Reform budget 2010: taking the tough choices

On the model of the Canadian Government in its 1995 Budget, the Reform Budget aims to reduce around seven-eighths of the deficit through spending reductions and one-eighth through tax rises.

The key outcomes of the Reform plans on the public sector financial balance and borrowing requirement are:

Current expenditure is forecast to grow in 2010 (to 42.7 per cent of GDP), which will be £6.1 billion below existing government plans. Further, the greater fiscal consolidation means that by 2014 government current expenditure as a share of GDP is estimated to fall to 36.0 per cent of GDP by 2014.

The current public sector budget (after accounting for depreciation) would remain in deficit until 2013 but then return to surplus for the final year of the forecast period.

Under the assumption that there is no change in the plans for net government investment, total managed expenditure is forecast to fall by 8.9 percentage points, from 47.6 per cent of GDP to 38.7 per cent, between 2009 and 2014.

Based on the forecasts for government receipts and total managed expenditure, the public sector net borrowing requirement is forecast to fall from £161.1 billion in 2009 to £6.0 billion in 2014. As a percentage of GDP this represents a fall of 11.2 percentage points, from 11.5 per cent to 0.3 per cent for these years.

Under this plan the deficit would be all but eliminated by the end of the current Parliament.