There has been a lot of reporting about how the cumulative adjustment for the next few years is going to be higher than €7.5 billion and how this was the figure that was announced at the time of the last budget.
I was a bit puzzled by this reporting because I had been under the impression that the figure for cumulative adjustments was €8.5 billion. Here’s why. Here’s the Stability Programme Update released at the time of last year’s budget, which is the document provided to the European Commission to illustrate the details of our multiyear plan.
Click on the document and go to page 19. Table 9 describes €3 billion per year in additional measures to be “delivered” in 2011 and 2012 as being made up of €1 billion per year in capital program adjustments that were “already identified and incorporated into the base” and €2 billion per year of additional adjustments.
For this reason, page 20’s description of the adjustments in future years shows €2 billion in 2011, €2 billion in 2012, €1.5 billion in 2013 and €1 billion in 2014, which adds up to €6.5 billion. However, since Table 9 tells us that an additional €1 billion a year in capital adjustments had been identified and incorporated into the base, I had believed the profile for total adjustments planned was €3 billion in 2011, €3 billion in 2012, €1.5 billion in 2013 and €1 billion in 2014, which adds up to €8.5 billion.
However, it turns out that the baseline for capital spending is a continuation at prevailing levels. Table 10 shows Gross Voted Capital falling from €6.445 billion in 2010 to €5.5 billion in 2011 and staying there afterwards. You can add this €1 billion cut in 2011 to the €6.5 billion identified elsewhere in the table to get to the €7.5 billion.
What about the additional €1 billion of capital spending cuts that Table 9 tells us had been identified and incorporated into the base from 2012 onwards? Apparently, the 2012 element of these “identified cuts” doesn’t exist. (It appears that someone in Finance mixed up their levels and changes.)
So, €7.5 billion is indeed the correct figure. However, those of you who, like me, had thought that the government had been planning €3 billion in adjustments in 2012 haven’t had it right.