Heather Jameson 07 November 2019

Public spending still lower than pre-recession, says IFS

Planned hikes in public spending would still leave spending in 2020-21 3% lower than it was in 2010-11, according to the Institute for Fiscal Studies.

Writing in a blog, IFS director Paul Johnson and deputy director Carl Emmerson said plans for increased spending were ‘large’ and come on top of this year’s spending increases.

But they warned the cash boost was not reflected across all public services. They wrote: ‘The Department for Health and Social Care will have seen its day-to-day spending budget rise by almost a quarter in real-terms. Spending on education has followed overall spending.

‘In contrast spending in many other areas has been subject to deep cuts. For example, the day-to-day spending budget of the Ministry of Justice in 2020–21 is a remarkable 23% lower than what was spent in 2010–11.’

The blog was published yesterday, on the day the Chancellor should have revealed his Budget and the Office of Budget Responsibility planned to put out its latest forecasts. However, both fiscal events have been cancelled due to the General Election.

The IFS pair suggest the chancellor ‘would have been keen to point out that reductions to borrowing since 2009–10 have meant that in 2018–19 borrowing in cash terms was back to the level seen in 2007–08.’

The speculate that further planned spending increases may be funded through increased borrowing rather than tax hikes, as the increases in the Spending Round were.

They add: ‘With interest rates very low (and the debt interest burden actually lower today than it was in 2007-08) then we may be in a position to cope with higher debt if it is accumulated as a result of effective investments which result in higher growth. However, debt cannot go on rise forever.’

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