The real scandal in the Chagos spending story is how government generally cooks its numbers

This morning’s Daily Telegraph provides a fascinating insight into what we might call the ‘post-truth’ age we live in when it comes to government spending with a story about how the Government appears to have massaged the figures over its abject deal to hand over the Chagos Islands to Mauritius.

Ministers managed to produce a figure ten times lower than the nominal sum by first adjusting it for inflation (reasonable enough, at first glance) and then applying something called the Social Time Rate Preference, a Treasury mechanism which values money spent today more highly than money spent in the future, presumably on the basis that a rabbit in the hand is worth two in the bush, and so on.

On the face of it, this isn’t really the ‘gotcha’ it might appear; whatever one’s views of the STRP, adjusting any long-term spending commitment for inflation is reasonable. Or rather it would be, if it were consistently done. Yet as the paper reveals, that is very much not the case:

“However, other projects announced by Labour have not used the same method, which has allowed ministers to advertise higher spending on popular policies. Angela Rayner has since launched a 10-year affordable homes plan that included inflation-level increases in government spending as part of the cost of the policy – a method not used with the Chagos deal.”

Obviously Labour aren’t the only party to do this. To pick just one example which springs immediately to mind from the previous government, Rishi Sunak’s defence spending commitment was worth about £20bn in real terms, but that didn’t stop Grant Shapps bandying about much higher figures when he was defence secretary. Or there was that ‘rolling’ deficit reduction target which continually pushed back the date by which the Government needed to rein in spending…

But whether for partisan reasons or simply because the arc of the national doom-spiral is tightening, this does seem to be getting more egregious. One thinks of the Government’s bold posturing about ‘renationalising the railways’ when it is merely allowing the passenger franchises to lapse on their contracted schedules.

Then, in February, Steve Loftus wrote on this site about Labour taking credit for recycling Conservative water policies. Last month, they did it again, if anything even more egregiously; as I noted over at UnHerd:

“Feargal Sharkey, no Conservative apologist, has handily listed all those policies that Labour has simply re-announced. These include full sewage monitoring (2023) and the attendant outflow reduction plan (2022); the £104 billion of new investment (2023); phosphorus reductions (2022); and nature-based solutions (also 2022).

“Two policies were in fact finalised in the run-up to last year’s general election: reinvesting company fines into local projects was announced that April, and Ofwat was prevented from announcing plans to ring-fence consumer bills for water infrastructure upgrades by the purdah period.”

So little of what was announced was actually creditable to the Starmer Government that I described the whole thing as a ‘pseudo-event’, a term coined in 1962 by Daniel Boorstin to describe an event staged primarily for creating images for the media. It worked, too: most newspapers wrote up Labour’s announcements without mentioning that they had all previously been announced or even enacted. From the Government’s perspective, that was job done.

This has pretty serious implications for the health of a representative democracy. It is one thing for politicians to massage public spending figures up or down as suits their preference, which they presumably always have done; but if the popular press doesn’t actually notice, and government spending can be announced on completely different bases and more than once to boot, it becomes extremely hard to see how the public could be expected to make an informed decision at the ballot box.

One of those problems is easier to solve than the other: it would be an obvious improvement if all government spending announcements were made in real terms. Monitoring the number of times a given item of spending is announced is trickier, because sometimes a later government really does deserve at least a share of the credit – for example, if it confirms and locks in spending a previous one had merely planned for.

Likewise, there is not obviously a tidy and impartial way to resolve things like the Treasury’s STRP. It may well make sense, from one point of view, to weigh money spent in the here and now more heavily than monies committed to being spent in the future.

But there is an obvious counter-case: that given the decaying arc of Britain’s public finances, money spent in the future will be drawn from a state with less fiscal wriggle-room than today, and a nation with an ever-smaller working-age tax base. If the NHS, social care, and pensions continue on their current trajectory, every scrap of government spending on other things will be more and more painfully acquired, at a steeper and steeper opportunity cost. That seems worth factoring in.

Such broader systems are, like George Osborne’s creation of the Office for Budget Responsibility, never going to be politically neutral; people can legitimately take different positions on what they think worth factoring in, and in such differences will always lie scope for some massaging of the message on public spending.

But the bare minimum we could do would be to ensure that every government spending announcement is made on the same comparable basis, and is made only once. But which party is ever, in office, going to have principles sufficient to bind its hands that way?