NIESR: What the Chancellor’s Spending Round should focus on

4 Sep 2019 10:27 AM

Today, the Chancellor will announce the results of the fast-tracked Spending Round and set departmental budgets for the 2020-21 financial year. This Press Note highlights where spending priorities should be set.

Main points

This fiscal event undermines the fiscal framework. It comprises a one year review without the longer horizon required for government plans.  It also does not have support of an OBR forecast or the fundamental tax review for which NIESR has called. It also should articulate the fiscal responses or space to respond to a no-deal Brexit. By concentrating on short-term initiatives there is a danger that it is seen as a re-election spending spree that does not address long-term economic challenges. 

Spending needs

Figure 1. Estimated over- and under-spending, selected areas

Figure 2. Quality of public services

Source: NIESR estimates. Chart shows difference between real total managed expenditure per capita and estimated warranted level by year.

Source: Office for National Statistics and NIESR calculations, indexed.

Education spending priorities

Health spending priorities

Back in June 2018 the (then) Prime Minister announced a package of £20.5bn increase in spending over 5 years on the NHS which would ensure a 3.4% real increase in spending per year up until 2023/24. She made it clear that this was money for the NHS and not for Social Care. For Social Care, she said there was to be a new Green Paper published setting out a new way of funding. No timeline was given for this report. It also appears that some £1.25bn of this ‘new’ money is already committed to ‘specific pension pressures’ in the NHS.

Assuming that:

It will be very interesting to see what plans have been laid out for how this £20.5bn might be spent in the short run.

The main challenge for NHS funding is how to improve the cost efficiency of the NHS to improve the offer to patients and other service users in the light of mounting demographic pressures of an ageing population. The priorities for this targeted spending should be:

But since most of these priorities lie at the interface of Social Care and NHS spending then we may have to wait for the new Green Paper on Social Care funding to piece together the full picture.

Fiscal and macroeconomic implications

Figure 3. Public sector net borrowing


Notes for editors:

A number of NIESR staff are available to comment on this Press Note. For further information and to arrange interviews, please contact the NIESR Press Office:

Luca Pieri on 020 7654 1931 /

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