FAQ for Interactive cuts visualization

How much do we need to cut? Why is default set at 85 billion pounds?

The Office for Budget Responsibility pre-budget forcast [1] shows that for 2009-2011 the public sector borrowing requirement (PSBR), i.e. the annual gap between spending and taxation, reached 11.1% of GDP (chart 4.1, page 29), i.e. 156.1 billion pounds per year.

As can be seen from the figure, between 2002-03 and 2007-08 it sat around 3% of GDP, a level that is probably sustainable given a GDP growth rate of around 3%.

Much of the annual rise of the PSBR is due to the fall in tax revenues during the deep recession of 2008-2010 (chart 3.1, page 9). As we are now coming out of recession, tax revenues are rising again, however in the mean time we have built up the total national debt, which we have to pay interest on.

The debt has risen to 44% of GDP (around 600 billion pounds) at the end of 2008-09 and is projected to be 62% of GDP (around 900 billion pounds) by the end of 2010-11 (Table 4.1, p30). So, we don’t have to save 156 billion pounds each year, but we do have to do more than rely on the recovery of the economy, to get the national debt back down to a level acceptable to international markets.

How much needs to be cut?

The Institute of Fiscal Studies (IFS) suggests that spending needs to be reduced by 85 billion pounds per year by 2014-15 (p3). Its not clear how much needs to be reduced for 2010-11 (which this calculator is directed at) but 85 billion seems like a good target to have in mind.

Why Haven’t You Included Trident (AN Other Programme) in Your List?

This interactive tool focuses on cuts and tax increases that could potentially be implemented immediately (i.e. for the current tax year, 2010-11). It does not currently list cuts that would take a long time to effect spending (i.e. trident). More updates coming!

What is the source of possible cuts and tax increases? How accurate are the estimates of potential savings?

Multiple sources have been used to generate the list of possible cuts and tax increases [3-5]. For some items there is a wide variation in estimates of potential savings from different sources. We have followed Institute of Fiscal Studies numbers in most cases where available [3], however all projected savings should be regarded as estimates since it is hard to predict the effect the effect of a change: for example raising VAT may cause overall expenditure to fall, reducing the amount of extra revenue. We also thank those working on ChoporNot at Channel4 for shared their data with us [5]

Why are some increases preselected?

Any preselected items are those already planned by government. At the moment this is just the National Insurance increases announced in 2008 which are currently due to come into force for the financial year 2011-12 [6]

Why is Inheritance Tax not included in your diagram?

The Institute of Fiscal Studies (IFS) recommends in the Green Budget 2010 (Chapter 7 page 158) that “Despite the political controversy it causes, inheritance tax (IHT) raises relatively little revenue for the government (Â£2.3 billion is the estimate for 2010â€“11). Therefore, it seems unlikely that there is much scope for raising significant further sums from IHT, at least in its current guise.” There are more options in this IFS document for changed to Inheritance tax that we would like to explore in the future.