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The 2007 CSR : A Challenging Spending Review. Carl Emmerson Institute for Fiscal Studies 20 February 2007. Main points. Fiscal tightening projected by Treasury taxes to rise and spending to fall as a share of national income A Challenging Spending Review

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the 2007 csr a challenging spending review

The 2007 CSR : A Challenging Spending Review

Carl Emmerson

Institute for Fiscal Studies

20 February 2007

main points
Main points
  • Fiscal tightening projected by Treasury
    • taxes to rise and spending to fall as a share of national income
  • A Challenging Spending Review
    • some tight allocations already made
    • apparent trade-off between schools, hospitals and child poverty
  • Plans could be topped up in future
    • but would require additional finance, which would be likely to mean further tax increases
forecast fiscal tightening
Forecast fiscal tightening

Source: HM Treasury

total managed expenditure
Total Managed Expenditure

Source: HM Treasury

total managed expenditure1
Total Managed Expenditure

Source: HM Treasury

how has spending increased
How has spending increased?

Source: HM Treasury

Note: Average annual increase 1996–97 to 2007–08

known allocations
Known allocations
  • Home Office
    • real freeze
  • Cabinet Office, HM Treasury, HM Revenue & Customs, administrative part of DWP
    • cut of 5% per year in real terms
  • Department for Constitutional Affairs
    • cut of 3½ per year in real terms
  • 5 smaller departments
    • cut of 5% per year in real terms
the difficult trade off
The difficult trade off?
  • Education spending
  • Child poverty
  • Health spending
school spending
School spending

“Our long-term aim should be to ensure for 100 per cent of our children the educational support now available to just 10 per cent”

Source: HM Treasury

school spending1
School spending

Private spend

= £8,000

Source: DfES

school spending2
School spending
  • 2007 CSR cannot meet this target
    • To meet in 2010–11 :

£2,330 per pupil * 7.2m pupils ≈ £17bn

  • Were pupil numbers to remain constant :

14 years at 2½% p.a.

7 years at 5% p.a.

  • Gap not closed if private spending increases
    • current state spending at 1996–97 private levels
child poverty in 2010 and 2020

2010 Cost = £4½bn to £13bn p.a.

depending on targeting

Child poverty in 2010 and 2020

Source: Brewer, Browne and Sutherland (2006)

health spending
Health spending

Source: OECD

health spending1
Health spending

NHS spending under Labour

Source: HM Treasury

wanless review
Wanless review

Fully engaged scenario:

“levels of public engagement in relation to their health are high: life expectancy increases go beyond current forecasts, health status improves dramatically and people are confident in the health system and demand high quality care. The health service is responsive with high rates of technology uptake, particularly in relation to disease prevention. Use of resources is more efficient.”

Source: HM Treasury

health spending2
Health spending

NHS spending under Labour

Source: HM Treasury

health spending3

Unweighted

Weighted

Health spending

EU total health spending, 2003

Source: OECD; IFS

health spending4

Unweighted

Weighted

Health spending

EU total health spending, 2003

Source: OECD; IFS

health spending5

Unweighted

Weighted

Health spending

EU total health spending, 2003

Source: OECD; IFS

what increases might we have
What increases might we have?

9 smaller departments

Department for Constitutional Affairs

Source: HM Treasury ; IFS

what increases might we have1
What increases might we have?

9 smaller departments

Department for Constitutional Affairs

Source: HM Treasury ; IFS

a trade off between health and education2
A trade-off between health and education?

Wanless recommendation = 4.4%

Labour to date

a trade off between health and education3
A trade-off between health and education?

Wanless recommendation = 4.4%

Labour to date

Expected growth in national income = 2½%

a trade off between health and education4
A trade-off between health and education?

Wanless recommendation = 4.4%

Labour to date

Expected growth in national income = 2½%

a firm and fixed csr
A ‘firm and fixed’ CSR?

Average increases from April 1999 to March 2002

Source: HM Treasury; Department of Health; IFS

conclusions
Conclusions
  • A Challenging Spending Review
    • some tight allocations already made
    • apparent trade-off between schools, hospitals and child poverty
  • Plans could be topped up in future
    • this is what happened under previous (July 1998) Comprehensive Spending Review
    • but would require additional finance, which would be likely to mean further tax increases
the 2007 csr a challenging spending review2

The 2007 CSR : A Challenging Spending Review

Carl Emmerson

Institute for Fiscal Studies

20 February 2007