Triggers, Accompanying Conditions, and Composition of Fiscal Squeezes

The second set of questions raised at the outset of this chapter concerns what we can say from reported economic and financial statistics about what triggered fiscal squeezes or what the accompanying conditions were, and what categories of spending or taxation were most affected by those squeezes. The fiscal squeezes shown in Table 2.1 occurred in varying economic and financial conditions (for example, at different levels of debt and deficit and in periods of boom and bust in the world economy), and Tables A3 and A4 in the Appendix give more details about such variations.

Table 2.3 shows that those squeezes were applied by governments of different types and political stripes (coalition, minority, and single-party governments and by both left- and right-of-centre governments). More squeezes occurred under single-party government than under coalition or minority governments, and right-of-centre governments initiated roughly twice as many squeezes as left-of-centre governments (but that approximately reflects the preponderance of single-party and right-of-centre government in the UK over the period).

But while Table 2.3 shows fiscal squeeze was not an exclusive preserve of either the right or the left in politics over this period, some party-political differences are observable from the right-hand columns reporting the composition of spending cuts or tax rises. For instance, while defence and education were substantially cut in spending squeezes by both right- and left-of-centre governments, social security only appears in the 'most cut' category of spending under right-of-centre governments.

Table 2.3 also indicates two noticeable changes over time that we briefly discuss in the following subsections. One relates to major changes in the composition of government spending over time—in particular long-term change in capital spending—and its implications for what spending can be squeezed. A second, picking up on points made in the previous section about the disappearance of hard revenue squeezes, relates to the notable absence of income tax rate rises in the later part of our period.

 
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