public services: deep cuts coming - ifs · microsoft powerpoint - rowena_crawford.pptx author:...

Public services: deep cuts coming

Rowena Crawford, Carl Emmerson and Gemma Tetlow

© Institute for Fiscal Studies

The outlook for spending

• Total public spending: PBR plans real freeze over 2011-12 to 2014-15

• Capital spending to bear the brunt:

– Current spending: +0 7% p aCurrent spending: +0.7% p.a.

– Investment spending: –14.4% p.a.

• Some areas of spending to continue growing

– Welfare payments debt interest payments etcWelfare payments, debt interest payments, etc

– No official forecasts

• How much is left for departmental spending?


Growth in components of spending: 2011-12 to 2014-15

0 0Total Managed Expenditure 0.0

Of which:

Total Managed Expenditure

9.4Debt interest

Of which:

1.5Social security

3.1Other AME

-2.9Departmental Expenditure Limits

-5 0 5 10 15Average annual percentage real increase

© Institute for Fiscal Studies Notes and sources: see Table 8.2 of the February 2010 IFS Green Budget.

Spending on public services

10

15

crea

se

5

10

e re

al in

c

0

5

erce

ntag

-5

Ann

ual p

-10

1 6 1 6 1 6 1 6 1 6 1 6 1

A

19

50

–5

19

55

–56

19

60

–6

19

65

–66

19

70

–7

19

75

–76

19

80

–8

19

85

–86

19

90

–9

19

95

–96

20

00

–0

20

05

–06

20

10

–1

© Institute for Fiscal Studies Notes and sources: see Figure 8.9 of the February 2010 IFS Green Budget.

Cuts in DELs: the Grand Old Duke of York

27

30

ome

24

27

iona

l inc

o

21

ge o

f na

t

18

Perc

enta

g

15

–99

–00

–01

–02

–03

–04

–05

–06

–07

–08

–09

–10

–11

–12

–13

–14

–15

P

19

98

–

19

99

–

20

00

–

20

01

–

20

02

–

20

03

–

20

04

–

20

05

–

20

06

–

20

07

–

20

08

–

20

09

–

20

10

–

20

11

–

20

12

–

20

13

–

20

14

–


Departmental spending in 2011-12 and 2012-13

• PBR planned total spending to be cut by 0.1% a year in real terms

• Implies average annual real cuts to Departmental Expenditure Limits of 3.0%

– Once estimates of debt interest payments, spending on social security and other annually managed expenditure are taken into account

• But some areas are to be ‘protected’


But some areas are to be ‘protected’...

• Overseas Development Assistance

– Meet 2013 target of spending 0.7% of Gross National Incomeg p g

In 2011-12 and 2012-13:In 2011 12 and 2012 13:

• Health

– Real freeze in “front-line” NHS spending– Real freeze in front-line NHS spending

• Education

0 7% real increase in “front line” schools spending– 0.7% real increase in front-line schools spending

– 0.9% real increase in “front-line” spending on 16-19 participation

– Real freeze in “front-line” spending on Sure Start– Real freeze in front-line spending on Sure Start


Implications for other departments?

Overseas Development "Front-line" "Front-line"

"Front-line" 16-19 "Front-line"

Average annual real growth: 2011–12 and 2012–13

10

12

DELDevelopment

AssistanceFront line

NHSFront line

schools16 19

participationFront line Sure Start

6

8

ease

2

4

annu

al in

cre

3 0

-2

0

Ave

rage

rea

l

-3.0

-8

-6

-4A


8

Notes and sources: see Table 8.3 of the February 2010 IFS Green Budget.





11.3

10

12

Other DELDevelopment


NHSFront line

schools16 19


6

8

ease

2

4

annu

al in

cre

-2

0

Ave

rage

rea

l

-3.4

-8

-6

-4A


8






11.3

10

12



NHSFront line

schools16 19


6

8

ease

0 02

4

annu

al in

cre

0.0

-2

0

Ave

rage

rea

l

-5.0

-8

-6

-4A


8






11.3

10

12



NHSFront line

schools16 19


6

8

ease

0 00.7 0.9

0 02

4

annu

al in

cre

0.0 0.0

-2

0

Ave

rage

rea

l

-6.7-8

-6

-4A


8


Cumulative spending changes to 2012-13

5

ge 1.6%

-5

0

ge c

han

-10

perc

enta -6.0%

-15

ulat

ive

p

DELs

'Protected' DELs

'U d' DEL

-12.9%

25

-20

Cum

u 'Unprotected' DELs

-25

2010–11 2011–12 2012–13 2013–14 2014–15


Cumulative spending changes to 2014-15?

5

ge

-5

0

ge c

han

-10

perc

enta

-10.9%

-15

ulat

ive

p

DELs

'Protected' DELs

'U d' DEL

25

-20

Cum

u 'Unprotected' DELs

-25

2010–11 2011–12 2012–13 2013–14 2014–15



5

ge

-5

0

ge c

han

-2.6%

-10

perc

enta

-10.9%

-15

ulat

ive

p

DELs

'Protected' DELs - "2yr protection"

'U d' DEL "2 i " 18 7%

25

-20

Cum

u 'Unprotected' DELs - "2yr protection" -18.7%

-25

2010–11 2011–12 2012–13 2013–14 2014–15



5

ge

2.9%

-5

0

ge c

han

-10

perc

enta

-10.9%

-15

ulat

ive

p

DELs


'Unprotected' DELs "2yr protection"

25

-20

Cum

u Unprotected DELs - 2yr protection


'Unprotected' DELs - "4yr protection" -24.8%-25

2010–11 2011–12 2012–13 2013–14 2014–15


Summary of implications for DELs

• By 2012-13:

– Cumulative cuts to real DELs of 6.0% (or £22.9bn)( )

– Pledges to maintain or increase real spending in some areas

– Total cumulative cuts required across ‘unprotected’ areas: 12.9% (or £25.8bn)

• By 2014-15:

– Cumulative cuts to real DELs of 10.9% (or £42.0bn)

– If ‘protection’ ends in 2012-13: cumulative cuts required across ‘unprotected’ areas by 2014 15 of 18 7% (or £37 2bn)‘unprotected’ areas by 2014-15 of 18.7% (or £37.2bn)

– If ‘protection’ continues: cumulative cuts required across ‘unprotected’ areas by 2014-15 of 24.8% (or £47.4bn) p y ( )

• Significant unprotected areas

– Defence, Higher Education, Transport and Housing, g , p g


Where do the Conservatives’ plans stand?

• Pledges on DEL:

– Meet ODA targetg

– Increase real NHS spending year on year throughout parliament

• If match Labour’s plans for total spending:p p g

– Cut required across other departments budgets by 2014-15 of 18.3% (or £45.7bn)

• Proposed fiscal targets imply a more ambitious tightening

– Delivering this with 1/3 further tax rises and 2/3 spending cuts would i limply...

– Without cuts to welfare spending, cuts to departmental spending of 13.9% by 2014-1513.9% by 2014 15

– Cuts across their unprotected areas of 22.8% (or £57.1bn) by 2014-15


Conclusions

• Labour plans to freeze total spending over 2011-12 to 2014-15

• Departmental spending would have to be cut by 10.9% or £42bn Departmental spending would have to be cut by 10.9% or £42bn by 2014-15 if no new measures to cut social security spending

• Tightest squeeze for public service spending since late 1970s and reversal of the % GDP increase seen so far under Labour

• Conservatives plan to tighten faster implying greater cuts to total di d d l dispending and departmental spending

• Mix of departmental spending cuts, welfare cuts and tax increases not yet set in stonenot yet set in stone


Public services: deep cuts coming

Rowena Crawford, Carl Emmerson and Gemma Tetlow


public services: deep cuts coming - ifs · microsoft powerpoint - rowena_crawford.pptx author:...

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