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Is that a lot of cash? The Maths of the Spending Review

Dave Harvey | 13:05 UK time, Thursday, 23 September 2010

The South West could lose 116,000 jobs, according to the region's top economist.
Is that a lot of people?

Nigel Jump, from the SW Regional Development Agency, also reckons the cuts will cost us £4.2bn in this part of the world.
Is that a lot of cash?

Interestingly, the same number was used by George Osborne, promising to save money on welfare. Squeezing people who, in The Chancellor's words, make a "lifestyle choice to just sit on out-of-work benefits," will reduce the welfare bill by £4bn.
Is that a big saving?


Job Centre Plus, Bristol

 

Now don't get me wrong. 116,000 job losses is terrible news for 116,000 people. Mums, dads, breadwinners, each will have their lives turned upside down. Families who lose benefits will face undeniably tough times. But how do we measure the impact on the whole of the west country? In short, how do we decide if they are big numbers?

Over the next few months, we are going to be bombarded with big numbers. Ministers will claim they have saved billions. Unions will warn of job losses in the thousands, even hundreds of thousands. Contractors will plead that cutting this plane or that dual carriageway will decimate their business.

So I've found myself asking this question a lot recently: Is that a big number?
If you want to make sense of these cuts and decide if you think they are worthwhile, follow me on a short maths trail.

First, those 116,000 jobs. I wondered how many of the South West's jobs that represents. Can you guess?
(For all these numbers, by the way, we have to use the government's official "South West", from Tewkesbury to Land's End. You'll find all the statistical sources at the bottom.)

In June 2010 there were 2,520,000 people employed in the South West. So that new dole queue of 116,000 people represents 4%, or 1 person in every 25.

Is that a lot?

Well, the same figures reveal total unemployment in the SW was 165,000. So 116,000 new claimants would lengthen the region's dole queue by 70%. That is, by any yardstick, a big number.

But then you realise these jobs will go over four years. So we are now talking about 29,000 people a year, which would increase the jobless total by 17%.

Ministers, of course, will assure us that many of these people will find work in private companies, reducing the number still further. But maths can't help with that, you need a crystal ball.

UK Banknotes

 

My second number is 4,000,000,000. It's usually written '4bn', but I think it's worth staring at all the zeros from time to time.

If Nigel Jump is right, would £4.2bn be a big loss to the South West economy? Will Mr Osborne's £4bn benefit cut be a huge saving in the national welfare bill? Naturally, as a good BBC correspondent, I won't offer you an opinion, only some more numbers.

In 2008, the latest available figures, the South West produced £97.84bn in goods and services. This is the total "Gross Value Added", broadly similar to GDP. So that £4.2bn loss is slightly under 4%. And, once again, this will be over four years, so the loss to the economy will be 1% a year.

Surely a £4bn cut in benefits is a big number? Well, once again, what's the total? In the June 2010 budget, the total welfare bill is £194bn. So that cut is a little over 2%. If departments are going to reduce their budgets by 25% or more, Mr Osborne will be talking about £50bn coming off the benefits bill, not £4bn.

The trouble is, billions are blinding. Be honest, when we see politicians talking in billions, we glaze over. What would it mean for me?

I decided to work out how much the government spends on my behalf, each year. And by how much the cuts will reduce that personal budget.

There are real government numbers for spending in the South West. The total is £42,386,793,000 for 2009-10. And there were 5,231,000 people living here that year. So per head, we are talking £8,103. Now there, at last, is a number I can imagine. And here's how it breaks down.

Government Spending in the SW, 2009, per head

 

There's a graph, or a video - you choose.

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The big headline for me was that welfare bill: £3,482. Mr Osborne's £4bn cut translates as £65 in my personal budget, cutting it to £3,417.

So, is that a big cut?

I'm told that in Whitehall there are now three letters against which there is no argument: DRP. The "Deficit Reduction Programme". To eradicate the national debt (the structural deficit, to be precise) Mr Osborne needs to cut spending by £66bn over 6 years.

Now, last year 6.58% of national spending came to the SW, so we could assume that our share of the cuts will be the same, namely £4.3bn. In my personal budget, then, The Chancellor is looking for £822.

He has said he won't touch the £1,817 spent on health. So, you would think, the other big spenders are surely going to take a big hit. Against the total target of £822, does £65 still look like a big number?

Here are some numbers to keep in your pocket.

  • £696bn : Total government spending, planned in the June 2010 budget
  • £66bn. Total cuts needed to eradicate the structural deficit over six years
  • 5m: The number of people, roughly, in the South West
  • 2.5m The number of people, roughly, in work here
  • 0.5m The number of people, roughly, who work in the public sector here
  • £97bn The total "GVA" earned by the SW in goods and services in 2008
  • £42bn The amount spent by the government in the SW in 2009

Show me the numbers: Sources and Stats

The Budget, June 2010
South West unemployment numbers, and other job figures
SW Economic Indicators. Click on the "Regional Indicators" and you'll find all the numbers you could ever want on our economy.

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