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Government Accused Of Masking Long-Term Cuts And £50bn Tax Hike With Short-Term Covid Spending In Budget

Government Accused Of Masking Long-Term Cuts And £50bn Tax Hike With Short-Term Covid Spending In Budget

Rishi Sunak's Budget hid a £4bn cut to public spending according to the Institute for Fiscal Studies (Alamy)

4 min read

A leading economic think tank has said Rishi Sunak’s spending plans “don’t look deliverable, at least not without considerable pain”, in a damning criticism of his Budget forecasts.

The Institute for Fiscal Studies (IFS) said once the short-term funding boost to deal with the pandemic wears off, the Chancellor's “medium-term spending plans simply look implausibly low”. 

IFS director Paul Johnson described what he viewed as "a tale of two Budgets” in a scathing assessment this morning. 

“By the end of the forecast period we are looking at a fiscal tightening of over £30billion relative to previous plans," Johnson said. 

“Take account of the cuts to planned spending announced in the Autumn and ‘Santa Sunak’, purveyor of billions today looks more like ‘Scrooge Sunak’, cutting spending and raising taxes to the tune of nearly £50billion relative to his pre-pandemic plans of March 2020.”

He said yesterday’s fiscal package had “no money to deal with post-pandemic priorities” and “no policies to deal with the inequalities that have opened up over the last year”.

Johnson used his traditional post-Budget briefing to sharply critique Sunak’s plans to marshal the country’s finances back to an even footing after the billions spent dealing with coronavirus.

He believed it was “50-50 at best” whether the big increase in corporation tax would actually happen. 

"There are the chances of delivering what look like £17billion of spending cuts relative to March 2020 plans which, broadly speaking, is what Sunak says he is planning," he added. 

“I may be proved wrong, but I’d offer 10 to 1 against that happening.”

He highlighted that Sunak took £12 billion a year out of his pre-pandemic spending plans in real terms in last Autumn’s spending review, and in the Budget chose to trim another £4billion per year, which “will cause additional pain”.

“This isn’t just a mechanical change and presenting it as such means the Chancellor isn’t really levelling with people about the choices the government is making to repair the public finances," Johnson continued. 

“The actual costs facing departments are unlikely to have fallen. And since the NHS, schools and the Ministry of Defence all have budgets fixed in cash terms until later in the Parliament, this new £4billion cut will fall entirely on other, unprotected services. 

“Those areas – including perennially squeezed budgets like justice and local government – are now facing real-terms cuts in 2022–23. That’s a recipe for a very tricky Spending Review in the autumn.

“But that’s only if you think these plans will actually be stuck to. Are we really going to spend £16billion less on public services than we were planning pre-pandemic? 

“Is the NHS really going to revert to its pre-Covid spending plans after April 2022?”

The IFS boss said in reality there will be all sorts of financial pressures post-pandemic, such as catching up on lost learning, dealing with the courts backlog, finally fixing social care, which will require top-up funding and means “the Chancellor’s medium-term spending plans simply look implausibly low”. 

Overall the IFS said Sunak had three challenges; to deliver short-term pandemic support, to set about fixing the public finances, and “to deal with the longer term consequences of the pandemic, especially its unequal consequences”.

While Johnson said Sunak has done a “decent job of the first”, he “still has a lot of work to do” on the second and “his spending plans in particular don’t look deliverable, at least not without considerable pain.”But Johnson accused Sunak of being "silent" on the long term consequences of the pandemic.

"No money to deal with post pandemic priorities," he said. "No policies to deal with the inequalities that have opened up over the last year between rich and poor, old and young, more and less well educated. 

“This is a big hole in the chancellor’s and the government’s policies, a hole which needs to be filled and soon if we are not to suffer a much worse hangover from this crisis than need be the case.”

The Treasury has been contacted for comment.

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