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Lack Of Transparency From Parties Over Incoming Cuts Is "Frustrating" Says Top Economist

Economists have warned Rishi Sunak's and Keir Starmer's fiscal rules could leave heavy spending cuts on the horizon. (Alamy)

4 min read

Paul Johnson, the director of the Institute for Fiscal Studies (IFS), has told PoliticsHome the lack of transparency over planned cuts to public services after the election by both Labour and the Conservatives is "frustrating".

Labour has commited to Chancellor Jeremy Hunt's pledge to get debt falling as a percentage of GDP by the end of the next parliament, which includes capping capital spending for unprotected departments - such as justice or local councils - at one per cent.

Protected departments - such as the NHS and defence - however, will receive more investment, with economists warning it will come at the expense of the budgets of other unprotected ones. 

Despite this, neither political party has addressed the looming cuts in detail - with both Labour leader Keir Starmer and Conservative leader Rishi Sunak appearing to sidestep the question at Tuesday night's leaders' debate on ITV. 

When asked if either of them would "rule out" cuts of up to four per cent a year to unprotected departments as a result of committing to fiscal rules, Sunak said the government would "continue investing record sums in public services"; Starmer responded by saying "we're not going to go back to austerity". 

However, the director of the IFS has told PoliticsHome it is a "matter of arithmetic" that public services are facing cuts under the government's fiscal rules, which Labour has signed up to. 

"[Hunt] said that day to day, public service spending will rise one per cent a year for the next five years," Johnson told PoliticsHome on Wednesday. 

"Now at first glance that doesn't look so bad, but when you know that defence spending will rise faster than that because they're both committed to that; and you knew that health spending will rise faster than that, partly because they're both committed to the NHS workforce plan, but also because we know that NHS spending always rises faster than that; and when you know that childcare spending is going to rise... it's just a pure matter of arithmetic.

"Other public service spending has to be cut, because if the overall level goes up by one per cent - particularly when you've got big things like health and defence going up more than that - you just have to have other things being cut, and cut fairly hard."

Neither Labour or the Conservatives have directly addressed concerns raised by economists over the future of public spending, with the IFS previously describing the situation as a "conspiracy of silence" between the two parties. 

"It's very frustrating - but it's not surprising or unusual," said Johnson.

"One has become slightly used to this being the way that elections are run... it's a naive hope, but it would be nice to see this discussed in a rather more open way."

Johnson told PoliticsHome he believed neither party are addressing the crisis facing public finances because it means "raising taxes or having debt rising". 

"[We are] in a situation in which we know that prisons are full; the backlogs in the courts are enormous; local government, local authorities keep going bust; the social care system is under incredible pressure... pressures on public sector pay, and so on," he said.

"There are lots and lots of pressures, so it's very - I'm not saying it's impossible - but it would certainly be hard to to make those cuts.

"And, of course, neither party is saying anything about where are those cuts would come -  nor are they saying: 'Well, we're definitely not going to put those cuts in place'.

"Because if you don't put those cuts in place, then you have to say how you're going to balance the books - which means either raising taxes or having the debt rising, rather than falling, at the end of the parliament".

Johnson also told PoliticsHome there were still some cuts that he'd consider unlikely - particularly after "so much cutting has already happened" under austerity during the Coalition and Conservative governments during the 2010s.

"There's a 50 per cent chance we'll get lucky... but you need to be prepared for the 50 per cent chance that things will be worse."

The Labour party and Conservative party have been approached for comment. 

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