Budget 2015: public spending squeeze to ease a year early

18 Mar 15

Public spending is set to increase from 2019/20, bringing austerity to an end a year earlier than planned, Chancellor George Osborne announced in the Budget.

In his last Budget statement before the general election, Osborne told MPs that this was down to falling debt. According to the independent Office for Budget Responsibility, the government is on course to meet the target to have debt falling as a proportion of GDP by the end of the current Parliament.

‘Because the national debt share is falling a year earlier than forecast at the Autumn Statement – the squeeze on public spending ends a year earlier too,’ Osborne said.

‘In the final year of this decade, 2019/20, public spending will grow in line with the growth of the economy. We can do that while still running a healthy surplus to bear down on our debt.’

He added that, public spending as a share of national income would be the same as it was in the year 2000.

‘That’s the year before spending got out of control and the national debt started its inexorable rise.’

He stressed that, despite the years of austerity, satisfaction with public services had not been adversely affected – indeed it had gone up, he said.

‘Satisfaction with the NHS is rising year on ear. Crime is down 20%. One million more children attend good or outstanding schools.’

But he said the government’s needed to stick to its fiscal path or risk a rise in national debt. Such as reversal would be a ‘tragedy’. A further £30bn in savings still needed to be achieved by 2017/18, of which £13bn would come from government departments, £12bn from welfare and £5bn from a clampdown on tax avoidance and evasion.

However, CIPFA chief executive Rob Whiteman highlighted that the  Budget documents showed the ‘huge cuts’ local authorities have dealt with in this parliament and how much more they still have to undergo.

‘In 2015/16 alone government support for councils will fall by 23%, on top of the 50% cuts they have already endured over the past five years,’ he stated.

‘Local services are already stretched thin and while many councils have dealt well under the pressures they have faced, there are increasing instances of them struggling to cope under the strain of their finances. The impacts of these cuts are now feeding through into pressures for other areas of the public sector such as the NHS and the criminal justice system.
‘With this in mind, those who are serious about the future of local councils and the services they provide must ask if the continued trajectory of funding cuts are sustainable or desirable.'

In a Budget statement that was short on giveaways, the chancellor did announce £1.25bn for a major expansion of mental health services for children and those suffering from maternal mental illness.

This was welcomed by NHS Providers who called it a major step forward. Chief executive Chris Hopson said: ‘This is an important statement of commitment to parity of esteem for physical and mental health.

‘We also welcome the additional £8.4 million to support veterans’ mental health, and the recognition of the important role in public health played by air ambulances, blood bikes and defibrillators in public places.’

But local government leaders criticised the Budget’s lack of funding or devolution assurances for councils.

‘The next government must protect funding for local services, tackle the adult social care crisis and set out a new settlement for England which devolves decisions about infrastructure and skills as well as health and social care, down to local areas,’ he said.

The CBI said the fiscal ‘breathing space’ should be used to achieve ‘intelligent reductions in public spending’ with a focus on infrastructure and innovation.

  • Judith Ugwumadu

    Judith Ugwumadu joined Public Finance International and Public Finance online as a reporter after stints at Financial Adviser, Global Security Finance and The Sunday Express. Currently, she writes about public finance, public services and economics.

    Follow her on @JudithUgwumadu_

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