Spending Squeezes: From Short and Sharp to Long and Shallow?
A third general point suggested by Table 2.1 is that there seems to have been some shift towards longer and shallower spending squeezes in the last three decades of the period, and the final episode, beginning in 2010 and analysed up to 2015/16 in this book, also seems to fit that pattern. Spending squeezes appear to have lasted longer in those final three decades, with lower average annual falls, than applied to the earlier episodes. Indeed, the majority (five out of eight) of spending squeezes since the 1950s were 'soft' squeezes, compared with the pre-1950 period when all four spending squeezes were hard. And almost by definition, long episodes are less likely to take the form of 'hard' squeezes than short episodes generating the same fiscal consolidation.
How can we account for this apparent shift towards longer and shallower spending squeezes? Does it reflect a changing position relative to financial and currency markets over the period, for instance in the movement to floating instead of fixed exchange rates from the 1970s? Does it reflect longer business or financial cycles in the recent past, consistent with the observation of long periods of positive and relatively stable growth since World War II (Hills, Thomas, and Dimsdale 2010)? Or might the explanation be more political, for example, as a result of Conservative electoral tactics in the 1990s and 2010s, discussed in later chapters, of challenging the Labour opposition to pledge to match plans for spending restraint in the future, or face election- campaign accusations of planning a 'tax bombshell'? Or is there something about the way modern state spending is constituted (for example, through long-term contracts with private suppliers, or through a changing mix of welfare and other spending) that makes it harder than it might have been previously to put the brakes on quickly?