Conclusion

This chapter has identified, analysed, and compared eighteen episodes of fiscal squeeze in the UK over a century, defining fiscal squeeze in terms of spending reductions or revenue increases and taking reported fiscal outcomes as the point of departure. It shows that episodes of fiscal squeeze so defined are not the same as episodes of 'fiscal consolidation' as identified from significant reductions in deficit. There was no episode of 'fiscal consolidation' without an accompanying fiscal squeeze episode (though as we have shown, the timings tend to vary), but about half the fiscal squeeze episodes were not associated with fiscal consolidation.

This chapter has also shown that fiscal squeeze was far from uncommon over the period (there was a fiscal squeeze of one kind or another approximately every decade, with the exception of the 1900s and 2000s). But it has also shown that there was only one unambiguous instance in the entire century of what we called 'double hard squeeze'—that is, when revenue rose and spending fell by more than 1 per cent in constant prices and relative to GDP, occurring in very unusual circumstances immediately after World War I.

Further, this chapter has brought out what variations in spending and revenue squeezes can be discerned from reported numbers. While the categories used for those administrative numbers are too coarse to bring out some important analytic distinctions (for example, in the types of welfare spending cut), such an analysis can show what broad spending domains get hit hardest during spending squeezes and what types of taxation dominate revenue squeezes.

Finally, this analysis shows that the short, sharp, hard revenue squeeze, once a staple of fiscal squeeze in the decades after World War II, became less prominent over the last three decades or so of the period considered here. That might seem surprising, given political pressures on governments to raise taxes to mitigate or avoid spending cuts. It may reflect a world in which globalization and related developments somehow make revenue harder for governments to control than spending, but there might be some electoral explanation as well—issues to which we return in the concluding chapter. At the same time, the changing composition of public spending over the century, discussed earlier, has meant that spending squeezes through slowing or cutting capital expenditure—also once a staple of fiscal squeeze—may have become more difficult as a result of privatization or radical reduction of government spending in the domains that once figured large in this type of squeeze.

We return to these issues in the concluding chapter. But first, in the eight chapters that follow, we explore the political story behind the numbers presented here for each of the squeeze episodes, to give us the basis for rating the intensity of the squeeze episodes on the three dimensions we identified in Chapter One.

 
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