ICAEW chart of the week: Fiscal interventions

10 July: Fiscal interventions reach £190bn as the Chancellor Rishi Sunak pours even more money into the economy in an attempt to keep it from stalling.

Components of £190bn in fiscal interventions - as set out in text below.

The Chancellor’s summer statement is the subject of this week’s #icaewchartoftheweek, with the £30bn ‘plan for jobs’ being the latest in a series of fiscal interventions in response to the coronavirus pandemic.
 
The measures announced included £9bn for a £1,000 job retention bonus for furloughed workers, £4bn for work placements and boosting work searching, skills training and apprenticeships, a £5bn boost for the hospitality and leisure industries in the form of a cut in VAT and discounts on eating out, and £12bn in economic stimulus. The latter includes over £5bn on infrastructure projects (as announced by the Prime Minister last week), £3bn to make homes energy-efficient and £4bn for a temporary cut in SDLT on housing sales under £500,000.
 
This brings the total amount of fiscal interventions to £190bn or around 9% of GDP, once an extra £33bn in spending on health and other public services is incorporated. This was also ‘announced’ yesterday, albeit by means of a small footnote buried inside one of the accompanying documents!
 
As a consequence, the fiscal interventions can be broadly split between £77bn being spent on supporting household incomes (£54bn on the furlough scheme, £15bn on the self-employed income support scheme and £8bn on universal credit), £30bn to support businesses (£13bn in business rates and other tax reliefs and £17bn in grants and other support), £53bn for public services and other (£39bn on health and social care and £14bn on public services and other spending), and £30bn in economic stimulus through the ‘plan for jobs’.
 
Businesses have also benefited from support with their cashflows through the deferral of £50bn in tax payments and £73bn of loans and guarantees.
 
This is not the end of the story for fiscal interventions. Not only are there are a number of sectors such as local government, universities, and manufacturing where rescue packages may be needed, but the Chancellor made clear that this announcement only covered the second of a three-phase response.
 
The third phase – rebuilding the economy – will be set out later in the year. How much additional money will be involved is anyone’s guess.

This article was originally published by ICAEW.

ICAEW chart of the month: Cabinet government

26 June: The prime minister has announced a reduction in the number of government departments. How big is the cabinet compared to the rest of the world?

The news that the UK Government is reducing the number of government departments by one prompts the #icaewchartofthemonth to take a look at the size of government executives across the world.
 
As the chart highlights, with 26 members, the UK cabinet is one of the largest amongst major economies – comprising the prime minister Boris Johnson, 21 department ministers and four ‘ministers attending cabinet’. This does not include the Cabinet Secretary or other officials, meaning that cabinet meetings generally involve more than 30 people in total.
 
Compare that with the more compact 16-member German federal cabinet (Chancellor Angela Merkel and 15 departmental ministers) and the ten-member Chinese state council executive (comprising the premier Li Keqiang, five vice-premiers and four other senior departmental ministers).
 
It is certainly much larger than FTSE-100 company boards, where the average size is 11, and very few listed companies have more than 16 board members.
 
There is some debate around whether reducing the size of the UK cabinet would be more conducive to effective government. Some suggestions that the merger of the Department for International Development (DfID) with the Foreign & Commonwealth Office (FCO) to form the new Foreign, Commonwealth & Development Office (FCDO) in September is the first step on the way to that goal – with further mergers possible. However, although there will be one fewer departmental minister, there is a reasonable prospect of the minister responsible for development at the FCDO being invited to attend cabinet given its importance to the government’s global agenda.
 
Of course, merging departments is not the only way to achieve a slimmer cabinet – for example, the 31-member Russian cabinet (not shown in the chart) rarely meets as one body. Instead, there are regular meetings of the 10-strong prime ministerial group (the prime minister Mikhail Mishustin and nine deputy prime ministers) and occasional meetings of the 20-strong cabinet praesidium that includes the most senior ministers as well.
 
The UK Cabinet also works in this way to a certain extent, with critical decisions often being made in smaller groupings of senior ministers, such as the 9-member National Security Council, the 9-member Climate Change Committee or the 12-strong EU Exit Operations Committee for example. Canada, with its 37-member cabinet, also operates through a series of cabinet committees ranging from around 8 to 15 members. However, in both cases, the full cabinet still meets regularly and remains the formal executive body for authorising government actions.
 
With rumours of a cabinet reshuffle in the UK this autumn, it will be interesting to see whether moves to reduce the size of the cabinet will actually take place or whether we will see further development of cabinet committees as the places to be ‘in the room where it happens’.

This chart of the month was originally published by ICAEW.