Fixing the budget to fit the figures?

Transcription

1 Fixing the budget to fit the figures? Gemma Tetlow IFS hosts two ESRC Research Centres

2 Cutting the deficit? 180 billion Budget March 2010 Autumn Statement 2010 Autumn Statement 2012 Budget Notes: Excludes Royal Mail and APF transfers.

3 Big picture Changes to economic forecasts have weakened public finances Forecast for growth reduced: half of this expected to be temporary, half expected to be permanent GDP deflator also lower Damage to the public finances since Budget 2008 has increased by 7 billion to 135 billion (in today s terms) Net effect on public borrowing of new measures announced yesterday was very small Chancellor now aiming for slightly weaker medium-term fiscal position than before Fiscal mandate still met but with less room for manoeuvre Deficit falling as share of national income in each year Supplementary target still on course to be missed Debt forecast to peak in

4 Changes in borrowing forecasts since Dec 2012 Public sector net borrowing, billion AS Budget All figures for borrowing are on a basis that excludes the Asset Purchase Facility and the impact of the transfer of Royal Mail Pension Plan assets.

5 Changes in borrowing forecasts since Dec 2012 Public sector net borrowing, billion AS Forecasting changes Measures Budget All figures for borrowing are on a basis that excludes the Asset Purchase Facility and the impact of the transfer of Royal Mail Pension Plan assets.

6 Forecasting changes since Dec 2012 Effect on public sector net borrowing, billion Total

7 Forecasting changes since Dec 2012 Effect on public sector net borrowing, billion Total Revenues Spending

8 Forecasting changes since Dec 2012 Effect on public sector net borrowing, billion Total Revenues Wages and salaries Corp. profits (non financial) North Sea production Sterling oil and gas prices Equity prices IT and NICs receipts modelling Other Spending

9 Changes in borrowing forecasts since Dec 2012 Public sector net borrowing, billion AS Forecasting changes Revenues Spending Measures Budget All figures for borrowing are on a basis that excludes the Asset Purchase Facility and the impact of the transfer of Royal Mail Pension Plan assets.

10 Changes in borrowing forecasts since Dec 2012 Public sector net borrowing, billion AS Forecasting changes Revenues Spending Measures Tax Spending (inc. underspends) Budget All figures for borrowing are on a basis that excludes the Asset Purchase Facility and the impact of the transfer of Royal Mail Pension Plan assets.

11 Effect of tax measures announced in Budget 2013 on public sector borrowing Effect on public sector net borrowing, billion Total

12 Effect of tax measures announced in Budget 2013 on public sector borrowing Effect on public sector net borrowing, billion Total Giveaways Takeaways

13 Effect of tax measures announced in Budget 2013 on public sector borrowing Effect on public sector net borrowing, billion Total Giveaways Employer s NI: 2k allowance Corporation Tax main rate reduced to 20% Personal Allowance Fuel Duty Beer Duty Takeaways

14 Effect of tax measures announced in Budget 2013 on public sector borrowing Effect on public sector net borrowing, billion Total Giveaways Employer s NI: 2k allowance Corporation Tax main rate reduced to 20% Personal Allowance Fuel Duty Beer Duty Takeaways Anti-avoidance Ending contracting out

15 Changes in borrowing forecasts since Dec 2012 Public sector net borrowing, billion AS Forecasting changes Revenues Spending Measures Tax Spending (inc. underspends) Budget All figures for borrowing are on a basis that excludes the Asset Purchase Facility and the impact of the transfer of Royal Mail Pension Plan assets.

16 Effect on public sector borrowing of spending measures since December 2012 Effect on public sector net borrowing, billion Total

17 Effect on public sector borrowing of spending measures since December 2012 Effect on public sector net borrowing, billion Total Additional capital spending from Dilnot social care 1 1 Childcare

18 Effect on public sector borrowing of spending measures since December 2012 Effect on public sector net borrowing, billion Total Additional capital spending from Dilnot social care 1 1 Childcare Implicit cuts to other current spending from

19 Effect on public sector borrowing of spending measures since December 2012 Effect on public sector net borrowing, billion Total Additional capital spending from Dilnot social care 1 1 Childcare Implicit cuts to other current spending from

20 Effect on public sector borrowing of spending measures since December 2012 Effect on public sector net borrowing, billion Total Additional capital spending from Dilnot social care 1 1 Childcare Implicit cuts to other current spending from Non DEL spend measures DEL denotes Departmental Expenditure Limits.

21 Effect on public sector borrowing of spending measures since December 2012 Effect on public sector net borrowing, billion Total Additional capital spending from Dilnot social care 1 1 Childcare Implicit cuts to other current spending from Non DEL spend measures Changes to DEL during SR2010 period DEL denotes Departmental Expenditure Limits.

22 Expected departmental underspends relative to March 2012 plans DEL underspend (compared to original plans), billion Budget AS Change between AS 2012 and B

23 Expected departmental underspends relative to March 2012 plans DEL underspend (compared to original plans), billion Feb 2012 Supplementary Estimates Supplementary Estimates are departments final spending plans for the year and form an absolute upper limit (EFO, page 129) Budget AS Change between AS 2012 and B

24 Expected departmental underspends relative to March 2012 plans DEL underspend (compared to original plans), billion Feb 2012 Supplementary Estimates 5.1 Additional underspend forecast by departments in Feb departments February forecasts showed that they nonetheless expected to deliver further reductions of 5.3 billion against their final plans (EFO, page 129) Budget AS Change between AS 2012 and B

25 Expected departmental underspends relative to March 2012 plans DEL underspend (compared to original plans), billion Feb 2012 Supplementary Estimates 5.1 Additional underspend forecast by departments in Feb 2012 Of which: Exceptional inter period flexibility at least 1.6 billion of the further shortfall in departments February forecasts is the direct result of the Government s actions to reduce spending in by pushing money forward into future years (EFO, page 129) Budget AS Change between AS 2012 and B

26 Expected departmental underspends relative to March 2012 plans DEL underspend (compared to original plans), billion Feb 2012 Supplementary Estimates 5.1 Additional underspend forecast by departments in Feb 2012 Of which: Exceptional inter period flexibility of the remaining 3.7 billion... in practice this will reflect a mixture of departments normal drive to remain safely below their final spending limits, and the further results of Government pressure to deliver further underspends (EFO, page 129) Budget AS Change between AS 2012 and B

27 Expected departmental underspends relative to March 2012 plans DEL underspend (compared to original plans), billion Feb 2012 Supplementary Estimates 5.1 Additional underspend forecast by departments in Feb 2012 Of which: Exceptional inter period flexibility OBR s assumed extra underspend against latest dept forecasts Budget AS Change between AS 2012 and B departments usually underspend against their February plans... Our forecast... assumes an additional further underspend of only 0.5 billion (EFO, page 129)

28 Historical Underspends Underspend relative to Plans ( bn) Undespends relative to final plans up to , and relative to PESA plans after Source: OBR March 2013 EFO Fiscal Supplementary Tables Table 2.15

29 Underspends by Department in Department Underspend ( bn) Underspend excluding Budget Exchange Underspend excluding Budget Exchange as % of Department Expenditure Limit (%) NHS Education Defence BIS 1 Transport Total DEL BIS spending excludes the Green Investment Bank. Notes: Underspends are relative to plans as of Budget 2012, and exclude measures announced since Budget Source: Budget 2013, Tables 2.4 and 2.5.

30 Expected departmental underspends relative to March 2012 plans DEL underspend (compared to original plans), billion Feb 2013 Supplementary Estimates 5.1 Additional underspend forecast by departments in Feb 2013 Of which: Exceptional inter period flexibility OBR s assumed extra underspend against latest dept forecasts Budget AS Change between AS 2012 and B

31 Expected departmental underspends relative to March 2012 plans DEL underspend (compared to original plans), billion Feb 2013 Supplementary Estimates 5.1 Additional underspend forecast by departments in Feb 2013 Of which: Exceptional inter period flexibility Cuts to offset Exc. inter period flex OBR s assumed extra underspend against latest dept forecasts Budget AS Change between AS 2012 and B

32 Expected departmental underspends relative to March 2012 plans DEL underspend (compared to original plans), billion Feb 2013 Supplementary Estimates 5.1 Additional underspend forecast by departments in Feb 2013 Of which: Exceptional inter period flexibility Cuts to offset Exc. inter period flex % cut to unprotected resource DEL OBR s assumed extra underspend against latest dept forecasts Budget AS Change between AS 2012 and B

33 Expected departmental underspends relative to March 2012 plans DEL underspend (compared to original plans), billion Feb 2013 Supplementary Estimates 5.1 Additional underspend forecast by departments in Feb 2013 Of which: Exceptional inter period flexibility Cuts to offset Exc. inter period flex % cut to unprotected resource DEL Ensuring ODA = 0.7% of GNI OBR s assumed extra underspend against latest dept forecasts Budget AS Change between AS 2012 and B

34 Expected departmental underspends relative to March 2012 plans DEL underspend (compared to original plans), billion Feb 2013 Supplementary Estimates 5.1 Additional underspend forecast by departments in Feb 2013 Of which: Exceptional inter period flexibility Cuts to offset Exc. inter period flex % cut to unprotected resource DEL Ensuring ODA = 0.7% of GNI Other DEL changes OBR s assumed extra underspend against latest dept forecasts Budget AS Change between AS 2012 and B

35 Expected departmental underspends relative to March 2012 plans DEL underspend (compared to original plans), billion Feb 2013 Supplementary Estimates 5.1 Additional underspend forecast by departments in Feb 2013 Of which: Exceptional inter period flexibility Cuts to offset Exc. inter period flex % cut to unprotected resource DEL Ensuring ODA = 0.7% of GNI Other DEL changes OBR s assumed extra underspend against latest dept forecasts Budget AS Change between AS 2012 and B

36 Changes in borrowing forecasts since Dec 2012 Public sector net borrowing, billion AS Forecasting changes Revenues Spending Measures Tax Spending (inc. underspends) Budget All figures for borrowing are on a basis that excludes the Asset Purchase Facility and the impact of the transfer of Royal Mail Pension Plan assets.

37 Changes in borrowing forecasts since Dec 2012 Public sector net borrowing, billion AS Forecasting changes Revenues Spending Measures Tax Spending (inc. underspends) Budget All figures for borrowing are on a basis that excludes the Asset Purchase Facility and the impact of the transfer of Royal Mail Pension Plan assets.

38 Changes in borrowing forecasts since Dec 2012 Public sector net borrowing, billion AS Forecasting changes Revenues Spending Measures Tax Spending (inc. underspends) Budget From now on we will have to fix the budget to fit the figures, instead of fixing the figures to fit the budget. (George Osborne, 14 June 2010)

39 Summary Big picture Borrowing forecast to be higher in each of next 5 years Partly permanent Budget measures reduced borrowing only very slightly in medium run Chancellor therefore aiming for a slightly weaker fiscal position Fiscal mandate still met but less room for manoeuvre Fixing policy to fit the forecasts? Cash borrowing still forecast marginally to fall between and : because departments expected to underspend significantly Achieving (or not) the objective of falling cash borrowing is economically unimportant Spending time and effort to try to achieve it could have had real economic costs