Resolution Foundation: public spending to shift towards health and old age

10 Nov 15

Public spending on education and economic development is set to fall to the lowest level on record by the end of the decade as spending shifts towards healthcare and provision for pensioners, a Resolution Foundation analysis has found.

The think-tank’s report said the share of state spending on old age and health will be more than twice that allocated to education and economic development combined by the end of the parliament.

Ahead of the November 25 Spending Review, the review concluded the government’s deficit reduction plan was being achieved largely through spending cuts, with government revenues remaining broadly flat. Spending as a share of gross domestic product is set to fall towards its historic low of around 36% by the end of the decade.

Within this, the profile of spending is changing considerably, Resolution Foundation chief economist Matthew Whittaker stated. Reductions announced by Chancellor George Osborne yesterday mean that revenue spending in communities, environment and transport departments will have been cut over 50% through the government’s austerity programme.

Alongside this, the proposed £8bn increase in NHS spending will have increased its funding by at least 14% over the same 10 year period.

This shift means that by 2019/20, health resource spending will be more than double the combined total spending of 15 other Whitehall departments, including local government, the Home Office, justice, culture, and transport. By contrast, in 2010, the health budget was slightly smaller than these other departments.

The direction of departmental and welfare spending means that the overall share of state spending on old age and health is set to reach 43% by 2020, up by around a quarter since 2007. By contrast, the share of overall state spending that goes on education and economic development, including housebuilding, is set to fall by around one-fifth over the same period to 19%.

“The details of the final four years of the chancellor’s decade-long fiscal consolidation programme, due to be set out on 25 November, will have profound implications,” Whittaker stated.

“The focus on spending cuts as the driver of deficit reduction, combined with protections for areas such as health and pensioner benefits, has created a big shift in state support towards older people – and away from children and young adults.

“This relative growth of state spending on health and old age – and withdrawal from areas such as post-16 education, housing and economic development – also raises big questions about the state’s role in supporting productivity growth.”

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