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IFS CSR 2007: Not the final settlement? Carl Emmerson Institute for Fiscal Studies Presentation to LGA Conference, “the comprehensive spending review”,

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Presentation on theme: "IFS CSR 2007: Not the final settlement? Carl Emmerson Institute for Fiscal Studies Presentation to LGA Conference, “the comprehensive spending review”,"— Presentation transcript:

1 IFS CSR 2007: Not the final settlement? Carl Emmerson Institute for Fiscal Studies Presentation to LGA Conference, “the comprehensive spending review”, Tuesday 23 rd October 2007

2 © Institute for Fiscal Studies, 2007 The big picture: Labour’s record Source: HM Treasury Labour ILabour II Borrowing = 2.7% of GDP

3 © Institute for Fiscal Studies, 2007 The big picture: going forwards Source: HM Treasury Labour ILabour II

4 © Institute for Fiscal Studies, 2007 Av. annual increase (%)CurrentCapitalTotal 2007 CSR A challenging spending review Source: HM Treasury; IFS calculations Note: Assumes GDP deflator of 2.7% per year going forwards

5 © Institute for Fiscal Studies, 2007 Av. annual increase (%)CurrentCapitalTotal 2007 CSR Labour April 1999 to March April 1997 to March 1999– –0.2 A challenging spending review Source: HM Treasury; IFS calculations Note: Assumes GDP deflator of 2.7% per year going forwards

6 © Institute for Fiscal Studies, 2007 Av. annual increase (%)CurrentCapitalTotal 2007 CSR Labour April 1999 to March April 1997 to March 1999– –0.2 Conservatives April 1979 to March – A challenging spending review Source: HM Treasury; IFS calculations Note: Assumes GDP deflator of 2.7% per year going forwards

7 © Institute for Fiscal Studies, 2007 What is a spending cut?

8 © Institute for Fiscal Studies, 2007 What is a spending cut? “The Conservative Party is committed to making cash cuts of £35 billion from Labour's public spending plans – cuts so large they could only be found from cutting deep into front-line public services, including schools, hospitals and the police.” (Alistair Darling, 17 March 2005)

9 © Institute for Fiscal Studies, 2007 Breakdown of spending growth Source: HM Treasury; IFS calculations

10 © Institute for Fiscal Studies, 2007 Breakdown of spending growth Source: HM Treasury; IFS calculations

11 © Institute for Fiscal Studies, 2007 Breakdown of spending growth Source: HM Treasury; IFS calculations

12 © Institute for Fiscal Studies, 2007 Breakdown of spending growth Source: HM Treasury; IFS calculations

13 © Institute for Fiscal Studies, 2007 Relative winners? Average DEL increase = 2.1 per cent Source: HM Treasury; IFS calculations Note: Assumes GDP deflator of 2.7% per year going forwards

14 © Institute for Fiscal Studies, 2007 Relative losers? Average DEL increase = 2.1 per cent Source: HM Treasury; IFS calculations Note: Assumes GDP deflator of 2.7% per year going forwards

15 © Institute for Fiscal Studies, 2007 Winners and losers? Source: HM Treasury; IFS calculations Note: Assumes GDP deflator of 2.7% per year going forwards

16 © Institute for Fiscal Studies, 2007 Winners and losers? Source: HM Treasury; IFS calculations Note: Assumes GDP deflator of 2.7% per year going forwards

17 © Institute for Fiscal Studies, 2007 Winners and losers? Source: HM Treasury; IFS calculations Note: Assumes GDP deflator of 2.7% per year going forwards

18 © Institute for Fiscal Studies, 2007 Local government settlement? Average = 0.8% Note: Assumes GDP deflator of 2.7% per year going forwards Source: HM Treasury; Department for Communities and Local Government; IFS calculations

19 © Institute for Fiscal Studies, 2007 Local government settlement? Note: Assumes GDP deflator of 2.7% per year going forwards Source: HM Treasury; Department for Communities and Local Government; IFS calculations

20 © Institute for Fiscal Studies, 2007 Local government settlement? Note: Assumes GDP deflator of 2.7% per year going forwards Source: HM Treasury; Department for Communities and Local Government; IFS calculations

21 © Institute for Fiscal Studies, 2007 Local government settlement? Source: HM Treasury; Department for Communities and Local Government; IFS calculations Note: Assumes GDP deflator of 2.7% per year going forwards

22 © Institute for Fiscal Studies, 2007 UK health spending Source: HM Treasury; IFS calculations Note: Assumes GDP deflator of 2.7% per year going forwards

23 © Institute for Fiscal Studies, 2007 Health spending shortfall? CSR 2007 settlement below Wanless 2002 recommendations for 2010–11 –£2bn under “fully engaged” scenario –£3bn under “solid progress” scenario –£6bn under “slow uptake” scenario Wanless (2007) “neither the assumed rate of productivity improvement nor the changes in personal behaviour that the more optimistic scenarios in the 2002 review envisaged have been achieved”

24 © Institute for Fiscal Studies, 2007 But plans could be topped up? Note: Initial plans adjusted for subsequent inflation Source: HM Treasury Departmental Expenditure Limits

25 © Institute for Fiscal Studies, 2007 The 2010 child poverty target

26 © Institute for Fiscal Studies, 2007 Conclusions Spending growth considerably slower than Labour’s spending reviews to date –growth in DELs planned to slow from 4.9% p.a. to 2.1% p.a. Might prove incompatible with aspirations for public services and child poverty Plans could be topped up –higher spending likely to require greater tax revenues

27 IFS CSR 2007: Not the final settlement? Carl Emmerson Institute for Fiscal Studies Presentation to LGA Conference, “the comprehensive spending review”, Tuesday 23 rd October 2007


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