Government spending

IFS Director Paul Johnson writes in The Times.

In this observation, we examine the main parties’ proposals for spending on 16-18 education in England, which includes students in School Sixth Forms, Sixth Form Colleges and Further Education Colleges. This area of education receives considerably less attention in public debate than other areas and seems not to have been a major spending priority for policymakers over recent decades.

The Conservative, Labour and Liberal Democrat manifestos all contained commitments to increase NHS spending over the next parliament. In this observation we set out what these commitments are likely to mean for the path of health spending in England going forwards, and put this in the context of the pressures faced by the health service from an ageing population. All three parties are proposing real increases in health spending over the next parliament, but at a rate well below the long run historical average. The next parliament will therefore continue to be an incredibly challenging period for the NHS, regardless of who wins the election. In the long run the NHS would be better served by a serious attempt to address long run funding pressures in a coherent and systematic fashion, than by the government just announcing further short term funding fixes.

In a new article in the Local Government Chronicle, IFS Associate Director looks at the tension between localised funding and centralised standard-setting in social care. The article is available here and reproduced below.

In this observation, we detail what the commitments outlined in the Conservative, Labour and Liberal Democrat manifestos on education spending would mean for the path of overall school spending in England and the prospects for continued reform of the school funding system.

Yesterday, the Conservative Party proposed changes to the rules governing who is eligible for government funding for social care, and backed away from a lifetime cap on care costs. In this observation, we discuss those changes and lay out their potential effects. Taking the population of people in their 70s in England we estimate that, on becoming in need of care in their own home, 12-17% would be eligible for state support under current rules but would not be eligible under the new rules proposed by the Conservatives. Others would find they needed to use more of their own wealth to fund the costs of care in their home before the state stepped in.

This presentation was given as a keynote presentation chief economists at the Bank of England on 19 May 2017.

The Liberal Democrat manifesto published today includes commitments to increase all rates of income tax by 1 percentage point as well as cancelling a number of significant benefit cuts and reversing others. In this observation we provide an overview of these proposals and compare them to the income tax and benefit proposals published by Labour yesterday.

As part of its proposal to create a National Education Service, the Labour party has put forward plans to dramatically increase and reform childcare subsidies in England. Taken together, these changes would transform the childcare system in England: extending access to free childcare to more and younger children, introducing subsidies for additional hours of care, and transitioning from a system in which subsidies are given to parents to a system of direct government subsidy. These proposals are costly: Labour anticipates that it will spend an additional £5.3 billion on the early years in 2021-22, 70% more than under current projections, and the long-run costs might be higher yet. There is a case for subsidising childcare to support children’s development and parents’ employment, particularly as Labour plans to invest in high-quality places. However, available evidence from the UK suggests that these benefits will be comparatively small. Both sides of the policy coin – benefit and cost – will depend on the take-up rates of these extended entitlements; however, there is a great deal of uncertainty about what a realistic estimate might be.

The Labour party is due to publish its June 2017 election manifesto later today. Below you will find detail on recent IFS analysis, which may help to contextualise and assess some of their policies.

IFS Associate Director Helen Miller writes an analysis piece for the BBC.

'Labour’s manifesto spending plans are impossible to cost', Times article by Paul Johnson

Labour’s Higher Education proposals will cost £8bn per year, although increase the deficit by more. Graduates who earn most in future would benefit most

This election observation details the education spending commitments and compares them to existing government plans.

The Labour party has promised to introduce free school meals for all primary school children, claiming that universal free lunches would remove stigma and ‘benefit the educational attainment and health of all children’. Previous IFS research concludes that providing school meals free of cost to all primary students can boost attainment by the equivalent of two months’ progress over two years, a meaningful effect. However, the costs of this policy are substantial – around £950 million a year – and the benefits from extending it nationwide might be smaller than found in the pilot study. In the context of constrained public spending and alternative programmes such as breakfast clubs that deliver similar gains at much lower cost, policymakers should think carefully about whether this is the best use of resources.