As it stands, the UK govt is behaving like a 'fool in the bath', insisting on controlling the level of water only by adjusting the flow from the taps and ignoring the option of pulling the plug and avoiding overflow. And that doesn't seem ideal
To me though, the lack of action on tax is the most remarkable thing. If the UK Govt wants to spend more - which it probably should - and doesn't want to borrow all of it in perpetuity - it probably shouldn't - then increasing revenues must be looked at
We've seen A LOT of speculation - it seems clearly coming from No11 - about changing fiscal rules . Net worth has measurement issues that affect incentives pretty fundamentally. Net financial liabilities - meh, it would be okay but not solve the problem that it's debt you issue in the market
In our weekly update: Scottish GDP fares better than previously thought, leaks about changing fiscal rules and the latest setback for the National Care Service. Read below:
This week the Scottish Government released the monthly estimate of GDP for July, as well as revisions to its estimates for June. We had positive news…
Scottish Income Tax: Mixed reactions from the business community
More than half of Scottish businesses (57%) have experienced little to no impact from the Scottish Government’s income tax policy, while 34% have felt the effects more sharply…
So using last year's pressures as a guide and excluding itemised lines in Rachel Reeves' statement, I get to about £3.5bn of other pressures - a far cry from the £8.6bn. What's in the other £5bn? The Treasury should release this information and not hide behind QA and supposed 'chilling effects'
But all these items, plus rail and other health pressures, are itemised in the public spending audit. And there aren't many more easily conceivable unforeseen large pressures from other departments, which get increasingly small to account for this
However, this uncovers the mess underlying the budget. The reserve has instead been used to fund the running of Ukraine aid (MoD and civilian), the DHSC pay award for 23-24 and what appears to be the whole of the asylum and migration systems. This runs roughshod through the principles of the reserve
The reserve is meant to be used for one-off, unforeseeable spending pressures. If we abstract from leases and depreciation (both non-cash), one-off pressures have become fewer and less expensive in recent years: £18.5bn in 21-22, £5.6bn in 22-23, £4.4bn in 23-24. Which is good news
What's in the Treasury's 'normal reserve claims' that amounted to £8.6 billion? It's hard to know, even after spending an unhealthy number of hours trawling through previous years' reserve usage figures to understand how it's been managed and what it tells us about unfunded pressures
On our weekly update - renewed scrutiny on the 'normal reserve claims' that the Treasury referred to back in July, sobering debt projections and a disappointing lack of an impact assessment for the winter fuel payment means-testing
As we move apace towards the new Labour Government’s first Budget, renewed scrutiny has fallen on the so-called ‘black hole’…
Absolutely. Worth pointing out that even then the health service ended up being much more costly than anticipated. Spending in year 1 (1948-49) was double the c.£250m budgeted, and continued pressures eventually led to glasses and false teeth charges in 1951 over which Bevan resigned