Public services: serious cuts to come
Rowena Crawford
© Institute for Fiscal Studies
Outline
• What do current plans imply for spending on public services?
• What about unprotected public services?
• Yesterday’s Budget contained cuts to welfare spending – to what
extent could similar further cuts lighten the load for services?
© Institute for Fiscal Studies
DELs: The grand old Duke of York?
March Budget
June Budget
25
20
15
© Institute for Fiscal Studies
Note: Figure shows Departmental Expenditure Limits (DELs) as a share of
national income under current policies.
2015-16
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
000
1999-20
10
1998-99
Perce
entage o
of nation
nal incom
me
30
Public service spending set for a squeeze
Current policies imply longest,
longest and deepest sustained
sustained, period
of cuts to public service spending since (at least) WW2
10
5
0
© Institute for Fiscal Studies
Note: Figure shows total public spending less spending on welfare benefits
and debt interest
2015–16
2010–11
2005–06
2000–01
1995–96
6 year moving average
1990–91
1985–86
Historic
1980–81
ConLib
1975–76
Labour
1965–66
1955–56
1950–51
-10
1970–71
-5
1960–61
Annual p
percentag
ge real inccrease
15
Perce
entage
NHS taking up an increasing share of the cake
35
NHS spending:
as a share of total spending
as a share of total public service spending
30
25
20
15
10
5
© Institute for Fiscal Studies
Note: Assumes no real growth in NHS spending from 2010–11.
2015–1
16
2010–1
11
2005–0
06
2000–0
01
1995–9
96
1990–9
91
1985–8
86
1980–8
81
1975–7
76
1970–7
71
1965–6
66
1960–6
61
1955–5
56
1950–5
51
0
Pain to come for unprotected DELs
Inde
ex: Labo
our 2010
0-11 = 10
00
150
DEL
Overseas Aid
NHS
Unprotected DEL
125
100
-14%
75
-25%
50
2010-11
© Institute for Fiscal Studies
2011-12
2012-13
2013-14
2014-15
Note: Assumes no real growth in NHS spending, and a £5bn AME margin
in 2014–15.
2015-16
Spending Review 2010: the DEL v AME trade-off
Cu
ut to Annually Managed Exxpenditurre
£ billlion (201
10-11 pricces)
30
NHS spending 'protected',
overseas aid
id target met
20
£13bn of AME
cuts, 20% cut to
unprotected DEL
10
No further AME
cuts, 25% cut to
p
DEL
unprotected
0
15
20
25
Cumulative percentage cut to unprotected DEL
© Institute for Fiscal Studies
Note: Assumes no real growth in NHS spending, and a £5bn AME margin
in 2014–15.
30
Spending Review 2010: allocating the pain
• Current policies imply unprotected DEL cuts of 25% in real terms
by 2014–15 compared to Labour’s 2010–11 baseline
– £13bn of AME cuts would reduce this to 20%
– would need to come from £270bn of AME spending included in the
spending
di review
i
(4
(4.8%)
8%)
– but likely from £154bn of spending once state pensions, council tax
a ced spending
spe d g aand
d pub
publicc corporation
co po at o spending
spe d g e
excluded
c uded (8.4%)
(8. %)
financed
• Plausible SR2010 settlements?
– NHS spending ‘protected’,
protected , ODA target met
– Spending on schools and defence cut by 10% by 2014–15
– Other
Ot e unprotected
u p otected DELss would
ou d need
eed to be cut by 33%: includes
c udes areas
a eas
such as higher education, home office, justice, transport and housing
– Or cutting AME by a further £13 billion would leave these other
unprotected
t t d areas ffacing
i cuts
t off 25%
© Institute for Fiscal Studies
Conclusions
• Current plans imply
– reversal of all of the increase in DELs as a share of national income
under Labour
– Longest and deepest sustained cuts to spending on public services
since at least WW2
– DELs to be cut in real terms by 14% by 2014–15
– Non-NHS
Non NHS non
non-ODA
ODA DELs to be cut by an average of 25%
• Further cuts to welfare spending or increases to public-service
pension contributions would reduce pain for unprotected DELs
– £13bn extra would still leave average cuts of 20%
• Very deep cuts to some areas likely
– 10% cuts to defence and schools budgets and no further AME cuts
would leave other unprotected DELs facing cuts averaging 33%
© Institute for Fiscal Studies