April 2024 | Fair Point | abrdn Financial Fairness Trust Newsletter

30 April 2024
The pre-election edition

Like most of the country, our minds are currently focused on elections. Not so much the ones taking place on Thursday (although we are looking forward to seeing dogs at polling stations), but the general election. We are supporting the IFS to carry out a series of rigorous, evidence-based and independent analysis of key policy issues in the run up to the general election. They have already started to produce comments, reports and ideas. These have included:

Public spending – an international comparison

The UK started the 21st century with an overall budget surplus: the government raised more in revenues than it spent. It had a much smaller state in terms of tax and spend than many other comparator countries and one of the lowest levels of government debt. Since 2001, the size of the UK’s state (measured as public spending as a fraction of national income) has moved closer to the average of comparator countries. New IMF forecasts suggest that over the period since 2019 the UK will have had the biggest increase in revenues out of 37 comparator countries. Despite this, the increase in revenues since 2001 has not kept pace with the UK’s increase in spending. In other words, although the UK now looks like an “average country” in terms of how much it spends, it still raises less than an average amount in tax.

Since 2005 this has led to consistently above-average public borrowing and a massive increase in government debt that is second only to that seen in Japan. With comparatively much weaker expected growth going forward, this situation leaves the UK’s public finances in a relatively fragile position, and whoever is Chancellor after the next general election will have to make some difficult judgements. In particular, for the UK to maintain spending levels that are more average compared to other countries, it will likely need to tax more like them too.

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Inheritance tax

There are several reforms that could be enacted that would move towards closing some of the inheritance tax loopholes, make the system fairer, and raise revenues that could be used to reduce the main rate of inheritance tax or fund other tax and spending priorities.

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Public investment

What is public investment? Why does it matter? How does investment fit into the fiscal rules? Do the debts target adopted by successive governments limit their ability to borrow to invest? What do manifesto plans imply? Should we adopt a broader definition of what counts as investment? And how does the UK compare internationally?

Read the explainer here

Recent trends in and the outlook for health-related benefits

4.2 million working-age people now claim health-related benefits, this could rise by 30% by the end of the decade. Recently the Prime Minister announced plans to consult on reforms to disability benefits, following new forecasts from the Department for Work and Pensions and the Office for Budget Responsibility, indicating a substantial increase in the number of people claiming health-related benefits in the coming years. Calculations by IFS researchers suggest that there are now 4.2 million working-age individuals – one in ten – in Great Britain claiming a health-related benefit. That number could rise to 5.4 million (12.4%) by 2028–29, a rise of more than 2 million since 2019–20. The rapid increases in health-related benefits cases that began around the beginning of the pandemic are projected to continue.

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Universal Credit flaw deepens financial insecurity for working families – new research

It was meant to “make work pay,” but new research from the University of Bath Institute for Policy Research has found that Universal Credit can make working households' incomes more volatile, less secure, and less predictable.

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Funding application deadline

The next funding deadline is 3rd June 2024. If you have an idea you think we might fund, get in touch. Find out more about what we fund and read our guidelines.

ICYMI: We also have new funding available for work on climate change and household finances in the UK. Find out more.