Council tax freeze: playing games with spending will damage growth – Ian Mulheirn

In his speech today, George Osborne made himself popular with delegates by announcing that he’s found £800m to freeze council tax bills in 2012-13. In fact this was something he announced back in 2008, but was later quietly dropped.

The council tax giveaway isn’t the only magic money the Government has found recently. Two weeks ago in Birmingham, Danny Alexander dug out £500m from the back of the Treasury sofa for new infrastructure spending too. But in austerity Britain, one is bound to ask where are the Treasury duo getting all this money from: haven’t we all been told that the cupboard is bare?

In reality all this cash is coming from this year’s under-spending by Whitehall departments. The Treasury gets tough with departments that blow their budgets, but when they under-spend – as they inevitably do – it snaffles the spare cash from this year for shiny new policy announcements like tax freezes and new investment for next year.

It’s disappointing that Whitehall spending rules seem designed to help boost ministers’ popularity by routinely allowing them to announce spending twice. But this is nothing new and successive governments have played the same games.

What’s concerning is that these games are being played at precisely the wrong time given the weak state of the economy. By shifting money that should have been spent this year into 2012-13, the Government is effectively cutting public spending further than planned in 2011. With growth tanking, now is precisely the wrong time to be doing that.