Options for the 2015 Spending Review
Soumaya Keynes
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50
45
40
35
30
25
20
15
10
5
0
Total spending
Public services spending
1948–49
1952–53
1956–57
1960–61
1964–65
1968–69
1972–73
1976–77
1980–81
1984–85
1988–89
1992–93
1996–97
2000–01
2004–05
2008–09
2012–13
2016–17
2020–21
Share of national income (%)
Public spending in context
Notes and sources: see Figures 5.1 and 7.1 of The IFS Green Budget: February 2015.
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Share of national income (LH axis)
Real terms per capita (RH axis)
Notes and sources: see Figure 7.1 of The IFS Green Budget: February 2015.
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10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Real terms spending per person
(£, 2015-16 prices)
50
45
40
35
30
25
20
15
10
5
0
1948–49
1952–53
1956–57
1960–61
1964–65
1968–69
1972–73
1976–77
1980–81
1984–85
1988–89
1992–93
1996–97
2000–01
2004–05
2008–09
2012–13
2016–17
2020–21
Share of national income (%)
Public services spending in context
Real terms DEL cuts since 2010-11:
original and latest plans
DEL
Real terms cut since 2010-11 (%)
0
-5
Original plans, original
inflation (to 2014-15)
-10
Original plans, actual
inflation (to 2014-15)
-8.8 -8.6
-10.6
-15
-9.5
Outturns and latest plans,
actual inflation (to 2014-15)
Latest plans to 2015-16
-20
-25
-30
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Notes, sources and equivalent numbers in £ billion: see Table 7.2 of The IFS
Green Budget: February 2015.
Real terms DEL cuts since 2010-11:
original and latest plans
DEL
Resource DEL
Capital DEL
Real terms cut since 2010-11 (%)
0
-5
Original plans, original
inflation (to 2014-15)
-10
Original plans, actual
inflation (to 2014-15)
-8.8 -8.6
-10.6
-15
-9.5
Outturns and latest plans,
actual inflation (to 2014-15)
Latest plans to 2015-16
-20
-25
-30
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Notes, sources and equivalent numbers in £ billion: see Table 7.2 of The IFS
Green Budget: February 2015.
Real terms DEL cuts since 2010-11:
original and latest plans
DEL
Resource DEL
Capital DEL
Real terms cut since 2010-11 (%)
0
-5
Original plans, original
inflation (to 2014-15)
-10
Original plans, actual
inflation (to 2014-15)
-8.8 -8.6
-8.3
-9.5
Outturns and latest plans,
actual inflation (to 2014-15)
-10.6
-15
Latest plans to 2015-16
-20
-25
-25.9
-30
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Notes, sources and equivalent numbers in £ billion: see Table 7.2 of The IFS
Green Budget: February 2015.
Real terms DEL cuts since 2010-11:
original and latest plans
DEL
Resource DEL
Capital DEL
Real terms cut since 2010-11 (%)
0
Original plans, original
inflation (to 2014-15)
-5
Original plans, actual
inflation (to 2014-15)
-6.4
-10
-8.8 -8.6
-8.3
-9.5
Outturns and latest plans,
actual inflation (to 2014-15)
-10.6
-15
Latest plans to 2015-16
-20
-25
-24.4
-25.9
-30
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Notes, sources and equivalent numbers in £ billion: see Table 7.2 of The IFS
Green Budget: February 2015.
Real terms DEL cuts since 2010-11:
original and latest plans
DEL
Resource DEL
Capital DEL
Real terms cut since 2010-11 (%)
0
Original plans, original
inflation (to 2014-15)
-5
Original plans, actual
inflation (to 2014-15)
-6.4
-10
-8.8 -8.6
-8.3
-7.8
-9.5
-10.6
-15
-13.6
Outturns and latest plans,
actual inflation (to 2014-15)
Latest plans to 2015-16
-20
-25
-24.4
-25.9
-30
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Notes, sources and equivalent numbers in £ billion: see Table 7.2 of The IFS
Green Budget: February 2015.
Real terms DEL cuts since 2010-11:
original and latest plans
DEL
Resource DEL
Capital DEL
Real terms cut since 2010-11 (%)
0
Original plans, original
inflation (to 2014-15)
-5
Original plans, actual
inflation (to 2014-15)
-6.4
-10
-8.8 -8.6
-10.6
-15
-8.3
-9.5
-7.8
-9.1
-11.9
-13.6
Outturns and latest plans,
actual inflation (to 2014-15)
Latest plans to 2015-16
-20
-25
-24.4
-25.9
-30
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Notes, sources and equivalent numbers in £ billion: see Table 7.2 of The IFS
Green Budget: February 2015.
DEL changes
original plans (latest inflation) & latest plans
Department
(% of total DEL in 2010–11)
2010 plans (to 2014-15)
Latest plans (to 2014-15)
All (100%)
Health (26.4%)
Education (15.1%)
Defence (8.9%)
Business, Innovation and Skills (5.0%)
Home Office (3.4%)
Transport (3.3%)
Justice (2.4%)
-40
-30
-20
-10
0
10
20
Real change in DELs since 2010-11 (%)
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Notes and sources: see Table 7.4 of The IFS Green Budget: February 2015.
DEL changes
original plans (latest inflation) & latest plans
Department
(% of total DEL in 2010–11)
2010 plans (to 2014-15)
Latest plans (to 2014-15)
All (100%)
Health (26.4%)
Education (15.1%)
Defence (8.9%)
Business, Innovation and Skills (5.0%)
Home Office (3.4%)
Transport (3.3%)
Justice (2.4%)
-40
-30
-20
-10
0
10
20
Real change in DELs since 2010-11 (%)
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Notes and sources: see Table 7.4 of The IFS Green Budget: February 2015.
DEL changes
original plans (latest inflation) & latest plans
2010 plans (to 2014-15)
Latest plans (to 2014-15)
Department
(% of total DEL in 2010–11)
All (100%)
Health (26.4%)
Latest plans (to 2015-16)
Education (15.1%)
Defence (8.9%)
Business, Innovation and Skills (5.0%)
Home Office (3.4%)
Transport (3.3%)
Justice (2.4%)
-40
-30
-20
-10
0
10
20
Real change in DELs since 2010-11 (%)
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Notes and sources: see Table 7.4 of The IFS Green Budget: February 2015.
Changes to DEL beyond 2015-16
Coalition plans
Autumn Statement 2014
Cumulative real growth
Departmental spending limits
of which:
Resource DEL (excl. depreciation)
Capital DEL
2010-11 to
2015-16
–9.5%
–9.1%
–11.9%
Notes and sources: see Table 7.1 and Table 7.6 of The IFS Green Budget: February 2015.
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Changes to DEL beyond 2015-16
Coalition plans
Autumn Statement 2014
Cumulative real growth
Departmental spending limits
of which:
Resource DEL (excl. depreciation)
Capital DEL
Average annual real growth
Departmental spending limits
of which:
Resource DEL (excl. depreciation)
Capital DEL
2010-11 to
2015-16
–9.5%
–9.1%
–11.9%
–2.0%
–1.9%
–2.5%
Notes and sources: see Table 7.1 and Table 7.6 of The IFS Green Budget: February 2015.
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Changes to DEL beyond 2015-16
Coalition plans
Autumn Statement 2014
Cumulative real growth
Departmental spending limits
of which:
Resource DEL (excl. depreciation)
Capital DEL
Average annual real growth
Departmental spending limits
of which:
Resource DEL (excl. depreciation)
Capital DEL
2010-11 to
2015-16
2015-16 to
2019-20
–9.5%
–14.1%
–9.1%
–11.9%
–17.3%
7.3%
–2.0%
–3.7%
–1.9%
–2.5%
–4.6%
1.8%
Notes and sources: see Table 7.1 and Table 7.6 of The IFS Green Budget: February 2015.
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Changes to DEL beyond 2015-16
Coalition plans
Autumn Statement 2014
Cumulative real growth
Departmental spending limits
of which:
Resource DEL (excl. depreciation)
Capital DEL
Average annual real growth
Departmental spending limits
of which:
Resource DEL (excl. depreciation)
Capital DEL
2010-11 to
2015-16
2015-16 to
2019-20
–9.5%
–14.1%
–9.1%
–11.9%
–17.3%
7.3%
–2.0%
–3.7%
–1.9%
–2.5%
–4.6%
1.8%
Notes and sources: see Table 7.1 and Table 7.6 of The IFS Green Budget: February 2015.
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Changes to DEL beyond 2015-16
Coalition plans
Autumn Statement 2014
Cumulative real growth
Departmental spending limits
of which:
Resource DEL (excl. depreciation)
Capital DEL
Average annual real growth
Departmental spending limits
of which:
Resource DEL (excl. depreciation)
Capital DEL
2010-11 to
2015-16
2015-16 to
2019-20
–9.5%
–14.1%
–9.1%
–11.9%
–17.3%
7.3%
–2.0%
–3.7%
–1.9%
–2.5%
–4.6%
1.8%
Notes and sources: see Table 7.1 and Table 7.6 of The IFS Green Budget: February 2015.
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Changes to DEL beyond 2015-16
Coalition plans
Autumn Statement 2014
Cumulative real growth
Departmental spending limits
of which:
Resource DEL (excl. depreciation)
Capital DEL
Average annual real growth
Departmental spending limits
of which:
Resource DEL (excl. depreciation)
Capital DEL
2010-11 to
2015-16
2015-16 to
2019-20
–9.5%
–14.1%
–9.1%
–11.9%
–17.3%
7.3%
–2.0%
–3.7%
–1.9%
–2.5%
–4.6%
1.8%
Notes and sources: see Table 7.1 and Table 7.6 of The IFS Green Budget: February 2015.
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Changes to DEL beyond 2015-16
Coalition plans
Autumn Statement 2014
Cumulative real growth
Departmental spending limits
of which:
Resource DEL (excl. depreciation)
Capital DEL
Average annual real growth
Departmental spending limits
of which:
Resource DEL (excl. depreciation)
Capital DEL
2010-11 to
2015-16
2015-16 to
2019-20
–9.5%
–14.1%
–9.1%
–11.9%
–17.3%
7.3%
–2.0%
–3.7%
–1.9%
–2.5%
–4.6%
1.8%
Notes and sources: see Table 7.1 and Table 7.6 of The IFS Green Budget: February 2015.
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Parties’ fiscal rules
• All three main UK parties have fiscal rules that would allow smaller
cuts than coalition plans
• Conservatives are aiming for a budget surplus
– Consistent with £21bn smaller cuts to departmental spending in
2019-20
• Labour/Liberal Democrats would exclude investment spending
from their targets
– Could reduce cuts to departments by £45bn in 2019-20 (and even
more on capital spending by departments)
• Though cost would be borrowing and debt falling less quickly
• In addition, changes to tax/social security spending could reduce
(or increase) the cuts to departmental spending
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Departmental cuts: alternative scenarios
2014 Autumn Statement plans
Real change 2015–16
to 2019–20:
%
£ billion
–14.1
Notes and sources: £ billion figures in 2015-16 prices. See Table 7.7 of The IFS Green
Budget: February 2015.
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Real change 2010–11
to 2019–20:
%
£ billion
Departmental cuts: alternative scenarios
2014 Autumn Statement plans
Real change 2015–16
to 2019–20:
%
£ billion
–14.1
–51.4
Notes and sources: £ billion figures in 2015-16 prices. See Table 7.7 of The IFS Green
Budget: February 2015.
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Real change 2010–11
to 2019–20:
%
£ billion
–22.2
–89.5
Departmental cuts: alternative scenarios
2014 Autumn Statement plans
Given parties’ fiscal rules and
stated intentions:
Real change 2015–16
to 2019–20:
%
£ billion
–14.1
–51.4
Notes and sources: £ billion figures in 2015-16 prices. See Table 7.7 of The IFS Green
Budget: February 2015.
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Real change 2010–11
to 2019–20:
%
£ billion
–22.2
–89.5
Departmental cuts: alternative scenarios
2014 Autumn Statement plans
Given parties’ fiscal rules and
stated intentions:
Conservatives
Real change 2015–16
to 2019–20:
%
£ billion
–14.1
–51.4
–6.7
-24.9
Notes and sources: £ billion figures in 2015-16 prices. See Table 7.7 of The IFS Green
Budget: February 2015.
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Real change 2010–11
to 2019–20:
%
£ billion
–22.2
–89.5
Departmental cuts: alternative scenarios
2014 Autumn Statement plans
Given parties’ fiscal rules and
stated intentions:
Conservatives
Labour
Real change 2015–16
to 2019–20:
%
£ billion
–14.1
–51.4
–6.7
–1.4
–24.9
–5.2
Notes and sources: £ billion figures in 2015-16 prices. See Table 7.7 of The IFS Green
Budget: February 2015.
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Real change 2010–11
to 2019–20:
%
£ billion
–22.2
–89.5
Departmental cuts: alternative scenarios
2014 Autumn Statement plans
Given parties’ fiscal rules and
stated intentions:
Conservatives
Labour
Liberal Democrats
Real change 2015–16
to 2019–20:
%
£ billion
–14.1
–51.4
–6.7
–1.4
–2.1
–24.9
–5.2
–7.5
Notes and sources: £ billion figures in 2015-16 prices. See Table 7.7 of The IFS Green
Budget: February 2015.
© Institute for Fiscal Studies
Real change 2010–11
to 2019–20:
%
£ billion
–22.2
–89.5
Departmental cuts: alternative scenarios
2014 Autumn Statement plans
Given parties’ fiscal rules and
stated intentions:
Conservatives
Labour
Liberal Democrats
Real change 2015–16
to 2019–20:
%
£ billion
–14.1
–51.4
–6.7
–1.4
–2.1
–24.9
–5.2
–7.5
Notes and sources: £ billion figures in 2015-16 prices. See Table 7.7 of The IFS Green
Budget: February 2015.
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Real change 2010–11
to 2019–20:
%
£ billion
–22.2
–89.5
–16.5
–10.8
–11.3
–53.1
–43.3
–45.7
2009-10 to 2015-16:
-300,000
30%
5
25%
4
20%
3
15%
2
10%
Headcount
% of total employment
© Institute for Fiscal Studies
Notes and sources: see Figure 7.6 of The IFS Green
Budget: February 2015.
2017-18
2014-15
2011-12
2008-09
2005-06
2002-03
1999-00
1996-97
1993-94
1989
1986
1983
0%
1980
0
1977
5%
1974
1
Percentage of total employment
2015-16 to 2019-20:
-900,000
6
1971
Headcount (millions)
General government employment
Autumn Statement
Change in general government employment
Change in general government
employment 2015–16 to 2019–20:
OBR forecast
public sector pay
growth
2014 Autumn Statement plans
–900,000
Given parties’ fiscal rules and
stated intentions:
Conservatives
Labour
Liberal Democrats
Notes and sources: see Table 7.7 of The IFS Green Budget: February 2015.
© Institute for Fiscal Studies
Public sector pay
grows in line with
CPI
Change in general government employment
Change in general government
employment 2015–16 to 2019–20:
OBR forecast
public sector pay
growth
2014 Autumn Statement plans
–900,000
Given parties’ fiscal rules and
stated intentions:
Conservatives
–550,000
Labour
–300,000
Liberal Democrats
–300,000
Notes and sources: see Table 7.7 of The IFS Green Budget: February 2015.
© Institute for Fiscal Studies
Public sector pay
grows in line with
CPI
Change in general government employment
Change in general government
employment 2015–16 to 2019–20:
2014 Autumn Statement plans
OBR forecast
public sector pay
growth
Public sector pay
grows in line with
CPI
–900,000
–750,000
Given parties’ fiscal rules and
stated intentions:
Conservatives
–550,000
Labour
–300,000
Liberal Democrats
–300,000
Notes and sources: see Table 7.7 of The IFS Green Budget: February 2015.
© Institute for Fiscal Studies
Change in general government employment
Change in general government
employment 2015–16 to 2019–20:
OBR forecast
public sector pay
growth
Public sector pay
grows in line with
CPI
–900,000
–750,000
Conservatives
–550,000
–400,000
Labour
–300,000
–100,000
Liberal Democrats
–300,000
–150,000
2014 Autumn Statement plans
Given parties’ fiscal rules and
stated intentions:
Notes and sources: see Table 7.7 of The IFS Green Budget: February 2015.
© Institute for Fiscal Studies
Spending review 2015 – departmental allocations
• Uncertain size of overall cut: 14.1% (£51.4bn, Coalition) to 1.4%
(£5.2bn, consistent with Labour announcements)
• Uncertain protections
– All three major parties signed up to protection of NHS and ODA
– Liberal Democrats announced protection for education
– Conservatives’ protection for schools
• Protecting large areas like education would have serious implications
for other unprotected departments
– For example, Conservative plans: 6.7% overall cut, protecting ODA and
£8bn real increase for NHS would imply unprotected departments cut by...
• 15.0% if freeze cash schools spending per pupil
• 12.4% if schools spending not ‘protected’
• Capital intensive departments likely to do relatively well
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Conclusions
• Cuts to capital spending by departments up to 2015–16 have been
halved relative to 2010 plans (up to 2014–15)…
• …which has meant that the government has not cut departmental
spending by as much as was originally planned.
• Autumn Statement plans imply large cuts beyond the next election
• These could take general government employment to its lowest
share of the workforce in almost fifty years
• But there are large differences implied by the parties’ stated
policies, leaving huge uncertainty for departments
• Continued protection for the NHS and schools would put pressure
on unprotected areas
• There is a real difference between the parties’ plans, for the size
and the composition of the state
© Institute for Fiscal Studies
Options for the 2015 Spending Review
Soumaya Keynes
© Institute for Fiscal Studies