Public spending - the party is over, says KPMG

Commenting on today's announcement Alan Downey, Head of Public Services of KPMG in the UK, said:

 

"These are painful expenditure cuts for the public sector. After 10 years of substantial, real terms increases in UK public expenditure, the party is finally over.

The immediate consequence of today's announcements for the public sector is that an additional 5 billion pounds of savings have to be found in 2010-11. For many years after that, public sector expenditure will increase at an annual rate of 1.2% which is substantially below the forecast rate of increase in GDP. It is not clear yet where these cuts will fall but it is safe to presume that local government, work & pensions, revenue & customs and the foreign office will be heavily affected. The "sacred” areas of education and health might suffer as well.

The key question however is whether that level of pain will be enough to claw back the dramatic increase of short term borrowing. The measures announced by the Chancellor today depend on a strong and rapid economic recovery. If the recession is deeper than forecast, or more prolonged, it is difficult to see how any government will avoid much deeper cuts in public expenditure.

Part of the shortfall could be met by the sale of assets and privatisation of government-owned bodies. Buried in the small print of the PBR is a commitment to review the status and ownership of a number of organisations, ranging from the Met Office and Royal Mint to the Land Registry and British Waterways.


Tax 24 November 2008


-ENDS-


Further information:
KPMG PBR Hotline: 0207 694 8773
www.kpmg.co.uk/pbr

Margot Cowhig, Tax PR Manager, KPMG in the UK
Media hotline: 020 7694 8773
Mobile: 07920 274 856
Mail: margot.cowhig@kpmg.co.uk


Notes to editors:
Budget proposals and other tax changes are summarised in this document. The proposals may, however, be amended significantly before enactment. The content of this communication is intended to provide a general guide to the subject matter and should not be regarded as a basis for ascertaining liability to tax or determining investment strategy in specific circumstances. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. 


About KPMG:
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