Britain could be headed for a new era of austerity, the leading tax and spending thinktank the Institute for Fiscal Studies (IFS) said after its analysis of Rishi Sunak’s budget revealed deep cuts in spending plans for Whitehall departments and local government.
Ben Zaranko, research economist at the Institute, said: “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.” He explained, : “For departments not fortunate enough to be protected by a pre-existing agreement with the Treasury, the chancellor’s spending plans are even tighter than they first appeared. This poses clear and obvious challenges, not least because of the new pressures created by the pandemic.”
The IFS said, public service spending was now set to be roughly £14bn lower than planned pre-Covid. Of that, about £5bn came from lower spending on overseas aid. Some areas of spending – such as the NHS and schools – are ringfenced from cuts, but cash spending for unprotected departments would be £9bn lower than under pre-pandemic plans. After taking inflation into account, this would mean a real cut of 7.5% in 2022-23.
The IFS said Sunak’s plans implied cuts for “perennially squeezed” areas such as the Crown Prosecution Service and the courts system. “It would also mean further cuts for local government – something that would be difficult to reconcile with a coherent ‘levelling-up’ agenda.”