A catalogue record for this publication is available from the British Library. All rights reserve... more A catalogue record for this publication is available from the British Library. All rights reserved. Reproduction, copy, transmission, or translation of any part of this publication may be made only under the following conditions: • with the prior permission of the publisher; or • with a licence from the Copyright Licensing Agency Ltd.,
Abstract: This paper investigates empirically whether large expenditure cuts and revenue rises th... more Abstract: This paper investigates empirically whether large expenditure cuts and revenue rises that were the result of deliberate political efforts towards being austere had an impact on electoral outcomes in the UK using data from 1900 to 2015. The main electoral outcomes considered are the change in ruling party ideology and the margin of victory faced by the incumbent at the general election, in terms of seats secured. The paper finds that large cuts in spending and large rises in revenue significantly increases the chance of a government changing. However, the loss in seats were significantly higher for the incumbent compared to the winning partly only when large spending cuts were pursued rather than revenue increases during the incumbent's tenure in office. We also find that voters are sensitive to particular types of spending cuts, such as cuts in social security. These results are contrary to those in Alesina et.al (2013) using OECD data for 19 countries from 1975-2008, ...
This volume identifies and compares 'fiscal squeezes' (major efforts to cut public spendi... more This volume identifies and compares 'fiscal squeezes' (major efforts to cut public spending and/or raise taxes) in the UK over a century from 1900 to 2015. The authors examine how different the politics of fiscal squeeze and austerity is today from what it was a century ago, how (if at all) fiscal squeezes reshaped the state and the provision of public services, and how political credit and blame played out after austerity episodes. The analysis is both quantitative and qualitative, starting with reported financial outcomes from historical statistics and then going behind those numbers to explore the political choices and processes in play. This analysis identifies some patterns that have not been explained or even recognized in earlier works on retrenchment and austerity. For example, it identifies a long term shift from what it terms a 'surgery without anaesthetics' approach (deep but short-lived episodes of spending restraint or tax increases) in the earlier part ...
An increasingly common trend in developed countries and middle income countries such as Thailand,... more An increasingly common trend in developed countries and middle income countries such as Thailand, South Africa, Malaysia, Indonesia and Sri Lanka is that females outperform males in terms of attainment at school and enrollment in higher education, on average. Surprisingly, in countries such as Sri Lanka and Thailand, households also seem to allocate significantly higher resources towards girls’ education rather than boys’ (Himaz, 2010; Wongmonta & Glewwe, 2017). This paper looks at attainment in mathematics among a sample of 12 year olds in Sri Lanka and uses decomposition analysis to see to what extent parental aspirations and teacher attitudes, inter alia, can explain gender differentials disfavoring boys. The paper finds that although teacher attitudes and parental aspirations are significantly lower for boys, these factors -as we measure them- do not sufficiently explain the attainment gap. Much of the gap remains ‘unexplained’ and is due to differences in returns to endowments....
This paper looks at the impact of education on household economic welfare in Sri Lanka over twent... more This paper looks at the impact of education on household economic welfare in Sri Lanka over twenty years from 1985 to 2006 using five cross section household survey datasets. Applying quantile regression techniques the analysis finds that the incremental value to household welfare shows a distinct jump for an extra year of education at levels where important national examinations are completed. Moreover, higher quantiles systematically enjoy greater incremental welfare to education levels between Grade 8 to completed Advanced level examinations. Both these effects happen partly via the labour market, as labour market returns to employment display similar trends. The first finding suggests that credentials are important in the labour market. The second finding suggests that individuals in the upper quantiles probably have better quality education as well as social and analytical skills that complement formal education, enabling them to earn higher returns for their education.
This paper asks whether there is a boy bias in household-level education expenditure for househol... more This paper asks whether there is a boy bias in household-level education expenditure for households with children aged 5-19 years of age in Andhra Pradesh in India, based on round 2 of the Young Lives survey conducted in 2006. The sample contains 982 households comprising 2578 children. The analysis is based on both demand analysis and a hurdle model. The results show that there is a bias favouring boys in terms of school enrolment as the children get older, captured by age categories 10-14 and 15-19. There is also a bias favouring boys in household education expenditure allocation, given positive expenditure, when children are between 10-14 years of age, driven mainly by extra tuition fees. Quite notably, once the households have decided to educate a child beyond the upper-primary level (i.e., beyond grade 8), there is no gender based expenditure bias and an equal proportion of boys and girls are sent to private school that provides better quality education.
This report contains initial findings of the Young Lives survey (round 2)using quantitative metho... more This report contains initial findings of the Young Lives survey (round 2)using quantitative methods, for Andhra Pradesh India. The survey was carried out in 2006/7 and has a sample of 3000 children spread across 2 cohorts. Young Lives is an international longitudinal study funded mainly by the DFID (UK), aiming to understand the causes and consequences of childhood poverty.
This chapter draws on historical statistics reporting financial outcomes for spending, taxation, ... more This chapter draws on historical statistics reporting financial outcomes for spending, taxation, debt, and deficit for the UK over a century to (a) identify quantitatively and compare the main fiscal squeeze episodes (i.e. major revenue increases, spending cuts, or both) in terms of type (soft squeezes and hard squeezes, spending squeezes, and revenue squeezes), depth, and length; (b) compare these periods of austerity against measures of fiscal consolidation in terms of deficit reduction; and (c) identify economic and financial conditions before and after the various squeezes. It explores the extent to which the identification of squeeze episodes and their classification is sensitive to which thresholds are set and what data sources are used. The chapter identifies major changes over time that emerge from this analysis over the changing depth and types of squeeze.
This chapter describes the long 2010–15 fiscal squeeze under the first Conservative–Liberal coali... more This chapter describes the long 2010–15 fiscal squeeze under the first Conservative–Liberal coalition since the early 1920s, in the aftermath of the 2008 global financial crisis and with debt and deficit at levels not seen for four decades or more. It included sharp political debate over timing, depth, and tax/spending balance of fiscal squeeze, with most of the coalition squeeze based on its Labour predecessor’s plans, and the deficit reduction outcome roughly the same as those Labour plans, principally because of shortfall on the revenue side. This episode was marked by a repeat of ‘bear trap’ tactics by the incumbents, and the post-squeeze 2015 election rewarded one party in the coalition, while the other party was heavily punished and so was the Labour Opposition. How far the victory of ‘Vote Leave’ (Brexit) in the 2016 referendum on UK membership of the EU can be attributed to fiscal squeeze is debatable.
This chapter explores fiscal squeeze under the World War II coalition government, comprising a se... more This chapter explores fiscal squeeze under the World War II coalition government, comprising a severe tax squeeze (including the development of mass income taxation and confiscatory top tax rates) with major cuts in civilian services together with soaring defence spending and a command economy, and the fiscal squeeze under the Attlee Labour Government elected by a landslide in 1945. The latter squeeze, taking place against the backdrop of currency crisis, massive overseas debt, and early steps towards a post-war mixed economy, comprised a continuation of high wartime levels of taxation with huge cuts in defence spending and, later, attempts to check the growth of spending in civilian public services (including the fledgling National Health Service) which led to a further split in the Labour Party, and growing electoral challenge from the Conservatives calling for spending cuts to fund lower taxes.
This chapter describes fiscal squeeze in the early 1930s against the backdrop of global financial... more This chapter describes fiscal squeeze in the early 1930s against the backdrop of global financial crisis and the Great Depression—fiscal squeeze less severe on financial outcomes data than the 1920s but with more dramatic political consequences. This episode comprises a hard revenue squeeze initiated by the UK’s second Labour Government in 1930 and an expert committee (the May Committee) to recommend spending cuts, followed after the collapse of that government by a hard expenditure squeeze under a ‘National’ Government. This episode includes constitutional crisis (with the formation of an emergency coalition government without an election to pursue fiscal squeeze), a naval mutiny sparked by pay cuts that forced the currency off the gold standard, a split in the Labour Party which reverberated for decades, and the greatest electoral victory in modern British history for a coalition government that had just enacted significant spending cuts, including reductions in unemployment benefit.
This chapter describes fiscal squeeze in an era of high political volatility and major economic c... more This chapter describes fiscal squeeze in an era of high political volatility and major economic challenges, including mass unemployment, a sharp increase in oil prices, double-digit inflation (i.e. a period of ‘stagflation’), and high levels of trade union militancy. The most dramatic period during the episode occurred in 1976, involving a split Labour Government under two different leaders, with a leadership election following a sudden prime ministerial resignation. That government pursued fiscal squeeze against the background of a deep currency crisis and bailout deals with outside lenders (the US Government and the IMF). The squeeze episode also led to some important institutional developments, producing the first major privatization since the 1950s and a new system of controlling public spending through ‘cash limits’.
This chapter discusses and defines fiscal squeeze, explains why fiscal squeeze and austerity is i... more This chapter discusses and defines fiscal squeeze, explains why fiscal squeeze and austerity is important and intriguing, sets out a way to identify, classify, and measure fiscal squeezes, and shows what can be learnt from exploring a single case, that of the UK, over a century. It reviews relevant literature and identifies three key political choices in fiscal squeeze: (a) tax hikes versus spending cuts; (b) depth versus length of squeezes (‘surgery without anaesthetics’ or ‘boiling frogs’); (c) how to handle the blame and the tactic of ‘heresthetic’. It develops the analytic approach pursued in the book, combining quantitative and qualitative analysis and focusing the latter on loss imposition, political cost to incumbents, and state effort in fiscal squeeze.
This chapter describes a long-drawn-out fiscal squeeze in the 1990s against the background of ano... more This chapter describes a long-drawn-out fiscal squeeze in the 1990s against the background of another sharp recession triggered by financial crisis. This episode spans the reigns of a divided Conservative Government which was unexpectedly re-elected in the 1992 election after changing its leader following a major tax revolt, but nevertheless succeeded in restraining public spending growth relative to growing GDP, and the early years of the succeeding ‘New Labour’ Government led by Tony Blair after a landslide victory in the 1997 election. The episode is notable for post-election tax hikes by both governments and for the fact that spending restraint plans announced by one government were followed by its successor for the first time since the 1920s—following a so-called ‘bear trap’ approach by the Conservatives, of announcing spending targets beyond their electoral term and challenging their political opponents to either accept those targets or face charges of planning a ‘tax bombshell’.
This chapter describes four fiscal squeezes across two decades marked by broadly full employment ... more This chapter describes four fiscal squeezes across two decades marked by broadly full employment and no major recession, albeit with slow economic growth, recurring currency crises, and ‘stop-go’ policies to dampen consumer demand. The first squeeze in the mid-1950s reflected the Conservatives’ uphill struggle to deliver on their 1951 election promise to cut taxes and ‘set the people free’ against the background of currency weakness and the Korean and Cold Wars. Spending restraint in this era put the emphasis on cutting wartime legacy spending rather than checking the core drivers of welfare state growth. The subsequent three squeezes under Conservative and Labour Governments in the 1960s all put a heavier emphasis on revenue than spending to support welfare state expenditure and stabilize the currency, but the Wilson Labour Government made significant defence cuts in the late 1960s.
This chapter describes two fiscal squeezes under the Conservative majority-party governments led ... more This chapter describes two fiscal squeezes under the Conservative majority-party governments led by Margaret Thatcher in the 1980s. The first comprised a hard post-election squeeze on revenue in the middle of a major recession and mass unemployment, beginning with an abrupt hike in VAT rates in 1979 and severe tax rises in the 1981 budget. The second comprised a strategy of holding down spending increases that led to public expenditure falling relative to GDP (but not in constant price terms) over an extended period as recession was followed by economic recovery from 1983. These periods of squeeze took place in an era of deep polarization between the two main parties and bitter industrial unrest and were fuelled to a considerable extent by sharply increasing North Sea oil revenue and widespread asset sales in the form of privatization of state-owned enterprises that counted as negative expenditure.
A catalogue record for this publication is available from the British Library. All rights reserve... more A catalogue record for this publication is available from the British Library. All rights reserved. Reproduction, copy, transmission, or translation of any part of this publication may be made only under the following conditions: • with the prior permission of the publisher; or • with a licence from the Copyright Licensing Agency Ltd.,
Abstract: This paper investigates empirically whether large expenditure cuts and revenue rises th... more Abstract: This paper investigates empirically whether large expenditure cuts and revenue rises that were the result of deliberate political efforts towards being austere had an impact on electoral outcomes in the UK using data from 1900 to 2015. The main electoral outcomes considered are the change in ruling party ideology and the margin of victory faced by the incumbent at the general election, in terms of seats secured. The paper finds that large cuts in spending and large rises in revenue significantly increases the chance of a government changing. However, the loss in seats were significantly higher for the incumbent compared to the winning partly only when large spending cuts were pursued rather than revenue increases during the incumbent's tenure in office. We also find that voters are sensitive to particular types of spending cuts, such as cuts in social security. These results are contrary to those in Alesina et.al (2013) using OECD data for 19 countries from 1975-2008, ...
This volume identifies and compares 'fiscal squeezes' (major efforts to cut public spendi... more This volume identifies and compares 'fiscal squeezes' (major efforts to cut public spending and/or raise taxes) in the UK over a century from 1900 to 2015. The authors examine how different the politics of fiscal squeeze and austerity is today from what it was a century ago, how (if at all) fiscal squeezes reshaped the state and the provision of public services, and how political credit and blame played out after austerity episodes. The analysis is both quantitative and qualitative, starting with reported financial outcomes from historical statistics and then going behind those numbers to explore the political choices and processes in play. This analysis identifies some patterns that have not been explained or even recognized in earlier works on retrenchment and austerity. For example, it identifies a long term shift from what it terms a 'surgery without anaesthetics' approach (deep but short-lived episodes of spending restraint or tax increases) in the earlier part ...
An increasingly common trend in developed countries and middle income countries such as Thailand,... more An increasingly common trend in developed countries and middle income countries such as Thailand, South Africa, Malaysia, Indonesia and Sri Lanka is that females outperform males in terms of attainment at school and enrollment in higher education, on average. Surprisingly, in countries such as Sri Lanka and Thailand, households also seem to allocate significantly higher resources towards girls’ education rather than boys’ (Himaz, 2010; Wongmonta & Glewwe, 2017). This paper looks at attainment in mathematics among a sample of 12 year olds in Sri Lanka and uses decomposition analysis to see to what extent parental aspirations and teacher attitudes, inter alia, can explain gender differentials disfavoring boys. The paper finds that although teacher attitudes and parental aspirations are significantly lower for boys, these factors -as we measure them- do not sufficiently explain the attainment gap. Much of the gap remains ‘unexplained’ and is due to differences in returns to endowments....
This paper looks at the impact of education on household economic welfare in Sri Lanka over twent... more This paper looks at the impact of education on household economic welfare in Sri Lanka over twenty years from 1985 to 2006 using five cross section household survey datasets. Applying quantile regression techniques the analysis finds that the incremental value to household welfare shows a distinct jump for an extra year of education at levels where important national examinations are completed. Moreover, higher quantiles systematically enjoy greater incremental welfare to education levels between Grade 8 to completed Advanced level examinations. Both these effects happen partly via the labour market, as labour market returns to employment display similar trends. The first finding suggests that credentials are important in the labour market. The second finding suggests that individuals in the upper quantiles probably have better quality education as well as social and analytical skills that complement formal education, enabling them to earn higher returns for their education.
This paper asks whether there is a boy bias in household-level education expenditure for househol... more This paper asks whether there is a boy bias in household-level education expenditure for households with children aged 5-19 years of age in Andhra Pradesh in India, based on round 2 of the Young Lives survey conducted in 2006. The sample contains 982 households comprising 2578 children. The analysis is based on both demand analysis and a hurdle model. The results show that there is a bias favouring boys in terms of school enrolment as the children get older, captured by age categories 10-14 and 15-19. There is also a bias favouring boys in household education expenditure allocation, given positive expenditure, when children are between 10-14 years of age, driven mainly by extra tuition fees. Quite notably, once the households have decided to educate a child beyond the upper-primary level (i.e., beyond grade 8), there is no gender based expenditure bias and an equal proportion of boys and girls are sent to private school that provides better quality education.
This report contains initial findings of the Young Lives survey (round 2)using quantitative metho... more This report contains initial findings of the Young Lives survey (round 2)using quantitative methods, for Andhra Pradesh India. The survey was carried out in 2006/7 and has a sample of 3000 children spread across 2 cohorts. Young Lives is an international longitudinal study funded mainly by the DFID (UK), aiming to understand the causes and consequences of childhood poverty.
This chapter draws on historical statistics reporting financial outcomes for spending, taxation, ... more This chapter draws on historical statistics reporting financial outcomes for spending, taxation, debt, and deficit for the UK over a century to (a) identify quantitatively and compare the main fiscal squeeze episodes (i.e. major revenue increases, spending cuts, or both) in terms of type (soft squeezes and hard squeezes, spending squeezes, and revenue squeezes), depth, and length; (b) compare these periods of austerity against measures of fiscal consolidation in terms of deficit reduction; and (c) identify economic and financial conditions before and after the various squeezes. It explores the extent to which the identification of squeeze episodes and their classification is sensitive to which thresholds are set and what data sources are used. The chapter identifies major changes over time that emerge from this analysis over the changing depth and types of squeeze.
This chapter describes the long 2010–15 fiscal squeeze under the first Conservative–Liberal coali... more This chapter describes the long 2010–15 fiscal squeeze under the first Conservative–Liberal coalition since the early 1920s, in the aftermath of the 2008 global financial crisis and with debt and deficit at levels not seen for four decades or more. It included sharp political debate over timing, depth, and tax/spending balance of fiscal squeeze, with most of the coalition squeeze based on its Labour predecessor’s plans, and the deficit reduction outcome roughly the same as those Labour plans, principally because of shortfall on the revenue side. This episode was marked by a repeat of ‘bear trap’ tactics by the incumbents, and the post-squeeze 2015 election rewarded one party in the coalition, while the other party was heavily punished and so was the Labour Opposition. How far the victory of ‘Vote Leave’ (Brexit) in the 2016 referendum on UK membership of the EU can be attributed to fiscal squeeze is debatable.
This chapter explores fiscal squeeze under the World War II coalition government, comprising a se... more This chapter explores fiscal squeeze under the World War II coalition government, comprising a severe tax squeeze (including the development of mass income taxation and confiscatory top tax rates) with major cuts in civilian services together with soaring defence spending and a command economy, and the fiscal squeeze under the Attlee Labour Government elected by a landslide in 1945. The latter squeeze, taking place against the backdrop of currency crisis, massive overseas debt, and early steps towards a post-war mixed economy, comprised a continuation of high wartime levels of taxation with huge cuts in defence spending and, later, attempts to check the growth of spending in civilian public services (including the fledgling National Health Service) which led to a further split in the Labour Party, and growing electoral challenge from the Conservatives calling for spending cuts to fund lower taxes.
This chapter describes fiscal squeeze in the early 1930s against the backdrop of global financial... more This chapter describes fiscal squeeze in the early 1930s against the backdrop of global financial crisis and the Great Depression—fiscal squeeze less severe on financial outcomes data than the 1920s but with more dramatic political consequences. This episode comprises a hard revenue squeeze initiated by the UK’s second Labour Government in 1930 and an expert committee (the May Committee) to recommend spending cuts, followed after the collapse of that government by a hard expenditure squeeze under a ‘National’ Government. This episode includes constitutional crisis (with the formation of an emergency coalition government without an election to pursue fiscal squeeze), a naval mutiny sparked by pay cuts that forced the currency off the gold standard, a split in the Labour Party which reverberated for decades, and the greatest electoral victory in modern British history for a coalition government that had just enacted significant spending cuts, including reductions in unemployment benefit.
This chapter describes fiscal squeeze in an era of high political volatility and major economic c... more This chapter describes fiscal squeeze in an era of high political volatility and major economic challenges, including mass unemployment, a sharp increase in oil prices, double-digit inflation (i.e. a period of ‘stagflation’), and high levels of trade union militancy. The most dramatic period during the episode occurred in 1976, involving a split Labour Government under two different leaders, with a leadership election following a sudden prime ministerial resignation. That government pursued fiscal squeeze against the background of a deep currency crisis and bailout deals with outside lenders (the US Government and the IMF). The squeeze episode also led to some important institutional developments, producing the first major privatization since the 1950s and a new system of controlling public spending through ‘cash limits’.
This chapter discusses and defines fiscal squeeze, explains why fiscal squeeze and austerity is i... more This chapter discusses and defines fiscal squeeze, explains why fiscal squeeze and austerity is important and intriguing, sets out a way to identify, classify, and measure fiscal squeezes, and shows what can be learnt from exploring a single case, that of the UK, over a century. It reviews relevant literature and identifies three key political choices in fiscal squeeze: (a) tax hikes versus spending cuts; (b) depth versus length of squeezes (‘surgery without anaesthetics’ or ‘boiling frogs’); (c) how to handle the blame and the tactic of ‘heresthetic’. It develops the analytic approach pursued in the book, combining quantitative and qualitative analysis and focusing the latter on loss imposition, political cost to incumbents, and state effort in fiscal squeeze.
This chapter describes a long-drawn-out fiscal squeeze in the 1990s against the background of ano... more This chapter describes a long-drawn-out fiscal squeeze in the 1990s against the background of another sharp recession triggered by financial crisis. This episode spans the reigns of a divided Conservative Government which was unexpectedly re-elected in the 1992 election after changing its leader following a major tax revolt, but nevertheless succeeded in restraining public spending growth relative to growing GDP, and the early years of the succeeding ‘New Labour’ Government led by Tony Blair after a landslide victory in the 1997 election. The episode is notable for post-election tax hikes by both governments and for the fact that spending restraint plans announced by one government were followed by its successor for the first time since the 1920s—following a so-called ‘bear trap’ approach by the Conservatives, of announcing spending targets beyond their electoral term and challenging their political opponents to either accept those targets or face charges of planning a ‘tax bombshell’.
This chapter describes four fiscal squeezes across two decades marked by broadly full employment ... more This chapter describes four fiscal squeezes across two decades marked by broadly full employment and no major recession, albeit with slow economic growth, recurring currency crises, and ‘stop-go’ policies to dampen consumer demand. The first squeeze in the mid-1950s reflected the Conservatives’ uphill struggle to deliver on their 1951 election promise to cut taxes and ‘set the people free’ against the background of currency weakness and the Korean and Cold Wars. Spending restraint in this era put the emphasis on cutting wartime legacy spending rather than checking the core drivers of welfare state growth. The subsequent three squeezes under Conservative and Labour Governments in the 1960s all put a heavier emphasis on revenue than spending to support welfare state expenditure and stabilize the currency, but the Wilson Labour Government made significant defence cuts in the late 1960s.
This chapter describes two fiscal squeezes under the Conservative majority-party governments led ... more This chapter describes two fiscal squeezes under the Conservative majority-party governments led by Margaret Thatcher in the 1980s. The first comprised a hard post-election squeeze on revenue in the middle of a major recession and mass unemployment, beginning with an abrupt hike in VAT rates in 1979 and severe tax rises in the 1981 budget. The second comprised a strategy of holding down spending increases that led to public expenditure falling relative to GDP (but not in constant price terms) over an extended period as recession was followed by economic recovery from 1983. These periods of squeeze took place in an era of deep polarization between the two main parties and bitter industrial unrest and were fuelled to a considerable extent by sharply increasing North Sea oil revenue and widespread asset sales in the form of privatization of state-owned enterprises that counted as negative expenditure.
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