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Home Publications UK Public Finances: From Crisis to Recovery

UK Public Finances: From Crisis to Recovery

Carl Emmerson and Gemma Tetlow
Journal article | Fiscal Studies, Vol. 36, No. 4, December 2015

The financial crisis of 2008 and associated recession caused significant permanent damage to the UK's public finances: the UK economy is not expected to regain the economic growth trajectory that was predicted pre-crisis. In response, UK governments have planned and (so far, partially) implemented a significant fiscal tightening to cut borrowing from a post-war high of over 10 per cent of GDP to a planned overall surplus. This fiscal tightening is heavily weighted towards spending cuts, which are expected to comprise 86 per cent of the measures. The spending measures imply not only a significant reduction in spending as a share of GDP but also a significant change in the composition of that spending – with benefits for pensioners, health care and schooling now taking up a much larger share of overall spending than they did pre-crisis. Overall, the new tax and benefit measures have included some welcome improvements to the structure of the system, but many of these have probably happened in spite of, rather than because of, the need for fiscal consolidation. Opportunities to make many significant improvements have been missed, while in other areas new policies have made the system less efficient and less coherent.

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Journal article | Fiscal Studies, Vol. 36, No. 4, December 2015
This introduction to a special issue of Fiscal Studies compares economic trends over the financial crisis, and the tax and benefit reforms implemented in response, across six EU countries.