autumn 2017 budget: options for easing the squeeze

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Carl Emmerson and Thomas Pope Presentation at the Institute of Chartered Accountants in England and Wales London, 30 th October 2017 Autumn 2017 Budget: Options for easing the squeeze

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Page 1: Autumn 2017 Budget: Options for easing the squeeze

Carl Emmerson and Thomas Pope

Presentation at the Institute of Chartered Accountants in England and Wales

London, 30th October 2017

Autumn 2017 Budget: Options for easing the squeeze

Page 2: Autumn 2017 Budget: Options for easing the squeeze

The March Budget plan

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

Page 3: Autumn 2017 Budget: Options for easing the squeeze

Terrible economic performance is important backdrop

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

90

95

100

105

110

115

120

125

130

135

140 20

08Q

1

2009

Q1

2010

Q1

2011

Q1

2012

Q1

2013

Q1

2014

Q1

2015

Q1

2016

Q1

2017

Q1

2018

Q1

2019

Q1

2020

Q1

2021

Q1

2022

Q1

2008

Q1

= 10

0

GDP per adult since 2008 Q1 (at time of March 2017 Budget)

18% gap

15% gap

2% per year trend

GDP per person aged 16+

Notes and sources: see Figure 2.1 of Autumn 2017 Budget: Options for easing the squeeze

Page 4: Autumn 2017 Budget: Options for easing the squeeze

The rise and fall of the deficit

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

2.8

9.9

2.9

+6.1 –5.6

–1.1

+1.4

0.0

2.0

4.0

6.0

8.0

10.0

12.0 PS

NB

(200

7–08

)

Chan

ge in

sp

endi

ng

Chan

ge in

rece

ipts

PSN

B (2

009–

10)

Chan

ge in

sp

endi

ng

Chan

ge in

rece

ipts

PSN

B (2

017–

18)

Chan

ge in

sp

endi

ng

Chan

ge in

rece

ipts

PSN

B (2

021–

22) Pe

r ce

nt o

f nat

iona

l ino

cme

Notes and sources: see Figure 2.2 of Autumn 2017 Budget: Options for easing the squeeze

Latest out-turns and March 2017 Budget forecasts for taxing, spending and borrowing

Spend 0.5% GDP

higher than 2007–08

Tax 0.4% GDP

higher than 2007–08

Page 5: Autumn 2017 Budget: Options for easing the squeeze

Further deficit reduction to come

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

2.8

9.9

2.9

0.7

+6.1 –5.6

–1.7

–1.1

+1.4

+0.5 0.0

2.0

4.0

6.0

8.0

10.0

12.0 PS

NB

(200

7–08

)

Chan

ge in

sp

endi

ng

Chan

ge in

rece

ipts

PSN

B (2

009–

10)

Chan

ge in

sp

endi

ng

Chan

ge in

rece

ipts

PSN

B (2

017–

18)

Chan

ge in

sp

endi

ng

Chan

ge in

rece

ipts

PSN

B (2

021–

22) Pe

r ce

nt o

f nat

iona

l ino

cme

Notes and sources: see Figure 2.2 of Autumn 2017 Budget: Options for easing the squeeze

Latest out-turns and March 2017 Budget forecasts for taxing, spending and borrowing

Page 6: Autumn 2017 Budget: Options for easing the squeeze

Policy changes doing most of the work

Net tax rise of £6 billion in 2021–22 relative to 2017–18

‒ Largest new tax measure is reduction in dividend allowance

Benefit cuts worth £12 billion saving in 2021–22

‒ Mostly from measures already in place

‒ Largest cut to come is benefits freeze

Cuts to departmental spending as a share of national income save £24 billion by 2021–22

‒ Investment spending to increase

‒ Large cuts to day-to-day spending

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

Page 7: Autumn 2017 Budget: Options for easing the squeeze

Spending cuts not shared equally across departments

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

-60% -40% -20% 0% 20% 40% 60%

DEFRA

HMT & HMRC & DWP

Justice

DCLG: communities

Scotland, Wales, N.I.

Home Office

Education

Health

Defence

Culture

DfID

Transport

2010–11 to 2019–20

2017–18 to 2019–20

Notes and sources: see Figure 2.10 of Autumn 2017 Budget: Options for easing the squeeze

Real terms departmental budget cuts, 2010–11 to 2019–20

Page 8: Autumn 2017 Budget: Options for easing the squeeze

Where would this leave tax and spend?

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

Tax and spend since 1948, latest outturns and March Budget forecast

25

30

35

40

45

50 19

50

1955

–56

1960

–61

1965

–66

1970

–71

1975

–76

1980

–81

1985

–86

1990

–91

1995

–96

2000

–01

2005

–06

2010

–11

2015

–16

2020

–21

Per

cent

of n

aton

al in

com

e

Notes and sources: see Figure 2.2 of Autumn 2017 Budget: Options for easing the squeeze

Lowest

spending since

2003–04

Highest

receipts since

1986–87

Highest tax

receipts since

1969–70

Current receipts

Total Managed

Expenditure

National accounts taxes

Page 9: Autumn 2017 Budget: Options for easing the squeeze

Where would this leave the deficit?

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

-4

-2

0

2

4

6

8

10

12 20

00–0

1

2001

–02

2002

–03

2003

–04

2004

–05

2005

–06

2006

–07

2007

–08

2008

–09

2009

–10

2010

–11

2011

–12

2012

–13

2013

–14

2014

–15

2015

–16

2016

–17

2017

–18

2018

–19

2019

–20

2020

–21

2021

–22

Per

cent

of n

aton

al in

com

e

Notes and sources: see Figure 2.6 of Autumn 2017 Budget: Options for easing the squeeze

Target: 2% limit in 2020–21

Public sector net borrowing

Cyclically-adjusted public sector net borrowing

Overarching objective: eliminate deficit by mid-2020s

Public sector net borrowing since 2000–01

Page 10: Autumn 2017 Budget: Options for easing the squeeze

Where would this leave debt?

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

0

10

20

30

40

50

60

70

80

90

100 20

00–0

1

2001

–02

2002

–03

2003

–04

2004

–05

2005

–06

2006

–07

2007

–08

2008

–09

2009

–10

2010

–11

2011

–12

2012

–13

2013

–14

2014

–15

2015

–16

2016

–17

2017

–18

2018

–19

2019

–20

2020

–21

2021

–22

Per

cent

of n

aton

al in

com

e

Target: debt falling

between 2019–20 and

2020–21

Public sector net debt

Public sector net debt, excluding Bank of England

Notes and sources: see Figure 2.7 of Autumn 2017 Budget: Options for easing the squeeze

Public sector net debt since 2000–01

Page 11: Autumn 2017 Budget: Options for easing the squeeze

Developments since March

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

Page 12: Autumn 2017 Budget: Options for easing the squeeze

Data so far this year paints a rosier picture

Borrowing last year now thought to have been £45.7 billion, £6 billion lower than forecast in March

Borrowing running behind the March forecast this year too

Not all of this improvement is likely to persist for the whole year

‒ Self-assessment receipts expected to be much weaker than last year

But a number of taxes are performing better than expected so far

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

Page 13: Autumn 2017 Budget: Options for easing the squeeze

Data so far this year paints a rosier picture

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

-5%

0%

5%

10%

15%

20%

PAYE NICs Corporation tax VAT Stamp duty land tax

Ann

ual g

row

th r

ate

OBR March Year to date

Notes and sources: see Figure 3.6 of Autumn 2017 Budget: Options for easing the squeeze

+£1.2bn +£1.0bn

+£2.1bn

+£1.2bn +£1.5bn

Growth in tax receipts: OBR March forecast for year as a whole and year to date

Page 14: Autumn 2017 Budget: Options for easing the squeeze

Data so far this year paints a rosier picture

A number of taxes are performing better than expected so far

‒ Could lead to improvement of around £6 billion

Spending on benefits and contributions to the EU also lower than expected

‒ Could save around £2¾ billion

Improvements come in spite of weaker-than-expected growth

If strength persists, would lead to lower medium-term borrowing

‒ Worth around £12 billion by 2021–22

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

Page 15: Autumn 2017 Budget: Options for easing the squeeze

Policy changes since March will increase borrowing slightly

Reversal of self-employed National Insurance contributions (NICs) measure costs £500 million per year

‒ May have a bigger effect in the long-run

Confidence and supply deal: £450 million per year for two years

‒ On Health, Education and Infrastructure in Northern Ireland

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

Page 16: Autumn 2017 Budget: Options for easing the squeeze

Policy changes since March will increase borrowing slightly

Changes to student loan system a considerable long-term cost, but little effect on short run measures

‒ Freezing fees at £9,250 small cut to University funding in short-run

‒ Repayment threshold to £25,000 means more debt written off

‒ Long-run cost of £2 billion a year, but not until 2046

Total effect of policy measures already announced increases borrowing in 2019–20 by £1.5 billion

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

Page 17: Autumn 2017 Budget: Options for easing the squeeze

Higher interest rates likely to mean higher borrowing in the short term

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

2017 2018 2019 2020 2021 2022

Base

rat

e (%

)

Notes and sources: see Figure 3.5 of Autumn 2017 Budget: Options for easing the squeeze

£1.5 billion more

borrowing in

2018–19

£0.7 billion

more

borrowing

in 2021–22

October

March

Market expectations over the base rate: March and now

Page 18: Autumn 2017 Budget: Options for easing the squeeze

Independent forecasters have downgraded growth forecasts slightly

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

98

100

102

104

106

108

110

112

2016Q1 2017Q1 2018Q1 2019Q1 2020Q1 2021Q1 2022Q1

Real

GD

P (2

016

Q1=

100)

Economy 0.3%

smaller in 2019 than

forecast in Feb

Notes and sources: see Figure 3.1 of Autumn 2017 Budget: Options for easing the squeeze

OBR, March

Bank of England, February

Bank of England, August

Real GDP: Bank of England and OBR forecasts since February

Page 19: Autumn 2017 Budget: Options for easing the squeeze

Taking these changes together, borrowing could be slightly down on the March forecast

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

0

20

40

60

80

2017–18 2018–19 2019–20 2020–21 2021–22

PSN

B (£

bill

ion)

OBR March

‘Moderate’

£5 bn

Notes and sources: see Figure 3.7 of Autumn 2017 Budget: Options for easing the squeeze

Public sector net borrowing under different growth scenarios

Page 20: Autumn 2017 Budget: Options for easing the squeeze

But a substantial productivity downgrade seems likely

OBR have stated a productivity growth downgrade is likely

‒ Robert Chote: “for now we are minded to revise down potential productivity growth significantly”

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

Page 21: Autumn 2017 Budget: Options for easing the squeeze

Productivity forecasts have been consistently optimistic

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

95

100

105

110

115

120 20

05

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

Out

put p

er h

our

(200

9 Q

1=10

0)

Out-turn

June 2010

March 2017

Notes and sources: see Figure 3.3 of Autumn 2017 Budget: Options for easing the squeeze

Successive forecasts for productivity growth since June 2010

Page 22: Autumn 2017 Budget: Options for easing the squeeze

Recent productivity performance has been historically terrible

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6% 19

72

1974

19

76

1978

19

80

1982

19

84

1986

19

88

1990

19

92

1994

19

96

1998

20

00

2002

20

04

2006

20

08

2010

20

12

2014

20

16

2018

20

20

Ann

ual g

row

th (%

)

Out-turn March forecast Average

Notes and sources: see Figure 3.4 of Autumn 2017 Budget: Options for easing the squeeze

‘Very poor’

scenario

‘Weak’ scenario

Productivity growth since 1972: Out-turns and the March forecast

Page 23: Autumn 2017 Budget: Options for easing the squeeze

A substantial productivity downgrade seems likely

OBR have stated a productivity growth downgrade is likely

‒ Robert Chote: “for now we are minded to revise down potential productivity growth significantly”

‒ Only slightly offset by an expected increase in hours and employment forecasts

‘Very poor’ productivity scenario

‒ 0.4% annual growth considered new normal

‒ Average real growth 2017-2021: 0.7% (1.8% in March)

‘Weak’ productivity scenario

‒ Downgrade halfway towards average of last seven years

‒ Average real growth 2017-2021: 1.3% (1.8% in March)

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

Page 24: Autumn 2017 Budget: Options for easing the squeeze

Weaker productivity would mean higher borrowing

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

0

20

40

60

80

2017–18 2018–19 2019–20 2020–21 2021–22

PSN

B (£

bill

ion)

‘Moderate’

OBR March

‘Weak’

‘Very poor’

£19 bn

£53 bn

Public sector net borrowing under different growth scenarios

Notes and sources: see Figure 3.7 of Autumn 2017 Budget: Options for easing the squeeze

Page 25: Autumn 2017 Budget: Options for easing the squeeze

All of which would be structural

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

0%

1%

2%

3%

4%

2017–18 2018–19 2019–20 2020–21 2021–22

Stru

ctur

al b

orro

win

g

(% n

atio

nal i

ncom

e)

‘Moderate’

OBR March

‘Weak’

‘Very poor’

£13 bn headroom

Structural borrowing under different growth scenarios

Notes and sources: see Figure 3.8 of Autumn 2017 Budget: Options for easing the squeeze

2% target

Page 26: Autumn 2017 Budget: Options for easing the squeeze

And the National Debt would rise as a result

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

75%

80%

85%

90%

95%

100%

2017–18 2018–19 2019–20 2020–21 2021–22

PSN

D (%

nat

iona

l inc

ome)

‘Moderate’

OBR March

‘Weak’

‘Very poor’

Public sector net debt under different growth scenarios

Notes and sources: see Figure 3.9 of Autumn 2017 Budget: Options for easing the squeeze

Page 27: Autumn 2017 Budget: Options for easing the squeeze

So what’s a Chancellor to do?

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

Page 28: Autumn 2017 Budget: Options for easing the squeeze

Elections tend to be followed by tax rises

£13bn

£11bn

£6bn

£16bn

£15bn

£25bn

0 5 10 15 20 25 30

2015

2010

2005

2001

1997

1992

£ billion (2017–18 terms)

Elec

tion

yea

r

Long run net tax rise from measures announced in the year following general elections

Notes and sources: see Figure 3.10 of Autumn 2017 Budget: Options for easing the squeeze.

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

Page 29: Autumn 2017 Budget: Options for easing the squeeze

Asymmetric response to public finance news

-10 -5 0 5 10 15 20

Underlying improvement (5 occasions)

Impact on borrowing (£ billion)

Average change in underlying borrowing and policy response since 2010

Short run policy

Long run policy

Underlying change

Notes and sources: see Figure 3.11 of Autumn 2017 Budget: Options for easing the squeeze.

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

Page 30: Autumn 2017 Budget: Options for easing the squeeze

Asymmetric response to public finance news

-10 -5 0 5 10 15 20

Underlying improvement (5 occasions)

Underlying deterioration (10 occasions)

Impact on borrowing (£ billion)

Average change in underlying borrowing and policy response since 2010

Short run policy

Long run policy

Underlying change

Notes and sources: see Figure 3.11 of Autumn 2017 Budget: Options for easing the squeeze.

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

Page 31: Autumn 2017 Budget: Options for easing the squeeze

Options for tax rises

One option is to announce tax rises

‒ if so could do worse than increasing rate(s) of one of the main taxes

‒ NICs rates rose in early 1990s, early 2000s and early 2010s

Could decide not to cut rate of corporation tax from 19% to 17%

‒ boost revenues by around £5 billion

‒ require House of Commons vote and break manifesto commitment

Politics makes any significant tax takeaways difficult

‒ apart from the seemingly obligatory “tax avoidance” measures?

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

Page 32: Autumn 2017 Budget: Options for easing the squeeze

Tax cuts more likely?

£6 billion net tax rise already still to come and tax burden forecast to rise to level not maintained since 1950s

Conservative manifesto commitment to increase income tax personal allowance to £12.5k and higher-rate threshold to £50k

‒ would now only cost £1.1 billion a year

‒ on top of £12 billion spent increasing personal allowance since 2010

Another freeze in fuel duties would cost £¾ billion a year

‒ on top of the £5.4 billion cost of freezing them since 2010

‒ would cost £¼ billion if frozen for petrol but not diesel

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

Page 33: Autumn 2017 Budget: Options for easing the squeeze

Possible benefit giveaways? (1/2)

£12 billion of cuts in benefits for working age families are still in the pipeline, on top of £29 billion implemented since 2010–11

Universal credit being rolled out nationwide

‒ rollout 8% complete in September, rising to 13% in March

‒ less generous than legacy system, cash terms protection for existing recipients

Concern with time taken before claimants receive first full payment

‒ paid monthly in arrears

‒ 7 waiting days before unemployed can claim: return to 3 waiting days would cost of £0.3 billion a year

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

Page 34: Autumn 2017 Budget: Options for easing the squeeze

Possible benefit giveaways? (2/2)

Most working age benefits to be frozen for next two years

‒ 4 year freeze (2015–16 to 2019–20) initially expected to save £3.4 billion

‒ rising inflation means now on course to save £4.6 billion

‒ could move to 1% increase for two years, or cancel final year of freeze, and keep broadly to the original saving

‒ could scrap final two years at cost of around £4 billion

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

Page 35: Autumn 2017 Budget: Options for easing the squeeze

Day-to-day public service spending squeezed

4,250 4,400 4,550 4,700 4,850 5,000 5,150 5,300 5,450 5,600

270 280 290 300 310 320 330 340 350 360

2007

–08

2008

–09

2009

–10

2010

–11

2011

–12

2012

–13

2013

–14

2014

–15

2015

–16

2016

–17

2017

–18

2018

–19

2019

–20

2020

–21

2021

–22

£ pe

r ca

pita

(201

7–18

pri

ces)

£ bi

llion

(201

7–18

pri

ces)

Resource Departmental Expenditure Limits

Notes and sources: see Figure 2.10 of Autumn 2017 Budget: Options for easing the squeeze.

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

Per capita (£, RH axis)

Total (£bn, LH axis)

Per capita spending to fall by a further 5% (£15bn) on top of the 13% (£46bn) since 2010–11

Page 36: Autumn 2017 Budget: Options for easing the squeeze

Retaining public sector pay cap not risk free

0

5

10

15

20

1997

–98

1998

–99

1999

–00

2000

–01

2001

–02

2002

–03

2003

–04

2004

–05

2005

–06

2006

–07

2007

–08

2008

–09

2009

–10

2010

–11

2011

–12

2012

–13

2013

–14

2014

–15

2015

–16

2016

–17

2017

–18

2018

–19

2019

–20

Perc

enta

ge

Average difference between public and private sector hourly pay

Average difference Projection: increase scales by 1% each year Projection: increase scales in line with Consumer Prices Index Projection: increase pay in line with private sector earnings

Notes and sources: see Figure 4.1 of Autumn 2017 Budget: Options for easing the squeeze.

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

Page 37: Autumn 2017 Budget: Options for easing the squeeze

NHS: extremely tight spending settlement

-4

-2

0

2

4

6

8

10

12 19

56–5

7

1960

–61

1965

–66

1970

–71

1975

–76

1980

–81

1985

–86

1990

–91

1995

–96

2000

–01

2005

–06

2010

–11

2015

–16

2020

–21

Perc

enta

ge

Annual real increase in per capita UK NHS spending

Notes and sources: see Figure 4.2 of Autumn 2017 Budget: Options for easing the squeeze.

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

Page 38: Autumn 2017 Budget: Options for easing the squeeze

NHS: managing to do more

3.2

7.7 6.7

15.7 15.1

0

5

10

15

20

English DH spending per

capita

A&E attendances

Non-elective (emergency) admissions

Elective admissions (overnight admissions

and daycases)

First outpatient

attendances

Perc

enta

ge c

hang

e,

2009

–10

to 2

016–

17

English hospital activity per capita

Notes and sources: see Figure 4.3 of Autumn 2017 Budget: Options for easing the squeeze.

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

Page 39: Autumn 2017 Budget: Options for easing the squeeze

NHS: clear signs of strain (1/2)

70

75

80

85

90

95

100

2004

–05

2005

–06

2006

–07

2007

–08

2008

–09

2009

–10

2010

–11

2011

–12

2012

–13

2013

–14

2014

–15

2015

–16

2016

–17

2017

–18

Per

cent

A&E patients in England increasingly likely to wait more than 4 hours

Notes and sources: see Figure 4.4 of Autumn 2017 Budget: Options for easing the squeeze.

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

% admitted, transferred or discharged within four hours

National target = 98% National target = 95%

Page 40: Autumn 2017 Budget: Options for easing the squeeze

NHS: clear signs of strain (2/2)

0

5

10

15

Apr-

09

Oct

-09

Apr-

10

Oct

-10

Apr-

11

Oct

-11

Apr-

12

Oct

-12

Apr-

13

Oct

-13

Apr-

14

Oct

-14

Apr-

15

Oct

-15

Apr-

16

Oct

-16

Apr-

17

Oct

-17

Per

cent

% waiting more than 18 weeks from referral to treatment in England

Notes and sources: see Figure 4.5 of Autumn 2017 Budget: Options for easing the squeeze.

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

8% target

Page 41: Autumn 2017 Budget: Options for easing the squeeze

NHS: clear signs of strain (2/2)

0

10

20

30

40

50

Aug-

07

Mar

-08

Oct

-08

May

-09

Dec

-09

Jul-1

0

Feb-

11

Sep-

11

Apr-

12

Nov

-12

Jun-

13

Jan-

14

Aug-

14

Mar

-15

Oct

-15

May

-16

Dec

-16

Jul-1

7

Feb-

18

Per

cent

% waiting more than 18 weeks from referral to treatment in England

8% target

Notes and sources: see Figure 4.5 of Autumn 2017 Budget: Options for easing the squeeze.

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

Page 42: Autumn 2017 Budget: Options for easing the squeeze

NHS: clear signs of strain (2/2)

0

10

20

30

40

50

Aug-

07

Mar

-08

Oct

-08

May

-09

Dec

-09

Jul-1

0

Feb-

11

Sep-

11

Apr-

12

Nov

-12

Jun-

13

Jan-

14

Aug-

14

Mar

-15

Oct

-15

May

-16

Dec

-16

Jul-1

7

Feb-

18

Per

cent

% waiting more than 18 weeks from referral to treatment in England

8% target

Notes and sources: see Figure 4.5 of Autumn 2017 Budget: Options for easing the squeeze.

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

Page 43: Autumn 2017 Budget: Options for easing the squeeze

Prisons: spending and staff cut

60

70

80

90

100

110

120 20

09–1

0

2010

–11

2011

–12

2012

–13

2013

–14

2014

–15

2015

–16

2016

–17

2017

–18

Per

cent

Notes and sources: see Figure 4.6 of Autumn 2017 Budget: Options for easing the squeeze.

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

Prison spending

Prison staffing

Prison population

Page 44: Autumn 2017 Budget: Options for easing the squeeze

Prisons: spending and staff cut

0

50

100

150

200

250 20

09–1

0

2010

–11

2011

–12

2012

–13

2013

–14

2014

–15

2015

–16

2016

–17

2017

–18

Per

cent

Prison staffing

Prison population Prison spending

Notes and sources: see Figure 4.6 of Autumn 2017 Budget: Options for easing the squeeze.

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

Page 45: Autumn 2017 Budget: Options for easing the squeeze

Prisons: assaults on staff, assaults on prisoners and prisoner self-harm up

0

50

100

150

200

250 20

09–1

0

2010

–11

2011

–12

2012

–13

2013

–14

2014

–15

2015

–16

2016

–17

2017

–18

Per

cent

Prison staffing

Prison population Prison spending

Notes and sources: see Figure 4.6 of Autumn 2017 Budget: Options for easing the squeeze.

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

Prisoner self-harm

Assaults on prisoners

Assaults on staff

Page 46: Autumn 2017 Budget: Options for easing the squeeze

So what’s a Chancellor to do? (1/2)

Mr Hammond has been dealt a tricky hand

If forecast productivity growth were unchanged public finance outlook would be slightly stronger than in March

Likely productivity downgrade would, if significant, dominate

‒ downgrading halfway towards recent experience could increase forecast borrowing in 2021–22 from £17 billion to £36 billion

‒ fiscal targets for this parliament could still be met, albeit with much reduced headroom

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

Page 47: Autumn 2017 Budget: Options for easing the squeeze

So what’s a Chancellor to do? (2/2)

Unlikely to announce a significant fiscal tightening

Budget giveaways seem likely, but an “end to austerity” unlikely

‒ choosing between competing spending demands difficult

Chances of eliminating the deficit anytime soon keep receding

‒ possible public finances will perform much better than expected

‒ but perhaps time to admit that a firm commitment to running a budget surplus from the mid-2020s onwards is no longer sensible

© Institute for Fiscal Studies Autumn 2017 Budget : Options for easing the squeeze

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Carl Emmerson and Thomas Pope

Presentation at the Institute of Chartered Accountants in England and Wales

London, 30th October 2017

Autumn 2017 Budget: Options for easing the squeeze