The precarious state of the state: The economy
For both day-to-day and investment spending, current plans imply tighter settlements for the next few years. Day-to-day spending is only set to increase by 1% per year in real terms. After accounting for commitments made to the NHS (through the 2023 workforce plan), education, defence, aid and childcare, this implies cuts of 2.6% per year in real terms for other services – which would come on top of cuts since 2010. 27 Chart D of Office for Budget Responsibility, Economic and Fiscal Outlook – March 2024, Cm 1027, The Stationery Office, 2024, retrieved 31 May 2024, www.obr.uk/efo/economic-and-fiscal-outlook-march-2024/.
The latest government plans are for public investment is to be broadly frozen in cash terms until 2028/29, leading to a sharp fall as a share of GDP – from 2.4% of GDP this year to 1.7% of GDP by 2028/29. Labour has made some extra commitments to invest towards its net zero target, but overall those plans still imply net investment falling sharply as a share of GDP. 28 Zaranko B, ‘A look under the hood of Labour’s investment plans’, blog, Institute for Fiscal Studies, 5 September 2023, retrieved 31 May 2024, ifs.org.uk/articles/look-under-hood-labours-investment-plans.
Firm spending plans from April 2025 are still to set, however the plans currently pencilled in will be difficult to deliver. Completing a spending review to set those plans, will be one of the first tasks facing the next government.
The timing of this will be important. The next government, whoever it is, will have to set spending plans for 2025/26 by the end of November 2024. There may be sufficient time for a spending review that sets multi-year budgets using existing processes and Whitehall architecture, however the timescale for doing this would be tighter than ever before. The alternative is to set one-year spending plans for 2025/26, creating more time to then run a full comprehensive and strategic multi-year spending review, concluding in the second half of 2025, that ensures spending is aligned with government priorities for the rest of the parliament.
Legal Disclaimer:
EIN Presswire provides this news content "as is" without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the author above.
