“Today's budget increases total departmental spending over this Parliament by £150 billion. That’s the largest increase this century, with spending growing by 3.8% a year in real terms.”
During his Autumn Budget and Spending Review statement, the Chancellor said that increases in public spending over this parliament would be the largest this century, with departmental budgets growing by £150 billion, or 3.8% per year once inflation is accounted for.
It is correct that departmental budgets are forecast to increase more under this parliament than any other this century. But they increased more each year under the—shorter—parliament from 2001 to 2005.
What the figures refer to
Firstly, it’s worth clarifying that the figures Mr Sunak uses here actually refer to about half of public spending, not the whole lot.
Government spending falls under two main categories:
- Departmental expenditure limits (DEL), which is spending the government can essentially budget for, like the cost of running a hospital
- Annually managed expenditure (AME), which the government can’t control that easily, like the cost of welfare payments
Mr Sunak’s statement was in reference to DEL only, not AME.
The Treasury states that total DEL will be £150 billion higher in cash terms (or £90 billion in real terms, once the rise in prices has been factored in) in 2024/25 compared to 2019/20.
It claims this would be an average yearly increase of 3.8% in real terms after excluding ringfenced Covid-19 funding and adjusting for “one-off time-limited funding”.
If you include the AME, total public spending is forecast to increase by £220 billion (or around £100 billion in real terms) between 2019/20 and 2024/25, or an average yearly increase of 2.2% in real terms (again excluding ringfenced Covid-19 funding and one-off time limited funding).
Biggest increase this century?
The Treasury could not point us towards the precise figures behind the claim but said it referred to the absolute increase in DEL over the parliament in real terms compared to the rise in DEL over the course of other parliaments this century.
The current parliament started after the December 2019 General Election, and so the spending in 2019/20 acts as its ‘baseline’ level of spending.
Under the Fixed-term Parliaments Act, Parliament is next due to be dissolved in early April 2024, ahead of a General Election in May by which point 2024/25 spending plans will already be underway.
That’s why the planned change in spending over the Parliament can be measured by looking at the change from 2019/20 to 2024/25.
(It’s possible the current parliament may be shorter than this given the Fixed-term Parliaments Act is on course to be repealed and there is speculation of an early election in 2023 but as things stand it makes sense to look at the change in spending between 2019/20 and 2024/25.)
Applying the same rules to other parliaments, statistics from the Office for Budget Responsibility (OBR) and the Institute for Fiscal Studies (IFS) show that the total DEL (TDEL) over this parliament is forecast to increase by more than it increased by over any other parliament this century, in absolute terms.
But spending increased by more each year under Labour during the 2001-2005 parliament. The reason TDEL didn’t increase by more in absolute terms (but did increase more annually) is because this parliament covered only four years of spending, rather than five as the current parliament is planned to.
These statistics use the OBR’s definition of DEL which differs from the Treasury’s. The IFS told us the reason to use these figures is that they are more consistent over time.
However, the Treasury’s figures show a similar picture.
They show TDEL is expected to grow by £88 billion between 2019/20 and 2024/25, or £18 billion per year, in today’s prices.
By comparison, between 2001/02 and 2005/06 TDEL in today’s prices increased by £75 billion, so less than forecast over the current parliament, but by £19 billion per year, more than forecasted over the current parliament.
So the Chancellor was correct to say spending will increase by more over this parliament than any other this century, but this is in part because it is likely to be longer than other parliaments this century.