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Monday, 15 July, 2002, 16:47 GMT 17:47 UK
The unanswered questions


There have been no big surprises in this spending review.

In fact the only surprise was that there was no last minute rabbit-out of-hat of the kind that the Chancellor is famous for.

Mr Brown has broadly stayed within his target and fiscal rules.

But he has remained silent on some of the most important questions, namely whether he has a ceiling for public spending in mind, or a deadline for big improvements in public services.


This spending review is really a chance to fill in some of the details

Mr Brown has emphasised yet again the importance of improving productivity.

He has unveiled a large surge in capital spending and placed a strong emphasis on reform in the management of public services.

But his big spending announcement was really made back in April's Budget.

Cutting up the surplus

We've known since then that taxes will rise to help pay for extra public spending.

And we've known that public spending will rise from 39.8% of total UK national income this year, to about 41.8% in 2005/06.


Does he have a figure in mind similar to the spending levels of our continental neighbours?

This spending review has been really a chance to fill in some of the details.

It's Mr Brown's opportunity to tell us how he is to allocate the extra 2% of national income that is being shifted from private spending to public spending.

He told us in April that the NHS would get roughly an extra 1% of national income up to 2005.

So the spending review boils down to dividing up that other 1% of national income that the Chancellor has to hand.

And education and overseas aid were the real winners in that process, gaining increases well above the 4.3% annual average that public spending will rise as a whole.

Unanswered questions

So much for what was included in the spending review.

Let's have a look at two of the issues that were not so clearly spelled out.

The first is how long the Chancellor intends to follow this strategy of raising the share of national income devoted to public spending.

We know that the share can't grow forever, because it surely has to stop by the time it reaches 100%.

So, how high does Mr Brown want it to go? Does he have a figure in mind similar to the spending levels of our continental neighbours, somewhere between 42% and 45%?

Or does he expect public spending to rise to beyond 42% and then fall again when Britain's infrastructure has been re-built?

Or does Gordon Brown not know the answer to this question?

Tax implications

It's an important question because a growth in the share of national income devoted to public spending more or less implies an increase in taxes to pay.


If there is no improvement in public services after five years, is it time to abandon the strategy of putting more money in?

During the last election, the Chancellor was pressed on whether his spending review would involve tax rises but he gave no hints away.

Now that economists have seen it, they will start asking the same question about the next one - will public spending take a bigger slice of Britain's wealth and will taxes have to rise as well?

Again, I suspect the chancellor will not treat us to answers before he has to.

Political gamble

There is a second issue on which we have even less clarity.

The chancellor made much of the needs for results in return for extra cash, review bodies, and the closure of ineffective institutions.

But in reality we don't know whether all this will produce better value for money.

How long do we need to wait before seeing a step change in the performance of public services?

It is a question to which the government itself would, I'm sure, love an accurate answer.

For the spending review involves a gamble that the public will not resent paying higher taxes, because they feel the money is delivering results.

Yet, it is easy to argue that it takes a generation to turn public services round. For example, if the NHS is to improve, it must be able to treat more patients, but that requires more doctors, and it could take a decade to train them.

So the time it takes to get results is of real importance.

If there is no improvement in public services after five years, is it time to abandon the strategy of putting more money in?

Or should we just be patient until the results will come?

Or will the public force a change in strategy before the results of higher spending can be felt?

What a pity the spending review does not give us the answers to these questions.

Without them, we have no idea how many more similar spending reviews we shall be experiencing in the course of Gordon Brown's Chancellorship.

The government's plans for future spending are published on 15 July

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12 Jul 02 | Business
10 Jul 02 | UK Politics
14 Jul 02 | Business
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