Don’t rush into decisions on spending cuts, Hunt warned

IfG and CIPFA urge Hunt to wait on detailed plans for cuts in fiscal statement
The NHS is already experiencing a shortage of 50,000 nurses and 12,000 hospital doctors. Photo: Julian Claxton/Alamy

By Katherine Hapgood

27 Oct 2022

Jeremy Hunt should not rush to announce detailed spending cuts in his November fiscal statement because the three-week countdown does not allow enough time to evaluate the “extent and effects” cuts could have, two influential organisations have said.

The chancellor should use his statement on 17 November to set out the timetable for the “tough calls” he has said are necessary to plug a £40bn hole in the public finances, the Institute for Government and the Chartered Institute of Public Finance and Accountancy said.

After being appointed chancellor last week, Hunt warned he would need to take decisions of “eye-watering difficulty” – comments that were echoed by Rishi Sunak this week. The new prime minister said there would be “difficult decisions to come” to reach economic stability.

Delaying the announcement of detailed plans for cuts until next year’s spring statement would allow Hunt to take the appropriate time to “ensure spending plans align with the government’s priorities before setting out firmer plans at a later date”, the IfG and CIPFA said. 

IfG, a rigorous research and analytical think tank, and CIPFA, a trade group, suggested in their joint paper yesterday that the £40bn in proposed budget cuts could have negative effects on many public services.

The report assesses the extent that 2010s-style austerity measures can be applied to 2022 to accomplish the estimated £40bn in cuts the government estimates as necessary. This would be a 7.8% decrease in public services’ day-to-day operations budgets by 2026-27.

These public services are “more fragile” now than before the 2010 austerity programme due to the pandemic and previous cuts, so these budget cuts are “likely to be both more damaging and hard to deliver.”

Currently, many public services are underfunded and understaffed, with budget cuts potentially detrimental to services like the NHS, prisons, and schools. Both the NHS and schools are already facing potentially widespread pay strikes and are experiencing retention and recruitment issues, the report said. The NHS, for example, is already experiencing a shortage of 50,000 nurses and 12,000 hospital doctors. 

The report says the post-2010 approach to public sector pay restraint — not increasing pay in line with inflation— and cutting staff while expecting the same levels of work from each department is “not politically or practically viable now, particularly given the high inflation rate.”

Other options to curb spending could be counter productive or increase pressures on other services, the report said. Some of these potentially negative approaches include cutting capital spending, preventative services or lower-profile services. 

Quick cuts to funding are almost certain to create worse services with the eventual need to provide emergency funding later via an emergency cash injection. “Sustainable savings will take time and upfront capital investment, such as in equipment, software or facilities,” the IfG and CIPFA said.

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