Spending Review 2004
IFS Press Briefing
www.ifs.org.uk/conferences/spending_review2004.
shtml
Public spending
Carl Emmerson
Total spending growth
Real growth in spending (%)
8
6.7
7
5.5
6
5
3.7
4
3
3.8
3.9
4.2
2.6
2
2.8
1.0
1
0.2
0
-1
-0.3
97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08
Source: HM Treasury
Breakdown of spending growth
Real increase in spending (%)
6.0
5.5
TME
5.0
DEL
AME
4.2
4.0
3.0
3.6
2.5
2.0
2.8
2.6
3.1
2.3
1.3
1.0
0.0
2005–06
2006–07
2007–08
Source: HM Treasury
Winners and losers? (3 years)
Average DEL increase = 4.1 per cent
International Development
9.2%
7.1%
NHS (UK)
Transport
Education (UK)
Trade and Industry
Home
Culture, Media and Sport
Housing
Foreign and Commonwealth Office
Defence
Environment, Food and Rural Affairs
-4.0%
4.5%
3.9%
2.8%
2.6%
2.3%
1.9%
1.4%
1.3%
1.2%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
Average annual real increase 2004–05 to 2007–08
10.0%
Source: HM Treasury
Winners and losers? (2 years)
Average DEL increase = 3.4 per cent
International Development
7.0%
NHS (UK)
Education (UK)
Home
Culture, Media and Sport
Housing
Foreign and Commonwealth Office
Defence
Environment, Food and Rural Affairs
-4.0%
7.1
2.8%
3.3%
Transport
Trade and Industry
6.8
5.5%
11.3
5.8
1.0%
6.0
2.3%
1.4%
1.0%
0.7%
1.3%
1.1%
5.9
3.7
2.0
–1.2
5.1
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
Average annual real increase 2005–06 to 2007–08
10.0%
Source: HM Treasury
Plans and outturns: TME
Real growth in spending (%)
6
Original plan
4.7
5
4
Latest estimate
4.9
4.3
3.2 3.4
3.2
2.8
3
?
2
1
0
CSR 98
SR 00
SR 02
SR 04
Source: HM Treasury
Plans and outturns: DEL
Real growth in spending (%)
6
4.9
5
4
5.7
5.6
5.3 5.2
Original plan
Latest estimate
4.1
3.7
?
3
2
1
0
CSR 98
SR 00
SR 02
SR 04
Source: HM Treasury
Plans and outturns: AME
Real growth in spending (%)
6
Original plan
Latest estimate
5
4.5
4
3
3.3
2.7
3.0
?
2.0
2
1
0.7
0.3
0
CSR 98
SR 00
SR 02
SR 04
Source: HM Treasury
Civil service numbers over time
Full time equivalents ('000)
700
600
500
400
HMT April 2004
300
IFS constructed series
200
100
0
-9
9
8
0
-9
1
9
2
-9
3
9
4
-9
5
9
6
02
98
00
01
97
99
Financial year
-0
3
0
4
-0
5
0
6
-0
7
0
8
Source: HM Treasury; IFS calculations
Civil service numbers over time
IFS constructed series
HMT May 2003
HMT May 2001
HMT May 1999
HMT May 1997
HMT Feb 1995
Full time equivalents ('000)
700
650
HMT April 2004
HMT May 2002
HMT May 2000
HMT Apr 1998
HMT Mar 1996
600
550
500
450
400
90
89
-9
1
9
2
-9
3
9
4
96
95
02
98
00
01
97
99
Financial year
-0
3
0
4
-0
5
0
6
-0
7
0
8
Source: HM Treasury; IFS calculations
Admin spending
5.0
Percentage of TME
4.5
4.0
3.5
3.0
HMT July 2004
HMT April 2004
IFS constructed series
2.5
2.0
90 -91 -92 -93 -94 -95 -96 -97 -98 -99 -00 -01 -02 -03 -04 -05 -06 -07 -08
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
Financial year
Source: HM Treasury; IFS calculations
Admin spending: 10th time lucky?
5.0
Percentage of TME
4.5
4.0
3.5
3.0
2.5
HMT July 2004
HMT April 2004
HMT May 2002
HMT May 2000
HMT Apr 1998
HMT Mar 1996
IFS constructed series
HMT May 2003
HMT May 2001
HMT May 1999
HMT May 1997
HMT Feb 1995
2.0
90 -91 -92 -93 -94 -95 -96 -97 -98 -99 -00 -01 -02 -03 -04 -05 -06 -07 -08
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
Financial year
Source: HM Treasury; IFS calculations
Conclusions
• Slower spending growth in 06-07 & 07-08
• NHS and defence relatively protected, slowdown
in spending growth in all other areas
• Greater efficiency growth needed for public
services to improve at same rate
• Previous projections have:
• Underestimated growth in total public spending
• Overestimated administrative savings
The new child poverty targets
Alissa Goodman
Background
“The Government’s long-term economic
ambition is to halve child poverty by the
end of the next decade as the
Government moves forward with its
commitment to end child poverty in
Britain within the next twenty years”
• Pre-Budget Report, 1999
The new child poverty targets
• Relative low income
“Halve the number of children in relative
low-income households between 1998-99
and 2010-11 on the way to eradicating
child poverty by 2020”
• Material deprivation
Target will be set in 2006 when data
becomes available
Per cent of children in poverty
Meeting the target
35%
30%
25%
20%
15%
10%
5%
0%
1960
1970
1980
1990
2000
2010
2020
Ita
Ire ly
la
nd
Sp
Po ain
rt
ug
al
Fi
nl
D and
en
m
a
Sw r k
ed
B en
el
gi
u
20
A m
10 us
TA tria
R
G
G
E
er T
N
et ma
he ny
rla
nd
Fr s
an
c
L u Gr e
U xe eec
ni
m
te
bo e
d
K urg
in
gd
om
Per cent of children in poverty
Moving up the EU-15 league?
30.0
20.0
10.0
0.0
Source: European Community Household Panel, 2001
More public spending needed?
• Child tax credit will need to be up-rated with
earnings growth beyond 2005
• Not factored into SR2004 projections for
AME?
Real growth in spending (%)
Growth in social security spending
7
6.2
6
5.4
5
4
4.0
3.2
2.6
3
2.1
2
1.2
1.2
1
1.0
0
99-00
00-01
01-02
02-03
03-04
04-05
05-06
06-07
07-08
Note: Includes expenditure on tax credits
Source: HM Treasury
More public spending needed?
• Child tax credit will need to be up-rated with
earnings growth beyond 2005
• Not factored into SR2004 projections for
AME?
• Longer-term policies to change underlying
income distribution also necessary
Conclusions
• Very ambitious target
• Returns child poverty to pre-Thatcher era
• Full costs not included in SR2004?
Spending Review 2004
IFS Press Briefing
www.ifs.org.uk/conferences/spending_review2004.shtml