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Where did the axe fall?

Where did the axe fall?. Rowena Crawford. Outline. Has the planned fiscal tightening changed? How has the composition of the tightening changed? Which departments were relative winners/losers?. Fiscal tightening. Sources: HM Treasury; IFS calculations. Fiscal tightening.

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Where did the axe fall?

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  1. Where did the axe fall? Rowena Crawford

  2. Outline • Has the planned fiscal tightening changed? • How has the composition of the tightening changed? • Which departments were relative winners/losers?

  3. Fiscal tightening Sources: HM Treasury; IFS calculations.

  4. Fiscal tightening Sources: HM Treasury; IFS calculations.

  5. Composition of the tightening in 2014-15

  6. Composition of the tightening in 2014-15

  7. Composition of the tightening in 2014-15

  8. Composition of the tightening in 2014-15

  9. Composition of the tightening in 2014-15

  10. Composition of the tightening in 2014-15

  11. Spending review: Impact on borrowing?

  12. Spending review: Impact on borrowing?

  13. Spending review: Impact on borrowing?

  14. Spending review: impact on net investment

  15. Spending review: impact on net investment • Additional investment spending brings the coalition plans for investment back to the levels planned in the March Budget • Still an average annual real cut of 14.4% (a total cut of 46.4% by 2014-15)

  16. Fiscal tightening Sources: HM Treasury; IFS calculations.

  17. Fiscal tightening Sources: HM Treasury; IFS calculations.

  18. Composition of the tightening in 2014-15

  19. Composition of the tightening in 2014-15

  20. Composition of the tightening in 2014-15

  21. Composition of the tightening in 2014-15

  22. Composition of the tightening in 2014-15

  23. Composition of the tightening in 2014-15

  24. DELs: The grand old Duke of York? Note: Figure shows Departmental Expenditure Limits (DELs) as a share of national income under current policies.

  25. DELs -11% -10% -13% -14%

  26. But George said... • “the average saving in departmental budgets will be lower than the previous Government implied” • Spending Review plan: -13%, after taking into account the in-year cuts in 2010-11 • March Budget plan: -10% • “departmental budgets other than health and overseas aid will be cut by an average of 19 per cent over four years, the same pace as planned by the previous government” (Spending Review 2010, page 5) • Spending Review plan: -19%, but excludes in-year cuts in 2010-11 • March Budget plan: -16% • (IFS election analysis said Labour plans implied a 20% cut to “unprotected” DEL • But more areas of spending protected, and was based on less official data)

  27. ‘Winners’ Note: Figures show real change in total (resource + capital) DEL

  28. Schools Spending • DfE to receive total real-terms cut in DEL of 10.8% • Schools spending including pupil premium to grow by 0.1% per year in real-terms (or 0.4% in total) • but total pupil numbers to increase by average of 0.7% per year • total schools spending per pupil to be cut in real-terms by 0.6% per year (total of 2¼%) • Assuming flat-rate pupil premium of £2,400 (stated total cost £2.5 billion) and underlying funding per pupil frozen in cash-terms • 60% of primary school pupils in schools where real funding falls • 87% of secondary school pupils in schools where real funding falls • 43% of pupils in (less deprived) schools would see cuts of 5% or more • 1 in 8 pupils in (very deprived) schools would see increase of 5% or more Note: Assumes all schools experience the same growth in pupil numbers

  29. ‘Winners’ Note: Figures show real change in total (resource + capital) DEL

  30. ‘Losers’ Note: Figures show real change in total (resource + capital) DEL

  31. ‘Losers’ Note: Figures show real change in total (resource + capital) DEL

  32. Record breakers? • Real increase over next 4 years • Total spending: tightest since World War II • Spending on public services: tightest since April 1975 to March 1980 • NHS: tightest since April 1951 to March 1956 • (ODA: greatest since Jan 2002 to Dec 2006)

  33. Conclusions • Additional investment spending increases borrowing • fiscal tightening now 73% from spending cuts by 2014–15 • March 2010 Budget plan: 70% from spending cuts by 2014–15 • Tightest squeeze on total spending since end of World War II • large cuts to working age welfare spending • tightest 4-year squeeze on public services since April 1975 to March 1980 • Deep cuts to departmental spending by 2014-15 • average cut of 13% compared to Labour’s 2010-11 baseline • larger than implied by March Budget despite Chancellor’s rhetoric • real increases in ODA, DECC, DWP and NHS budgets • largest cuts to: Communities and Local Government, DEFRA and BIS

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