The new UK coalition government presented its “emergency budget” to Parliament on 22 June. This aims to more or less eliminate the current deficit, mostly created in order to bail-out overstretched banks in 2008, by taking £113 bn (say US$ 170 bn) out of the economy in spending cuts and tax increases by 2014/15. The fear amongst economically-literate commentators is that by ignoring the Keynesian orthodoxy of counter-cyclical public spending, this risks snuffing-out the current weak economic growth, and creating a 1930s-style depression (not least because most of our European trading partners are set on the same demand-reduction path).
So far as higher education is concerned, we will have to wait to the main annual budget in the autumn to see what effect spending cuts will have on universities and colleges, but it does not look good. Overall, an almost unimaginable 25% cut of government spending is planned by 2014/15 (health spending is protected, so the impact is worse everywhere else). Universities are arguing that they will underpin future economic growth, so cutting their public subsidies is folly; but, as noted, economic logic does not seem to be foremost in government thinking at the moment.