Putting the cart before the horse

Mr Brown’s public spending announcements last month raised two main questions. First, how these very large additional sums of money are going to be translated into genuine improvements in public services on the ground, and when are we going to see these improvements? There is clearly a very big act of faith here.

The second question is whether the amounts are affordable and going on from that how precisely they will be raised. Here again we have an act of faith. Mr Brown argues in general terms; that for the year 1999-2000 there was a substantial surplus on current budget, that tax revenues look buoyant, and that his cautious assumptions about economic growth justify his decisions.

Thus, he argues, the July announcements can be afforded, at least in the short and maybe a medium term, but with (sotto voc) more risk in the longer term when, as is sooner or later inevitable, the economy turns down.

But many people, and you don’t have to be an accountant to feel this way, would be more convinced if there were some harder indications given of where the money was going to come from. Indeed in recent years its been very hard to find out how the budget is funded, though recently, that otherwise maligned document the government’s annual report does give us a pair of pie charts showing for 1999-2000 where the money came from and where it went.

For the future, however, we have nothing on the income side. We are told the spending numbers up to 2003-2004, but not tax numbers that must pay for them. So it is spend first, tax later, with tax as the residuary legatee.

The fact is that it is all done in the wrong chronological order. The right thing would be to bring together forecasts of expenditure and tax over the whole period, to provide a basis for judgement of the reality of the overall plans, to say nothing of judging the balance between the various elements. But no.

What we got in July this year are bald spending plans, albeit with a considerable uncertainty over some elements, up to the end of 2004.

Following that in the autumn there is the pre-Budget report with an update of economic and fiscal prospects and, presumably, details of the crucial social security uprating. And then, next spring, we get the Budget which will show tax and expenditure in more detail but only up to the end of 2001-2002. This is precisely the reverse order in which any sensibly planned concern would do things.

But whoever said government was a sensibly planned concern?

  • Sir Peter Kemp is chief executive of the Foundation for Accountancy and Financial Management.

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