Spring Budget: Little change to spending plans as departments continue to face significant real-terms cuts

Jeremy Hunt also says that the next spending review will “prioritise” proposals that pay for themselves with cash savings within five years
Jeremy Hunt holds his ministerial box as he leaves 11 Downing Street to deliver the government's Spring Budget. Photo: Simon Dawson/No.10

By Tevye Markson

06 Mar 2024

There will be little change to departments’ budgets, with only the NHS getting extra funding, the chancellor announced at today’s Spring Budget.

This means most departments continue to face significant real-terms cuts to their spending power in the coming years. The Institute for Fiscal Studies warned in October, following the Autumn Statement, that departments were facing spending cuts of around 3.4% per year. At the same time the Resolution Foundation think tank predicted unprotected departments’ spending power would fall by around 16% in real terms between 2022-23 and 2027-28.

Jeremy Hunt also announced that the next spending review will “prioritise” proposals that pay for themselves with cash savings within five years. In SR21, the Treasury set multi-year budgets for departments, “encouraging” them to achieve savings of approximately 5% on their “day-to-day” budgets by 2024–25.

The chancellor also announced the launch of the Treasury’s “landmark” public sector productivity plan “for long-term growth”, which was trailed ahead of the budget. The productivity plan will include 3.4bn for the NHS and £800m for boosting productivity across other public services.

Outling his plan for departmental budgets, Hunt told the House of Commons: “In Autumn 2022 I set day-to-day spending to increase by 1% a year in real terms over the next parliament. Some say that's not enough, and we should raise spending by more. Other say it's too much and we should cut it to improve efficiency. Neither are right. it's not fair to ask taxpayers to pay for more when public service productivity has fallen, nor would it be wise to reduce that funding given the pressures public services face. So I'm keeping the planned growth in day-to-day spending at 1% in real terms, but we are going to spend it better.”

Hunt announced an extra £2.5bn day-to-day funding for NHS in 2024/25 alongside the £3.4bn in capital funding over an unspecified period aimed at improving the productivity of heath services.

He also said military spending will rise to 2.5% of GDP “as soon as economic conditions allow”. It is currently at 2% of GDP.

Responding to the 2024 Spring Budget, the Office for Budget Responsibility said it now expects real department spending until 2026-27 to be 8% lower per person than it would be if Treasury had stuck to plans set out at Spending Review 2021.

It also said the government has still not set out detailed plans beyond March next year for how much spending restraint will needed to be delivered to meet commitments to growing spending on several major services including health, defence and overseas aid in line with or faster than GDP.

‘Civil servants can’t keep doing more with less’: Unions slam lack of investment in public services

Civil service unions warned the chancellor’s approach to public spending would have grave consequences.

FDA general secretary Dave Penman said: “The chancellor’s failure to properly invest in public services is a false economy. Decimating services to prioritise politically motivated tax cuts is not the right approach.”

Penman said strategic investment can deliver greater revenue for the Treasury.

“The government has historically received a return of at least £6.30 for every £1 invested in HMRC compliance, yet over the last 12 months we’ve seen a reduction in staff headcount,” he said. “HMRC today has 6,000 fewer employees than back in 2011, yet the number of taxpayers has increased by more than 16% during that same period.

“Civil servants can’t keep doing more with less – the best way to genuinely increase productivity and ultimately deliver better public services is to invest in the people delivering those services.”

Mike Clancy, General Secretary of Prospect, said Hunt had got the balance between having the right levels of tax and spend “clearly wrong”.

“The majority of the public would rather see increased spending to revive our flagging public services rather than tax cuts and real terms cuts to services we can ill-afford,” he said.

“It seems the government is intent on playing cynical games and making unsustainable decisions in an attempt to prevent a wipe out at the next election. Whilst they are taking a more reasonable approach to business investment, this does little to make up for the inexplicable lack of a coherent industrial strategy. The country is crying out for a proper plan for growth that will deliver quality jobs, and ease the transition to a low carbon economy. Nothing in this budget suggests that plan exists.”

PCS general secretary Fran Heathcote said the government has "once again failed to deliver".

“Jeremy Hunt say he wants to ‘make work pay’, but yet again he is failing to make this a reality for the government’s own workforce. It should be a matter of shame for a government employer that the civil service has become a minimum wage employer," she said. 

“When the largest government department, the DWP, admits that it is understaffed, by as much as 10 per cent in its job centre network, but is falling well short of its recruitment targets; when the Cabinet Office permanent secretary says that pay is a common factor in failed recruitment campaigns and that low pay is a chronic problem; these should have been wake up calls for the government to take urgent action, but once again they have failed to deliver.

“What we don’t need is a return to austerity. No amount of pre-election tax gimmickry can make up for 14 years of underinvestment in our public services and the public servants that increasingly struggle to deliver them. Our members and the wider public deserve better.”

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