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Public Services in a Time of Fiscal Constraint - Seminar held at HM Treasury on 4 November 2008 

It takes a lot to drag a room-full of Treasury public-spending experts away from their computers in the last few weeks before the pre-Budget report.  But the Programme succeeded in doing just that with a lunch-time seminar on ‘Public Services in a Time of Fiscal Constraint’, chaired by James Richardson, the Treasury’s Director of Spending.  Christopher Hood (PSP Director) discussed policy choices from a historical perspective, taking examples from the 1920s when public spending was cut by one-quarter by the infamous “Geddes’ Axe”, and the 1970s when major cuts were made in public sector employment but without corresponding cuts in expenditure.

Carl Emmerson from the Institute for Fiscal Studies analysed more recent data.  He showed that in recent decades, public spending has followed the ups-and-downs of the economic cycle with governments spending relatively more on public services as a percentage of GDP when the output gap is positive (that is, when the economy is growing).  Maintaining expenditure in more straitened times would represent a break from this pattern, and has implications for increased government debt.  

 The discussion covered a variety of topics.  For example: is the growth of Health spending uncheckable? What can we learn from the past about new expenditure control mechanisms that tend to go with changes in public spending policy?   In periods of fiscal constraint, how can we preserve learning capacity and investment in future developments? A senior official described the seminar as ‘very stimulating, lots of food for thought, no easy answers’.  We are pursuing the idea of holding follow-up seminars.