LONDON (MNI), Nov 26 – The cross-party Treasury Select Committee
has raised concerns over the government’s decision to ringfence some
areas of spending, such as health, to protect them from spending cuts.

The TSC’s report on the 2010 Spending Review warned that
ringfencing may result in the protected departments failing to make the
efficiency savings that are being urged on other departments, and it
said it could create problems for the efficient allocation of
government expenditure.

“Ringfencing may fulfil electoral promises. But ringfencing can
also lead to allocative problems across government as a whole,” the
report says

In the 2010 election, the Conservative Party pledged to ringfence
health and international aid, and it implemented these commitments when
it came to power in a coalition government.

The TSC noted that, when it took evidence from experts, “Several of
those who provided written evidence considered it wrong to ringfence
departments, such as health, which had received large real increases in
the recent past.”

It said “the Treasury should not be afraid to demand that spending
currently ringfenced in certain areas be used where the benefit is the
greatest, or where greater value for money can be obtained.”

TSC chairman Andrew Tyrie said: “There has been a great deal of
ring-fencing in the current spending review. The risk is that
ring-fencing distorts spending priorities, particularly in a radical
review such as this.”

The Spending Review set out the detailed spending cuts which will
designed to cut total public expenditure from over 47% of GDP in 2009-10
to around 41% in 2014-15.

On the politically sensitive subject of whether the Spending
Review’s impact was regressive or progressive, the TSC report said,
given the decision to make benefit cuts take more of the strain of
deficit reduction, it would have been very hard to make it progressive.

The Institute for Fiscal Studies called it “clearly regressive”
with the less well off, who rely on more on benefits, being hit harder.
The TSC report does not dispute the point.

“It would have been extremely difficult for the overall
consolidation to have been progressive,” Tyrie said.

–London newsroom: 4420 78627492; email: ukeditorial@marketnews.com

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