Post-election public spending boom predicted

Public spending could return to levels not seen since the 1970s, regardless of who wins the general election, according to a new study.

The analysis by the Resolution Foundation claims that both the Conservatives and Labour appear to be ‘aligned’ in their ambitions to increase public spending, after almost a decade of austerity and cutbacks.

The report notes the Conservative chancellor Sajid Javid has promised to establish a ‘new economic plan’ over the years beyond 2020-21 that would shift the UK economy from ‘recovery’ to ‘renewal’.

Mr Javid has placed a particular emphasis on capital spending, saying that the ‘first priority of our new economic plan will be to rebuild our national infrastructure’.

‘We might therefore expect the party’s manifesto to provide more detail of these ambitions, maintaining the Spending Round momentum on current expenditure and introducing new targets for capital spending,’ the report states.

And the report notes that Labour’s public spending plans are ‘even further-reaching’.

Its 2017 election manifesto included more than £70bn in new spending pledges, comprising £48.6bn of day-to-day spending and £25bn of capital.

‘What stands out is that both [parties] would push the UK state close to – or even above – 1970s levels of spending,’ the report adds.

‘The election, therefore, has the potential to reverse the Thatcher revolution on the public finances – despite parts of what the state did in the 1970s sitting today in private hands.’

But the report also notes that the ‘shadow of austerity remains all too real’ for large parts of the public sector – and for many households too.

It states that the local government budget is due to have been cut by 77%, with several other departments, including transport and BEIS facing cuts of between one-third and one-half.

And it warns that the shape of the state has change significantly over time, with recent policy choices meaning spending on health and on older people has come to account for an increased share of the total.

It says combined spending on health and older people currently accounts for 13% of British GDP.

In 10 years that figure could be 15%, and may rise as high as 20 per cent by the middle of the century.

That would mean spending on these two functions would go from accounting for 29% of all spending in 1997/98 to 36% today and 44% by 2037-38.

It adds by 2067-68, health and old age social security might account for 50p of every £1 spent.

‘Alongside Brexit, we can expect the coming election campaign to be characterised by something of an arms race on spending.

‘But before firing the gun on that race, it is important that our politicians take a step back and consider the past, present and future not just of the size of the UK state, but also its shape,’ the report states.

The full report – The shape of things to come – is available to read here.

Photo Credit – Stevepb (Pixabay)


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