the public finances
DESCRIPTION
The public finances. Christine Frayne. 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. - PowerPoint PPT PresentationTRANSCRIPT
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
© Institute for Fiscal Studies, 2004
New measures
2004-05 2005-06 2006-07 2007-08
Tax -195 225 470 650
£ million
© Institute for Fiscal Studies, 2004
New measures
2004-05 2005-06 2006-07 2007-08
Tax -195 225 470 650
Spend 520 590 695 995
£ million
© Institute for Fiscal Studies, 2004
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
© Institute for Fiscal Studies, 2004
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
© Institute for Fiscal Studies, 2004
Non-discretionary changes
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
Note: Excludes change in classification of NHS trusts
© Institute for Fiscal Studies, 2004
Non-discretionary changes
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
Note: Excludes change in classification of NHS trusts
© Institute for Fiscal Studies, 2004
Non-discretionary changes
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
Note: Excludes change in classification of NHS trusts
© Institute for Fiscal Studies, 2004
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
© Institute for Fiscal Studies, 2004
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
© Institute for Fiscal Studies, 2004
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
© Institute for Fiscal Studies, 2004
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
© Institute for Fiscal Studies, 2004
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
© Institute for Fiscal Studies, 2004
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
© Institute for Fiscal Studies, 2004
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
© Institute for Fiscal Studies, 2004
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
© Institute for Fiscal Studies, 2004
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
£124bn £98bn £45bn £8bn £5bn
© Institute for Fiscal Studies, 2004
Meeting the golden rule? (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%
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
Average current budget surplus 1999–2000 to 2005–06, as a share of national income
£5bn
© Institute for Fiscal Studies, 2004
Meeting the golden rule? (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%
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
Average current budget surplus 1999–2000 to 2005–06, as a share of national income
£5bn £8bn
© Institute for Fiscal Studies, 2004
Meeting the golden rule? (1)
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%
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
Average current budget surplus 1999–2000 to 2005–06, as a share of national income
£5bn £8bn –£6bn
© Institute for Fiscal Studies, 2004
Meeting the golden rule? (1)
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%
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
Average current budget surplus 1999–2000 to 2005–06, as a share of national income
£5bn £8bn –£6bn –£2bn
© Institute for Fiscal Studies, 2004
Meeting the golden rule? (2)
-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
© Institute for Fiscal Studies, 2004
Meeting the golden rule? (2)
-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
Cyclically adjusted current budget surplus, as a share of national income
© Institute for Fiscal Studies, 2004
Meeting the golden rule? (2)
-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
Cyclically adjusted current budget surplus, as a share of national income
Current cycle
© Institute for Fiscal Studies, 2004
Meeting the golden rule? (2)
-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
Cyclically adjusted current budget surplus, as a share of national income
Next cycle