Government finances and spending

This presentation was given at a BVRLA / RAC Foundation roundtable on the future of motoring taxation, held in London on 3 September 2018.

When it comes to big decisions around Brexit and independence it is dangerous to pretend that the political choice does not require some serious economic choices too, says IFS Director Paul Johnson in The Times.

The recalculation of local government funding allocations should take into account all the ways councils could bring in money.

The last time the government updated its assessment of what different councils in England need to spend was in 2013. And since 2016, the cuts the government has been making to the grants it gives to councils have taken into account the council tax revenues they raised in 2015-16. This has left things in need of reform – we cannot end up with a local government finance system where funding in the 2020s and 2030s simply depends on the distribution of grants and council tax revenues in the mid 2010s.

Major changes are afoot in English local government finance. The Fair Funding Review will see new methods and formulae to redistribute funding between councils according to their assessed spending needs and revenue-raising capacity. The expansion of the business rates retention scheme is likely to see the abolition of revenue support grant. And changes to the adult social care system could have big impacts on the cost of the system and how it is financed. In this article for the Municipal Journal, David Phillips, discusses the big picture questions that need to considered along the policy detail in coming years.

Governments are responsible for spending huge amounts of public money. Effective control of that spending is essential if governments are to meet their fiscal objectives, deliver their desired policy outcomes, and achieve value for money for the taxpayer. A new IFS report, published today as part of a wider study of the history of public expenditure control, uses more than twenty years of data to analyse the planning and control of public expenditure between 1993 and 2015.

Presentation at the launch event for our report, held at the Institute for Government.

With substantial budget cuts and ongoing major reforms to the finance system (such as business rates retention and the Fair Funding Review), what scope is there for fair and sustainable funding for local government? This presentation, by David Phillips, IFS Associate Director, was given at the CIPFA annual conference in Bournemouth.

It's important to think about the overall effects of taxes. Business rates bring in a handy £30 billion a year for government - abolishing them won't help local shops

It is now just over two years since the UK’s vote to leave the European Union. Since then, it is fair to say that there has been a confusing barrage of apparently contradictory claims about the state of the economy.

The Prime Minister has committed to spending increases for the NHS over the next five years and promised this would be at least partly funded by a ‘Brexit dividend’. This is not the first time that NHS spending increases have been linked to the UK’s exit from the EU – the now infamous £350 million per week pledge was a significant feature of the 2016 referendum campaign.

Yesterday, the Prime Minister announced a ‘70th Birthday present’ for the NHS, pledging average real annual increases of 3.4% per year for the next five years. One challenge for the Government is where the money to pay for this will come from. After social security spending, the NHS is the single biggest element of government spending, so a large increase in NHS funding has significant implications for the public finances.

Following widespread austerity measures introduced in 2009/10, public funding for adult social care has fallen substantially. In particular, funding for social care for people aged 65 and older has been particularly hard hit, falling by 21% between 2009/10 and 2015/16. While some additional money in recent years has reversed some of these cuts, these funding decisions are likely to have had a number of consequences for users of social care, their carers and for other related public services. But what do we really know about their impact?

Yesterday we heard the first details of a new five-year funding settlement for the NHS in England. It was announced NHS England funding would be slightly more than £20 billion higher in 2023-24 than in 2018–19 after adjusting for forecast economy-wide inflation over the period. This represents a larger increase in funding for the NHS than we have seen in the last 8 years, but remains below historical average growth in UK health spending (3.7% per year).