economic policy in a time of austerity
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Economic policy in a time of austerity. Tom Sefton Economics and Social Policy Adviser Church of England @ TASefton. Outline. Shorter-term economic priorities: Deficit reduction Growth Fairness Long-term structural challenges: e.g. Stagnating living standards. Deficit reduction. - PowerPoint PPT PresentationTRANSCRIPT
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Economic policy in a time of austerity
Tom SeftonEconomics and Social Policy Adviser
Church of England@TASefton
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Outline
• Shorter-term economic priorities:– Deficit reduction– Growth– Fairness
• Long-term structural challenges:– e.g. Stagnating living standards
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Deficit reduction
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Spending and revenues – with & without policy19
96–9
719
97–9
819
98–9
919
99–0
020
00–0
120
01–0
220
02–0
320
03–0
420
04–0
520
05–0
620
06–0
720
07–0
820
08–0
920
09–1
020
10–1
120
11–1
220
12–1
320
13–1
420
14–1
520
15–1
620
16–1
720
17–1
83032343638404244464850
Spending (no action)Revenues (no action)
Perc
enta
ge o
f nat
iona
l inc
ome
Source: IFS Green Budget 2013
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2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
0.1%
2.4%2.9%
3.4% 3.0%2.5% 2.6%
6.7%
11.0%10.1%
7.5%
5.5%
3.5%
2.1%1.1%
Government net borrowing - % of GDP(June 2010 plans)
Publ
ic se
ctor
net
bor
row
ing
as %
of G
DP
Labour (actual)
Labour (Mar 2010 plans)
Coalition (Jun 2010 plans)
Source: Budget June 2010 (and previous Budget reports for earlier years)
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2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
0.1%
2.4%2.9%
3.4%3.0%
2.5% 2.6%
6.9%
11.2%
9.5%
7.9% 7.8% 7.5%
6.5%
5.5%
Government net borrowing - % of GDP(March 2013 plans)
Publ
ic se
ctor
net
bor
row
ing
as %
of G
DP
Source: Office for Budget Responsibility Economic and fiscal outlook charts and tables - March 2013
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2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-1840%
50%
60%
70%
80%
90%
100%
110%
120%
Public sector net debt - as % of GDPNo policy action June 2010 plans Latest OBR forecasts
June 2013 plans
Source: IFS Green Budget 2013
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“Consideration should be given to greater near-term flexibility in fiscal adjustment path in the light of
lacklustre private demand." (IMF World Economic Outlook, April 2013)
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Timing and composition of fiscal consolidation20
08–0
9
2009
–10
2010
–11
2011
–12
2012
–13
2013
–14
2014
–15
2015
–16
2016
–17
2017
–18-2
0
2
4
6
8
10Other current spendDebt interestBenefitsInvestmentTax increases
Fisc
al ti
ghte
ning
(% n
atio
nal i
ncom
e)
Source: IFS Green Budget 2013
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Growth
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Source: NIESR
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Source: Gavyn Davies, ‘Why is UK recovery weaker than the US?’ (FT, Nov 14 2012)
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Mar '10 Jun '10 Sep '10 Dec '10 Mar '11 Jun '11 Sep '11 Dec '11 Mar '12 Jun '12 Sep '12 Dec '12-1,000,000
-500,000
0
500,000
1,000,000
1,500,000
2,000,000
Change in private and public em-ploymentPrivate sector Total Public sector
Chan
ge in
em
ploy
men
t sin
ce M
arch
201
0
Source: Labour Market Statistics (EMP02)
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Fairness
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9.3
1.8
0.5
2.3
4.4
3.2
1.2
Total value of welfare cuts by 2014-15 - £bn
Benefit uprating
Housing benefits
Council Tax Benefit
Disability benefits
Tax credits
Child Benefit
Other family benefits
Total cuts = £22.7bn
Source: Own analysis based on Budget reports and Autumn Statements
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Poorest 2 3 4 5 6 7 8 9 Richest-8%
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
Impact of tax-benefit reforms between 2010 and 2015/16 - by income group
Income decile group
Perc
enta
ge ch
ange
in n
et in
com
e
Source: IFS Green Budget 2013
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Forecasts for UK child poverty: 2010-2020
Source: Browne, J. et al (2013), ‘Child and Working-Age Poverty in Northern Ireland [and UK] from 2010 to 2020’
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Source: British Social Attitudes Survey