Public services 'face second dose of austerity' to meet Sunak's spending cuts

Chancellor’s spending plans "even tighter than they first appeared”, IFS warns
Photo: joshua bratt / Alamy Stock Photo

By Alain Tolhurst

18 Mar 2021

New analysis of Rishi Sunak’s Budget by a leading economic think tank warns either taxes or borrowing will need to be hiked or “many public services are due a second, sharp dose of austerity”.

The Institute for Fiscal Studies said for government departments without protected funding, the “chancellor’s spending plans are even tighter than they first appeared”.

In a new briefing, the think tank said those “unprotected” departments like the Ministry of Justice, local government and the Department for Work and Pensions, will “suffer cuts of 3% in 2022−23”, which represents an 8% cut relative to pre-coronavirus plans in March 2020.

The IFS said it is “most likely these figures are simply unrealistic, and borrowing or taxes will be higher than planned. If they are adhered to, then many public services are due a second, sharp dose of austerity.”

Boris Johnson has repeatedly said the UK will not return to a period of austerity, like the one implemented after the 2008 financial crash, to repair the damage done to the economy by the pandemic.

But despite Sunak announcing the continuation of Covid-related spending and tax increases only on big business, there was criticism the economic forecasts in his Budget last month did point to a return to austerity.

“Plans can change, but as things stand, for many public services, the first half of the 2020s could feel like the austerity of the 2010s,” Ben Zaranko, research economist at the IFS, said today.

Analysis by his colleagues at the respected think tank originally said the £4bn a year cut to planned public service spending from 2022-23 buried in the Treasury’s plans would imply a real-terms cut of around 1% to departments without pre-agreed cash settlements such as those offered to the Ministry of Defence and the NHS.

But the IFS now says that “does not account for the Barnett formula” – the method used to adjust spending allocated across the UK nations – and it “is in fact more like 3% in real-terms”.

They added: “That would mean cuts for perennially-squeezed areas like the Crown Prosecution Service and the courts system, and for some such as HM Revenue and Customs and the Home Office which have sizeable post Brexit responsibilities.

“It would also mean further cuts for local government – something that would be difficult to reconcile with a coherent ‘levelling up’ agenda.

“Looking at it another way, the plans in the Budget would mean spending 8% less on ‘unprotected’ services in 2022−23 than the government was planning prior to Covid-19 – despite the extra demands and costs caused by the pandemic.”

The Treasury has been contacted for a response.

Alain Tolhurst is chief reporter for CSW's sister title PoliticsHome, where this article first appeared.

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