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%
+0 7% p.a.
pa
– Investment spending: –14.4% p.a.
• Some areas of spending to continue growing
– Welfare payments
payments, debt interest payments
payments, etc
– No official forecasts
• How much is left for departmental spending?
© Institute for Fiscal Studies
Growth in components of spending: 2011-12 to 2014-15
Total Managed Expenditure
00
0.0
Of which:
Debt interest
9.4
Social security
1.5
Other AME
3.1
Departmental Expenditure Limits -2.9
-5
0
5
10
Average annual percentage real increase
© Institute for Fiscal Studies
Notes and sources: see Table 8.2 of the February 2010 IFS Green Budget.
15
Spending on public services
Annual percentage real inccrease
A
15
10
5
0
-5
© Institute for Fiscal Studies
Notes and sources: see Figure 8.9 of the February 2010 IFS Green Budget.
2010–11
2005–06
6
2000–01
6
1995–96
1990–91
6
1985–86
1980–81
1975–76
6
1970–71
6
1965–66
1960–61
1955–56
6
1950–51
-10
© Institute for Fiscal Studies
Notes and sources: see Figure 8.10 of the February 2010 IFS Green Budget.
2014––15
2013––14
2012––13
2011––12
2010––11
2009––10
2008––09
2007––08
2006––07
2005––06
2004––05
2003––04
2002––03
2001––02
2000––01
1999––00
1998––99
Percentag
P
ge of national inco
ome
Cuts in DELs: the Grand Old Duke of York
30
27
24
21
18
15
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’
© Institute for Fiscal Studies
But some areas are to be ‘protected’...
• Overseas Development Assistance
– Meet 2013 target
g of spending
p
g 0.7% of Gross National Income
In 2011
2011-12
12 and 2012
2012-13:
13:
• Health
– Real freeze in “front-line”
front-line NHS spending
• Education
– 0.7%
0 7% real increase in “front
front-line
line” schools spending
– 0.9% real increase in “front-line” spending on 16-19 participation
– Real freeze in “front-line”
front-line spending on Sure Start
© Institute for Fiscal Studies
Implications for other departments?
Average annual real growth: 2011–12 and 2012–13
DEL
Overseas
Development
Assistance
"Front-line"
Front line
NHS
"Front-line"
Front line
schools
"Front-line"
16-19
16
19
participation
12
10
Average real annual incre
A
ease
8
6
4
2
0
-2
-4
-3.0
30
-6
-8
8
© Institute for Fiscal Studies
Notes and sources: see Table 8.3 of the February 2010 IFS Green Budget.
"Front-line"
Front line
Sure Start
Implications for other departments?
Average annual real growth: 2011–12 and 2012–13
Other DEL
12
Overseas
Development
Assistance
11.3
"Front-line"
Front line
NHS
"Front-line"
Front line
schools
"Front-line"
16-19
16
19
participation
10
Average real annual incre
A
ease
8
6
4
2
0
-2
-4
-3.4
-6
8
-8
© Institute for Fiscal Studies
Notes and sources: see Table 8.3 of the February 2010 IFS Green Budget.
"Front-line"
Front line
Sure Start
Implications for other departments?
Average annual real growth: 2011–12 and 2012–13
Other DEL
12
Overseas
Development
Assistance
11.3
"Front-line"
Front line
NHS
"Front-line"
Front line
schools
"Front-line"
16-19
16
19
participation
10
Average real annual incre
A
ease
8
6
4
2
00
0.0
0
-2
-4
-6
-5.0
8
-8
© Institute for Fiscal Studies
Notes and sources: see Table 8.3 of the February 2010 IFS Green Budget.
"Front-line"
Front line
Sure Start
Implications for other departments?
Average annual real growth: 2011–12 and 2012–13
Other DEL
12
Overseas
Development
Assistance
11.3
"Front-line"
Front line
NHS
"Front-line"
Front line
schools
"Front-line"
16-19
16
19
participation
0.7
0.9
"Front-line"
Front line
Sure Start
10
Average real annual incre
A
ease
8
6
4
2
00
0.0
0
-2
-4
-6
-8
8
© Institute for Fiscal Studies
-6.7
Notes and sources: see Table 8.3 of the February 2010 IFS Green Budget.
00
0.0
Cumulative spending changes to 2012-13
Cumu
ulative p
percentage change
5
1.6%
0
-5
-6.0%
-10
-15
-20
-25
25
2010–11
© Institute for Fiscal Studies
-12.9%
DELs
'Protected' DELs
'U
'Unprotected'
d' DELs
DEL
2011–12
2012–13
2013–14
Notes and sources: see Figure 8.17 of the February 2010 IFS Green Budget.
2014–15
Cumulative spending changes to 2014-15?
Cumu
ulative p
percentage change
5
0
-5
-10
-15
-20
-25
25
2010–11
© Institute for Fiscal Studies
-10.9%
DELs
'Protected' DELs
'U
'Unprotected'
d' DELs
DEL
2011–12
2012–13
2013–14
Notes and sources: see Figure 8.17 of the February 2010 IFS Green Budget.
2014–15
Cumulative spending changes to 2014-15?
Cumu
ulative p
percentage change
5
0
-2.6%
-5
-10
-15
-20
-25
25
2010–11
© Institute for Fiscal Studies
-10.9%
DELs
'Protected' DELs - "2yr protection"
-18.7%
18 7%
'U
'Unprotected'
d' DELs
DEL - "2yr
"2 protection"
i "
2011–12
2012–13
2013–14
Notes and sources: see Figure 8.17 of the February 2010 IFS Green Budget.
2014–15
Cumulative spending changes to 2014-15?
Cumu
ulative p
percentage change
5
2.9%
0
-5
-10
-15
-20
-10.9%
DELs
'Protected' DELs - "2yr protection"
'Unprotected'
Unprotected DELs - "2yr
2yr protection"
protection
'Protected' DELs - "4yr protection"
'Unprotected' DELs - "4yr protection"
-25
25
2010–11
© Institute for Fiscal Studies
2011–12
2012–13
-24.8%
2013–14
Notes and sources: see Figure 8.17 of the February 2010 IFS Green Budget.
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
2014 15 of 18.7%
18 7% (or £37.2bn)
£37 2bn)
– If ‘protection’ continues: cumulative cuts required across
p
areas by
y 2014-15 of 24.8% ((or £47.4bn))
‘unprotected’
• Significant unprotected areas
– Defence,, Higher
g
Education,, Transport
p
and Housing
g
© Institute for Fiscal Studies
Where do the Conservatives’ plans stand?
• Pledges on DEL:
– Meet ODA target
g
– Increase real NHS spending year on year throughout parliament
• If match Labour’s p
plans for total spending:
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 l
imply...
– Without cuts to welfare spending, cuts to departmental spending of
13.9% by 2014
2014-15
15
– Cuts across their unprotected areas of 22.8% (or £57.1bn) by 2014-15
© Institute for Fiscal Studies
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
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
spending
di and
dd
departmentall spending
di
• Mix of departmental spending cuts, welfare cuts and tax increases
not yet set in stone
© Institute for Fiscal Studies
Public services: deep cuts coming
Rowena Crawford, Carl Emmerson and Gemma Tetlow
© Institute for Fiscal Studies