More spending will go on ‘health, pensioners and debt payments’

18 Mar 13
A bigger share of public spending will be focused on health, pensioner benefits and debt interest payments by 2017/18, the Institute for Fiscal Studies has said.

By Vivienne Russell | 18 March 2013

A bigger share of public spending will be focused on health, pensioner benefits and debt interest payments by 2017/18, the Institute for Fiscal Studies has said.

In an observation published today, the IFS noted that the level of public spending as a share of national income was forecast to fall back to its long-run average of 39.5%, the level it was in 2003/04. But, by comparing the breakdown of spending within these two years, the think-tank predicts there will be some significant shifts in priorities.

Debt interest payments are set to increase dramatically, from £28.4bn in 2003/04 to £62bn in 2017/18, an increase in real spending of 118%.

Expenditure on health and pensioners is also set to rise, with real growth in spending of 36% and 37% respectively.

‘These trends are driven by the policies or both the last government and the current one, which are in fact remarkably similar in many respects in terms of the relative priority given to different areas of spending,’ the observation’s authors, Rowena Crawford and Paul Johnson, noted.

‘While the last government increased spending across the board, it raised spending on health faster than spending on other public services. Whilst this government is responding to the very big deficit it inherited by cutting public service spending rather dramatically, it is protecting health spending.’

They added that both the previous and current government had been ‘relatively generous’ to pensioners, increasing benefits and, subsequently, protecting them from cuts inflicted on the rest of the welfare budget.

Spending on working-age benefits, however, will account for a slightly smaller proportion of total expenditure in 2017/18 than in 2003/04. ‘This is actually one area where the spending priorities of the current government appear to differ from those of the previous government,’ Crawford and Johnson said.

They concluded that it was an ‘open question’ whether it was sustainable to spend less on other public services at the expense of health services and pensioner benefits.

At the weekend, Chancellor George Osborne announced that the government would introduce the new flat-rate state pension a year earlier than planned. From 2016, pensioners will receive £144 a week in state pension. The change is expected to be confirmed in the Budget later this week.


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