Budget 2003:Chancellor Stands By Spending Plans

Chancellor Gordon Brown this week reaffirmed public spending plans due to deliver 7.2% growth in NHS spending over the next five years, including unprecedented investment in healthcare IT.

Delivering the 2003 Budget, he told the Commons, “We have not been, and will not be, diverted from increasing investment on our health and public services at a faster rate than in any post war period.”

The Chancellor said that difficult decisions made earlier had resulted in low debt which enabled him to allocate £3bn to fund the war in Iraq, make provision for humanitarian aid and pay for enhanced security in the UK.

The overwhelming verdict from analysts and commentators was, however, that the Chancellor was taking a bit of a gamble. The Institute for Fiscal Studies (IFS) struck a typically sceptical note. It said, “Weak economic growth and the costs of war dealt an unexpected blow to the government’s finances, but hope in the Treasury clearly springs eternal.

"The Chancellor dismissed the arguments of those like the IFS, who believe that his revenue forecasts over the medium term are probably too optimistic even if the economy performs as he hopes. He may be right, but if not the resulting hole in the public finances could become much harder to ignore by the time the government has to call the next election.”

Commenting on the Chancellor’s bullish view of future economic growth, Ed Crooks of the Financial Times wrote, “Mr Brown may turn out to be right: forecasting is an art not a science, and the margins of error are wide.
If he is wrong, then he will face the embarrassment of inaccurate prediction without even the excuse that everyone else was equally misguided, and he may be forced to raise taxes to keep borrowing under control with a general election looming.”

Meanwhile, in the small print of the full Budget Report the Treasury announced that Derek Wanless, author of a report on healthcare funding published last year, has been commissioned to provide a progress report in its implementation early next year.

The Wanless Report laid great emphasis on the need to increase spending on healthcare IT over the next five years in order to lift the UK’s health services up to modern European standards. The report’s “fully engaged” scenario adopted by the government envisaged heavy spending in the early part of the next five years.

The Budget Report announcement said, “Derek Wanless, against a background of progress made, and given the public expenditure implications after 2008, will provide an update of the long term challenges in implementing the ‘fully engaged’ scenario set out in his report on long-term health trends – with a particular focus on cross-departmental work on preventative health and health inequalities.”