Download - The public finances

IFS

The public finances

Christine Frayne

© Institute for Fiscal Studies, 2004

Outline

• Current receipts– Short term forecast revised down– Medium term level unchanged

• Current spending– Short term forecast unchanged– Medium term slightly higher

• Golden rule– Treasury expects to be met– Small margin of error


New measures

2004-05 2005-06 2006-07 2007-08

Tax -195 225 470 650

£ million


New measures

2004-05 2005-06 2006-07 2007-08

Tax -195 225 470 650

Spend 520 590 695 995

£ million


New measures

2004-05 2005-06 2006-07 2007-08

Tax -195 225 470 650

Spend 520 590 695 995

Extra borrowing

715 365 225 335

£ million


Non-discretionary changes

2004-05

2005-06

2006-07

2007-08

2008-09

Current receipts

-2 -2 -1 0 -½

Note: Excludes change in classification of NHS trusts



2004-05

2005-06

2006-07

2007-08

2008-09

Current receipts

-2 -2 -1 0 -½

Current spend

-0.8 -1 -2 ½ ½




2004-05

2005-06

2006-07

2007-08

2008-09

Current receipts

-2 -2 -1 0 -½

Current spend

-0.8 -1 -2 ½ ½

PSNI -0.7 1½ 2 ½ 0




2004-05

2005-06

2006-07

2007-08

2008-09

Current receipts

-2 -2 -1 0 -½

Current spend

-0.8 -1 -2 ½ ½

PSNI -0.7 1½ 2 ½ 0

TME -1.5 ½ 0 1 ½



Revenue projections

36

37

38

39

40

41

42

43

96–9

7

97–9

8

98–9

9

99–0

0

00–0

1

01–0

2

02–0

3

03–0

4

04–0

5

05–0

6

06–0

7

07–0

8

08–0

9

09–1

0

Per

cent

age

of n

atio

nal i

ncom

e

Current receipts - Budget 2002Current receipts - Budget 2003Current receipts - Budget 2004Current receipts - Pre-Budget Report 2004

Source: HM Treasury


Receipts bouncing back?

7.8%

7.3%

6.9%

7.8%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0%

Required growth over next 5 months

First 7 months

Pre-Budget Report 2004

Budget 2004

Nominal growth

Growth in net taxes and social security contributions in 2004–05

Source: HM Treasury


Spending projections

36

37

38

39

40

41

42

43

96–9

7

97–9

8

98–9

9

99–0

0

00–0

1

01–0

2

02–0

3

03–0

4

04–0

5

05–0

6

06–0

7

07–0

8

08–0

9

09–1

0

Per

cent

age

of n

atio

nal i

ncom

e

Total Managed Expenditure - Budget 2002Total Managed Expenditure - Budget 2003Total Managed Expenditure - Budget 2004Total Managed Expenditure - Pre-Budget Report 2004

Source: HM Treasury


Current spending growth slowing?

5.1%

5.4%

6.6%

3.8%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0%

Required growth over next 5 months

First 7 months

Pre-Budget Report 2004

Budget 2004

Nominal growth

Growth in central government current spending, (including depreciation) in 2004–05

Source: HM Treasury


The Chancellor’s fiscal rules

• Golden rule: only borrow to invest – Receipts cover current spending– Surplus or balance on current budget– Judged over the economic cycle

• Sustainable investment rule: debt at a ‘stable and prudent’ level, <40% of national income


Current budget surpluses

-2.8

-0.2

1.2

2.1 2.1

0.9

-1.3-1.9

-1.1-0.6

0.00.3

0.6 0.8

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

96–9

7

97–9

8

98–9

9

99–0

0

00–0

1

01–0

2

02–0

3

03–0

4

04–0

5

05–0

6

06–0

7

07–0

8

08–0

9

09–1

0

Per

cent

age

of n

atio

nal i

ncom

e

Outturns

PBR 2004 forecast

Source: HM Treasury


Current budget surpluses

-2.8

-0.2

1.2

2.1 2.1

0.9

-1.3-1.9

-1.1-0.6

0.00.3

0.6 0.8

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

96–9

7

97–9

8

98–9

9

99–0

0

00–0

1

01–0

2

02–0

3

03–0

4

04–0

5

05–0

6

06–0

7

07–0

8

08–0

9

09–1

0

Per

cent

age

of n

atio

nal i

ncom

e

Outturns

PBR 2004 forecast

Source: HM Treasury

Current economic cycle


Meeting the golden rule? (1)

1.4%

1.1%

0.5%

0.1% 0.1%

-0.2%0.0%0.2%0.4%0.6%0.8%1.0%1.2%1.4%1.6%1.8%2.0%

Budget 01 Budget 02 Budget 03 Budget 04 PBR 04

Pe

rce

nta

ge

of

na

tion

al i

nco

me

Average current budget surplus 1999–2000 to 2005–06, as a share of national income



1.4%

1.1%

0.5%

0.1% 0.1%

-0.2%0.0%0.2%0.4%0.6%0.8%1.0%1.2%1.4%1.6%1.8%2.0%

Budget 01 Budget 02 Budget 03 Budget 04 PBR 04

Pe

rce

nta

ge

of

na

tion

al i

nco

me


£124bn £98bn £45bn £8bn £5bn



0.1%

-0.2%0.0%0.2%0.4%0.6%0.8%1.0%1.2%1.4%1.6%1.8%2.0%

PBR 04 PBR 04, unspentmargin

PBR 04, but2004–05 as trend

PBR 04, but2004–05 as trend& unspent margin

Pe

rce

nta

ge

of

na

tion

al i

nco

me


£5bn



0.1% 0.1%

-0.2%0.0%0.2%0.4%0.6%0.8%1.0%1.2%1.4%1.6%1.8%2.0%




Pe

rce

nta

ge

of

na

tion

al i

nco

me


£5bn £8bn



0.1% 0.1%

-0.1%-0.2%0.0%0.2%0.4%0.6%0.8%1.0%1.2%1.4%1.6%1.8%2.0%




Pe

rce

nta

ge

of

na

tion

al i

nco

me


£5bn £8bn –£6bn



0.1% 0.1%

-0.1% 0.0%-0.2%0.0%0.2%0.4%0.6%0.8%1.0%1.2%1.4%1.6%1.8%2.0%




Pe

rce

nta

ge

of

na

tion

al i

nco

me


£5bn £8bn –£6bn –£2bn



-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

99–00 00–01 01–02 02–03 03–04 04–05 05–06 06–07 07–08 08–09 09–10

Per

cent

age

of n

atio

nal i

ncom

e

Budget 02

Budget 03

Budget 04

PBR 04

Source: HM Treasury

Cyclically adjusted current budget surplus, as a share of national income



-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

99–00 00–01 01–02 02–03 03–04 04–05 05–06 06–07 07–08 08–09 09–10

Per

cent

age

of n

atio

nal i

ncom

e

PBR 04

PBR 04 - cautious case

Source: HM Treasury




-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

99–00 00–01 01–02 02–03 03–04 04–05 05–06 06–07 07–08 08–09 09–10

Per

cent

age

of n

atio

nal i

ncom

e

PBR 04


Source: HM Treasury


Current cycle



-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

99–00 00–01 01–02 02–03 03–04 04–05 05–06 06–07 07–08 08–09 09–10

Per

cent

age

of n

atio

nal i

ncom

e

PBR 04


Source: HM Treasury


Next cycle

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