Headlines: March 8th, 2004

The days of public services, other than health, looking forward to increased funding are over, according to a report out today from the Institute for Public Policy Research. It says the foundations of Labour’s next manifesto are about to be set and that the Budget will be a sideshow.The report “Tough Choices: The 2004 Spending Review” says Government budgets until 2007-08 will be determined by this summer’s Spending Review, which will set the overall direction of policy in the next Parliament. It says it is already known how much money will be available and that the National Health Service will be the big winner.

The ippr document says previous big increases in the education budget mean that it should not rise as a share of GDP, in order to have the resources to continue to make progress on the Government’s child poverty targets and prevent a slashing of the transport budget. Public subsidy to the rail industry will need to be reduced, it says, leading to an inevitable rise in rail fares, but that the road budget cannot be cut ahead of the expansion of charging road users towards the end of the decade.

“Tough Choices” adds that in order to meet other commitments, cuts will have to be made in industrial and agricultural support and the defence and housing budgets will need to be frozen.

Peter Robinson, ippr Senior Economist said tough choices would have to be faced regardless of how the economy or the public finances are expected to evolve over the next few years. Even if things work out as the Treasury hopes, the 2004 review will still have to address difficult trade-offs. He added, “If the Tories were elected and were true to their aim of cutting public pending to 40 per cent of GDP, the trade-offs would be even more stark.”

He said that for most public services, spending as a proportion of GDP would have to remain stable or will have to fall in the next Parliament. The ippr report questions whether an election could be won using the five targets most likely to achieve social justice – reducing mortality rates from the major killer diseases by 2010; cutting by at least 40 per cent the number of adults in the UK workforce without an NVQ 2 or equivalent; cutting crime and the fear of crime; reducing the number of children in low-income households by at least a quarter and increasing the employment rates of disadvantaged areas and groups.