The present system for planning public expenditure in the UK places too much emphasis on short-term financial efficiency and too little on the objectives of expenditure, argued Nicholas Bosanquet at a lunchtime meeting on 11 January. The present system, he noted, was still based on the framework set by the 1961 Plowden Report, despite major changes in the nature of public expenditure. Nicholas Bosanquet is Senior Research Fellow at the Centre for Health Economics, University of York, and a Research Fellow in CEPR's Human Resources since 1900 programme.
Bosanquet advocated changes to the planning of public expenditure which could be implemented using existing data. Most importantly, expenditure should be presented on a `client group' basis for three key groups the elderly, families with children, and the unemployed. Expenditure on these groups has increased rapidly as a proportion of total public spending, from £40 to £69 billion over the period 1981/2-1986/7; during this period other public expenditure grew only from £61 to £67 billion. In the early 1960s, he argued, capital expenditures were an important component of public spending; now, long-term income support has assumed a dominant role and required a different planning mechanism. Changes in the composition of public expenditure were serving to erode government control over its spending, Bosanquet argued: expenditure on client groups increases as a result of demographic change. The client group presentation would give a clearer focus on those areas of public spending mostly not covered by cash limits where public expenditure has grown most rapidly.
Information on direct expenditure on each client group should be supplemented by data on indirect support, taking into account tax expenditures, for example, which for pensions now amount to over £9 billion. This change would shift the focus of discussions from public expenditure to the more comprehensive notion of `public initiative'. This should be combined with a closer examination of the economic and social prospects of particular age groups, which would highlight the impact of the full range of government policies. This `cohort' approach would lead to more informed discussions about government policy priorities, Bosanquet concluded, and more effective public expenditure.