.

The Chancellor's speech emphasised not the deficit, as he often does, but debt. He is right to do so: in the long-run what matters is that the public finances are sustainable and that means stabilising debt. The sustainability of the Government's spending commitments affects its ability to sustain the services it provides for future generations. Controlling the debt is a means to that end. Moreover, it is not today's debt that matters but the level it settles at over decades.

On that front, the numbers are against the Chancellor. He proudly announced that he will meet the 2015-16 debt target that he set himself in 2010, which many people believed he would miss. Unfortunately, the Office for Budget Responsibility's projections show that that fall in debt is temporary. Over the coming decades, the demographic pressures of an ageing population will bear heavily on the NHS and the pension system. Without drastic reform, that will cause debt to inexorably rise, passing through 200 per cent of GDP within 50 years.

Those implausible figures indicate that health and pension services, which are crucial to the wellbeing of many of the UK's most vulnerable residents, will need to be either reformed or reduced over the coming years. Sadly, public services barely warranted a mention in the Budget speech. That is particularly concerning because the Chancellor's plans for the next four years outline cuts to public services deeper than any seen in this Parliament.

There is no doubt that the budgetary pressure of the past five years has improved the efficiency of some public services, which is extremely welcome. Higher productivity allows more to be done to support wellbeing with the limited resources available. For the NHS, increasing productivity will be the only way to avoid reducing service provision in future.

There are encouraging signs from this Parliament. For example, crime has fallen even as police budgets have dropped by 20 per cent. However, cuts have not always been well targeted: for example, the cuts to local government funding have greatly reduced the provision of social care. That is not to say social care could not be delivered better for less, but effective spending pressure must bear most heavily on the areas that are most inefficient.

It is concerning that the Chancellor now plans even greater cuts than previously but has no plan for achieving them. Two days before the Budget, Sir Amyas Morse, who heads the National Audit Office, warned that the Government's approach to spending cuts is equivalent to "performing radical surgery" without knowing "where the heart is." Osborne is right to worry about wellbeing and sustainability but his latest Budget is brandishing the knife blindfolded.