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Welfare Reform on the Web (March 1999): Welfare Spending

HOW DEEP ARE BROWN'S POCKETS?

L. Paterson
Independent, 14th July 1998, p. 17

Reports consensus view that the government has to a certain extent loosened fiscal policy. It is calculated that between 1998 and 2002 the Chancellor is planning to increase government spending by 9% in real terms. Health and education look set to receive increases of around 4% each in their budgets. Even this may underestimate the true magnitude of proposed increases. Working Families Tax Credit (WFTC) will be treated as a tax rather than an expenditure, and so escapes the spending cap. The government has also abolished the distinction between the "control total" and parts of public expenditure seen as being outside its control, such as debt interest. If "non-controllable" items like debt interest begin to rise, then government spending could spiral upwards. On the receipts side, if the extra spending is financed by tax hikes effects on inflation would be neutral. However, it is expected that part of the expenditure will be financed by the sale of national assets, widely seen as being inflationary.

HOW TOUGH IS THE IRON CHANCELLOR?

R. Radcliffe and J. Hawksworth
London: Pricewaterhouse Coopers, 1998

Calculate that the Government is preparing to spend a total of £23 billion more on health and education than Kenneth Clarke's final set of plans. Warn that the Chancellor's generosity could set off a damaging chain reaction with higher interest rates increasing the chance of a hard landing for the economy. This might, in turn, mean that the Chancellor's borrowing and spending rules would be broken and necessitate fiscal tightening immediately after the next election.

LONG SLOG TO THE ELECTION HAS BEGUN

L. Elliott
Guardian, 15th July 1998, p. 5

Argues that the public spending increases without tax hikes promised in the Comprehensive Spending Review will ensure Labour's popularity in the run-up to the next election. They confirm Labour as a government with a real commitment to the public sector and appear to be well thought out and affordable. Plans could, however, be derailed by a recession, which would cause social security spending and interest payments on the national debt to increase while tax revenues would fall.

MODERN PUBLIC SERVICES FOR BRITAIN: INVESTING IN REFORM: COMPREHENSIVE SPENDING REVIEW: NEW PUBLIC SPENDING PLANS 1999-2002.

London: TSO, 1998 (Cm 4011)

On the welfare front, promises:>

  • more than £20.6bn to modernise the NHS over the next three years, build hospitals and cut waiting lists;
  • £19 bn extra for education and doubling of investment in schools to cut class sizes;
  • £4.4 bn to regenerate cities, improve council houses and extend the "new deal" to the most deprived estates;
  • a new minimum guaranteed pension for the poorest pensioners, plus abolition of eye test charges and more help with fuel bills;
  • a new means tested educational maintenance allowance for teenagers who stay on at school to replace child benefit for over-16s.

Spending is to be financed by reductions in the Defence, Legal Aid and Agriculture budgets, a continuing squeeze on public sector pay and the sale of national assets. Departments' spending will be subject to continuous scrutiny and audit. Each department will be expected to achieve quantifiable targets and to produce an annual output and performance analysis. The public will also be given more information about public sector performance through League Tables.

(See also Financial Times, 15th July 1998, p. 1, 8-13; Daily Telegraph, 15th July 1990, p. 1, 8-9; Times, 15th July 1998, p. 1, 6-9; Guardian, 15th July 1998 p. 1, 5-9)

MORE LIKE FRANCE

P. Toynbee
Guardian, 15th July 1998, p. 20

Praises the approach of the government to public spending on capital projects to improve public transport, school and hospital buildings. This will improve the image of the public services and raise morale. Approves measures to target welfare spending on the poorest, exemplified by the new minimum pension guarantee, the Sure Start programme supporting mothers and toddlers in deprived areas, and the New Deal for Communities offering comprehensive regeneration schemes.

MPS ATTACK "UNDERHAND" CHANGES TO BENEFITS BILL

A. Segali and G. Jones.
Daily Telegraph, 16th July 1998, p. 17

Reports criticism of the Chancellor of the Exchequer for his removal of the £5 billion annual cost of the Working Families Tax Credit from the social security budget. Had the cost been scored as part of the benefits bill, social security spending would rise at a rate of 2% per year, twice the rate predicted in the Comprehensive Spending Review. The Chancellor also admitted to the Treasury Select Committee that forecasts of social security spending assumed stable levels of employment and did not allow for rising unemployment in the event of a recession.

(See also Financial times, 16th July 1998, p. 12; Daily telegraph, 16th July 1998, p. 1 & 2)

STILL STUCK IN SPENDING TRAP

P. Riddell
Times, 13th July 1998, p. 20

Argues that government has missed its opportunity to introduce far reaching structural reforms in its Comprehensive Spending Review. It is willing to experiment managerially to improve standards through use of performance targets, with incentives for bodies which are efficient and tough inspections for those which fail. It is not willing to be radical in altering the balance of public and private provision of public services.

THROW MONEY AT THESE YOUNGSTERS: WE CAN SAVE A FORTUNE

P. Toynbee
Guardian, 13th June 1998, p. 16

Argues that the Government's Comprehensive Spending Review should use new money as seed corn to shift resources from coping with the results of deprivation and social breakdown (eg high crime rates and numbers of children in local authority care) to prevention. Points to the confusion that arises in funding multi-agency community projects catering for the health, education and social care needs of the socially excluded. These are starved of funds as they fall between health, education and social services budgets.

TUC FEARS PAY GAP TO WIDEN

S. Milne
Guardian, 15th July 1998, p. 5

Reports major concerns among trade unions about the continuing squeeze on public sector pay announced in the Comprehensive Spending Review. Union leaders predict recruitment and retention difficulties and increasing demoralisation among public sector workers.

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