Budget 2003 Briefing Institute for Fiscal Studies www.ifs.org.uk/budgetindex.shtml.

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Presentation transcript:

Budget 2003 Briefing Institute for Fiscal Studies

Measures affecting households Matthew Wakefield

Outline Distributional analysis of measures directly affecting households Child Trust Fund

The Measures £100 per year if aged 80+ Housing Benefit disregard Duty freeze on spirits, cider, sparkling wine

The Measures £100 per year if aged 80+ £ 180m Housing Benefit disregard £ 45m Duty freeze on spirits, cider, sparkling wine £ 30m Total cost: £ 255m

Distributional Effects

Effects by family type

Measures omitted Not affecting households directly Company car tax (+£125m) Anti-VAT fraud (+£235m) Fuel duty freeze (-£300m in 2003/04) The Child Trust Fund (-£235m)

The Child Trust Fund Endowment at birth £250 / £500 Cost: £ 235million Additional contributions from family/friends Accessible at 18 No restrictions on how funds can be spent Open market competition

The Child Trust Fund: issues Full proposals in summer Further state contributions? Incentives to family/friends? Accounts by 2005

Why a Child Trust Fund? Change distribution of wealth for young adults: £ 250 to £ 600 £ 500 to £ 1200 Accurately targeted? regular testing

Why a Child Trust Fund? Change distribution of wealth for young adults Lump-sum to 18 year olds: ‘Asset effect’ Plus learn forward planning and managing financial assets Alternatives

Conclusions CTF new, will help a certain group Small set of changes to taxes / benefits

The Public Finances Christine Frayne

Changes since November PBR GDP forecast changes : 2003: 2½–3% to 2–2½% 2004: 3–3½% unchanged 2005: 2¾–3¼% to 3–3½%

Changes since November PBR Budget measures : : - £0.5bn, (+ £0.3bn with margin reset) : - £0.3bn (- £1.2bn with margin reset) : + £0.1bn (- £1.6bn with margin reset)

Meeting the golden rule? Source: HM Treasury Cyclically adjusted current budget surplus

Increase in spending £ billion Change since PBR – War contingency reserve – AME reserve (reduced CMF spending) – Social security benefits – Local authority self-financed expenditure – Higher debt interest spending

Revenue forecasts Source: HM Treasury

Change in revenue forecasts £bn Total non- discretionary changes –10.7–14–9–20 Equity prices–1–3½–5 Compliance and enforcement 02½3½44 Financial company profits –5–6–4½–1½–1 Other economic & forecasting effects –5–5½-2½01½ Source: HM Treasury

Conclusions Treasury forecasts: Golden rule to be met over current economic cycle Higher borrowing only temporary But how cautious are these forecasts? IFS Green Budget forecasts: £4bn to £11bn tax increases Additional spending pressures: Child poverty target World-class public services?

Budget 2003 Briefing Institute for Fiscal Studies