Narrowed Horizons: The fiscal choices at Spending Review 2013 and beyond
20th June 2013
The government’s plans for deficit reduction have increasingly stark implications for public spending as their deadline draws nearer, according to new Resolution Foundation analysis.
While overall expenditure is set to remain relatively flat in 2015-16 (the period covered by the latest Spending Review) the pace of reduction in total government spending is due to increase significantly in the two subsequent years.
Our analysis shows that delivering current deficit reduction plans in this period would imply making £10 billion of new tax rises or further welfare cuts after 2015 just to maintain the current pace of cuts to departmental spending. An alternative would be to speed up that pace to make total cuts of 64 per cent to the Foreign Office, 46 per cent to the Home Office and 38 per cent to Defence between 2010 and 2018.
On current deficit reduction plans, the share of departmental spending that goes to Health will rise from one quarter to one third by 2018.
And, on the current path, the amount of welfare spent per working-age household will fall by 15 per cent between 2010 and 2018 while the amount spent per pensioner household grows by 6 per cent.
The Resolution Foundation analysis does not recommend any particular course of action but sets out the combined implications of Coalition plans for deficit reduction, the current mix of tax rises and spending cuts, forecasts for Annually Managed Expenditure from the Office for Budget Responsibility and the government’s pledges to protect key areas of spending.
In the audio and slide commentary below, the Resolution Foundations senior economist Matthew Whittaker explains the implications of current spending commitments and forecasts to the next election and beyond.
A full set of slides setting out the analysis appears above.
20 June 2013
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