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Experts Say Government Plans For Public Spending Cuts Are "Laughable"

Chancellor Jeremy Hunt (Alamy)

7 min read

The "fictional" cuts to public spending that underpinned Jeremy Hunt's Spring Budget mean voters are not getting a true picture of the choices facing the next Government, experts have said.

Now that the dust has settled on this week's Spring Budget, one of the major questions facing the Rishi Sunak Government is how its plans to reduce public spending stack up.

It is a question facing Labour leader Keir Starmer and Shadow Chancellor Rachel Reeves, too, as opinion polls continue to suggest it is they who will inherit these implied cuts after the next general election.

Speaking in the House of Commons on Wednesday, the Chancellor of the Exchequer announced that the Government would reduce National Insurance contributions by a further two per cent.

Conservative strategists hope that tax cuts will improve their chances of avoiding defeat to the Labour Party when that election comes around, which is currently expected to be in the Autumn.

But within hours of Hunt finishing his speech, attention turned away from the headline Budget announcements to what could be found in small print — namely, how ministers planned to actually fund their pre-election tax cuts.

That's because the Government revealed that it would raise the money it needs by reducing day-to-day spending of unprotected departments by around 3.3 per cent every year over the course of the next Parliament; projected cuts to the public sector totalling around £19bn.

By unprotected departments we mean those to which the Government has not already made funding commitments; these include the Home Office, justice and local government. Protected departments include the NHS, defence and education. 

According to analysis by the Resolution Foundation, this implied fall in spending would amount to nearly three quarters of the cuts made in the 2010 Parliament by the David Cameron-led Government as part of its stringent austerity programme. 

As one senior Conservative put it: "If you are in an unprotected department, you are feeling pretty bleak."

The prospect of further spending cuts to areas of the public sector that are already under severe strain like prisons, courts and councils has already been widely dismissed as fictitious.

Fourteen years ago there were conversations to be had about waste, but that is not a conversation MPs are having with public bodies now.

The same Tory, a former secretary of state, made the point that the public sector is in a very different state now to what it was in 2010 when the new prime minister Cameron and the then-chancellor George Osborne decided to embark on sweeping cuts to government spending.

"Fourteen years ago there were conversations to be had about waste, but that is not a conversation MPs are having with public bodies now," they told PoliticsHome.

According to Nick Davies, Programme Director at the Institute for Government, the cuts implied in Sunak and Hunt's Spring Budget are akin to those planned by Cameron when he returned to office at the 2015 general election, but which his government then deemed "impossible to deliver".

Davies stressed that in some of unprotected areas where the implied cuts would fall, like criminal justice, demand on services is expected to rise in the coming months and years.

He told PoliticsHome: "As a result of this Government’s successful recruitment of 20,000 additional officers, it is expected that there will be more people charged with crimes, more cases to be processed by courts, and more people being sent to prison.

"The idea that you an make substantial cuts to criminal justice while demand is growing in this way is laughable."

Former Conservative MP David Gauke was Chief Secretary to the Treasury when in 2016 the Theresa May-led Tory Government recruited an additional 4,000 prison officers.

This, the former Cabinet minister explained, was after cuts to prison estate staff by the Cameron Government had contributed to prisons spiralling out of control and riots becoming more common.

"What is implied at the moment is we are going to go back to where we were in 2016, and I can tell you that was not a happy place to be," he said.

“When a Government is faced with a crisis, they find extra money.

"In reality, extra money will be found for a lot of these services, otherwise the quality will deteriorate so much that the public simply won’t accept it. That’s why they are pretty fictional.”

Labour leader Keir Starmer and Shadow Chancellor Rachel Reeves

Political commentator Sam Freedman argues we won't get a clearer idea of what Sunak and Hunt's planned cuts would mean for the public sector in practice because, as we learned this week via the Office for Budget Responsibility, the Government does not plan to hold a Spending Review prior to the next general election.

A Spending Review is when a Government sets out its spending plans in detail, usually to accompany a fiscal event. They typically take a number of months to produce so that departments have sufficient time to prepare to implement them. 

Freedman, who was formerly a policy adviser at the Department for Education, said that by not holding a Spending Review before the next general election, the Sunak administration was leaving the next Government — likely to be Labour — the very difficult task of carrying out a "truncated" Spending Review before the new spending period in April, assuming that vote takes places in the Autumn. 

This means that if Prime Minister Starmer and Chancellor Reeves agree that the planned spending cuts they inherit are not deliverable, they will not have a huge amount of time to draw up new plans.

“Even if the Government genuinely believes that these spending plans are achievable, by not holding a Spending Review until so late it is not giving the public sector enough time to plan and that is inevitably going to make like much harder for departments and an incoming Government.

"And this is all being done in the name of political expediency," he said.

However, Labour has also come in for criticism for its approach to this issue.

Paul Johnson, Director of the Institute for Fiscal Studieson Thursday told reporters that the Government and official opposition had joined "in a conspiracy of silence and not acknowledging the scale of the choices and trade offs that will face us after the election".

Fiscal responsibility has been at the heart of Labour's political strategy, with Starmer and Reeves determined to convince voters that they can be trusted to run the economy sensibly.

A part of this approach has been to mirror to Government's own fiscal rules, which dictate that debt should be on course to fall as a share of GDP in five years' time. The Labour leadership has been prepared to scale back policies like the now-defunct pledge to spend £28bn a year on green investment in the name sticking to those rules, even if it irks elements of the party.

The primacy of this principle to Labour's thinking means, however, that the party has left itself with little room for manoeuvre when it comes to spending — and now even less room after Sunak and Hunt used the Spring Budget to essentially copy Labour policies of scrapping non-dom tax brakes and extending the windfall tax on energy giants to fund their own plans.

“They [Labour] are a little bit trapped because the Tories want to run a campaign saying Labour want to tax and borrow more, and Reeves is determined to not create that opportunity," said Gauke. "But I'm afraid that in the end a future Government will spend more and that means taxes will go up, and that will be a difficult moment — especially for a Labour government."

Labour also has public opinion on the matter to consider, too. While economic competence has historically been the party's Achilles heel, opinion polls show there is a clear public appetite for more funding for public services, not less. 

“The public all be squeamish about further cuts to the public sector," said Scarlett Maguire, Director at JL Partners Polls. "When people in focus groups say Britain is broken, that mainly comes from their interaction with the public sector, especially the NHS.” 

Johnson from the IFS said any Government that decides to stick with the implied cuts set out by Hunt this week would need need to make "some staggeringly hard choices".

“One only has to look at the scale of NHS waiting lists, the number of local authorities in near bankruptcy, backlogs in the justice system, the long term cuts to university funding, the struggles of the social care system to wonder where these cuts will really credibly come from," he said.

But voters will likely to have to wait a while to find out what choices will be taken.

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