Saturday, November 25, 2023
A new austerity?
We suspected it, but now the Institute for Fiscal Studies have confirmed it. The IFS say that Jeremy Hunt’s economic plans have put Britain on course for drastic public sector cuts even more “painful” that the austerity period of the 2010s.
The Independent reports on the IFS's view that the Conservative chancellor may have boasted of handing out the biggest tax cuts since the 1980s, but their experts say he offered no credible plan to deliver the huge spending cuts now required:
The Institute for Fiscal Studies (IFS) said “sharp” and “harsh” budgetary reductions were now needed, accusing Mr Hunt of leaving a big problem for whoever is chancellor after the next general election.
The influential think tank’s director Paul Johnson said the austerity ahead would be even more severe than the Tory programme delivered by David Cameron and his chancellor George Osborne between 2010 and 2016.
Mr Johnson said: “George Osborne managed to get the size of the state back down after the financial crisis. That was painful. Doing it again will be more painful still.”
“Mr Osborne made his cuts after a decade of big spending increases. Mr Hunt – or his successor – will have no such luxury,” he added.
The IFS expert said Mr Hunt’s “successor is going to have the mother and father of a headache when it comes to making the tough decisions implied by this statement in a year or two’s time”.
The institute said the Rishi Sunak government’s tax cuts – including a 2p cut to national insurance and £11bn-a-year-tax break for businesses – were “paid for” by “pretty serious cuts across other areas of public spending”.
“How did Mr Hunt afford tax cuts when real economic forecasts got no better? He banked additional revenue from higher inflation, and pencilled in harsher cuts to public spending,” said Mr Johnson.
Leading economists have been scathing about the impact of the tax giveaway – warning that Mr Hunt had left the next government a “ticking time bomb” of austerity cuts to public services. Those departments not ringfenced face cuts of over £20bn by 2027-28, said the IFS.
Ben Zaranko, an economist at the IFS, said councils, prison services and courts and benefits at the Department for Work and Pensions could be “squeezed”. He added: “It seems inconceivable that you could make cuts of 2 per cent or 3 per cent per year to those services and not have some impact on quality.”
The Office for Budgetary Responsibility (OBR) warned that Mr Hunt’s plans left £19bn-worth of real-terms spending cuts ahead, warning that it would “present challenges”.
The watchdog said it meant a 2.3 per cent a year real-terms cut to spending in the decade ahead. Unprotected departments – those outside of health and defence – would face cuts of 4.1 per cent a year in real terms.
OBR chief Richard Hughes said on Thursday that Mr Hunt had pumped only £5bn extra into public spending – but insisted that the chancellor would have had to have added £25bn “if he wanted to keep them the same in real terms”.
Liberal Democrats’ Treasury spokesperson Sarah Olney MP said Mr Hunt had stored up a “disaster” for hospitals, schools and local authorities with the spending cuts. She said he had set out “no plan for the future, leaving our crucial public services in a dire state”.
In my view the Tories have miscalculated in putting all their eggs into the tax cuts basket. I believe that the next General Election will be fought on the state of public services. If that is the case then, when married to the increased tax burden, Hunt has just delivered a massive onw goal.
The Independent reports on the IFS's view that the Conservative chancellor may have boasted of handing out the biggest tax cuts since the 1980s, but their experts say he offered no credible plan to deliver the huge spending cuts now required:
The Institute for Fiscal Studies (IFS) said “sharp” and “harsh” budgetary reductions were now needed, accusing Mr Hunt of leaving a big problem for whoever is chancellor after the next general election.
The influential think tank’s director Paul Johnson said the austerity ahead would be even more severe than the Tory programme delivered by David Cameron and his chancellor George Osborne between 2010 and 2016.
Mr Johnson said: “George Osborne managed to get the size of the state back down after the financial crisis. That was painful. Doing it again will be more painful still.”
“Mr Osborne made his cuts after a decade of big spending increases. Mr Hunt – or his successor – will have no such luxury,” he added.
The IFS expert said Mr Hunt’s “successor is going to have the mother and father of a headache when it comes to making the tough decisions implied by this statement in a year or two’s time”.
The institute said the Rishi Sunak government’s tax cuts – including a 2p cut to national insurance and £11bn-a-year-tax break for businesses – were “paid for” by “pretty serious cuts across other areas of public spending”.
“How did Mr Hunt afford tax cuts when real economic forecasts got no better? He banked additional revenue from higher inflation, and pencilled in harsher cuts to public spending,” said Mr Johnson.
Leading economists have been scathing about the impact of the tax giveaway – warning that Mr Hunt had left the next government a “ticking time bomb” of austerity cuts to public services. Those departments not ringfenced face cuts of over £20bn by 2027-28, said the IFS.
Ben Zaranko, an economist at the IFS, said councils, prison services and courts and benefits at the Department for Work and Pensions could be “squeezed”. He added: “It seems inconceivable that you could make cuts of 2 per cent or 3 per cent per year to those services and not have some impact on quality.”
The Office for Budgetary Responsibility (OBR) warned that Mr Hunt’s plans left £19bn-worth of real-terms spending cuts ahead, warning that it would “present challenges”.
The watchdog said it meant a 2.3 per cent a year real-terms cut to spending in the decade ahead. Unprotected departments – those outside of health and defence – would face cuts of 4.1 per cent a year in real terms.
OBR chief Richard Hughes said on Thursday that Mr Hunt had pumped only £5bn extra into public spending – but insisted that the chancellor would have had to have added £25bn “if he wanted to keep them the same in real terms”.
Liberal Democrats’ Treasury spokesperson Sarah Olney MP said Mr Hunt had stored up a “disaster” for hospitals, schools and local authorities with the spending cuts. She said he had set out “no plan for the future, leaving our crucial public services in a dire state”.
In my view the Tories have miscalculated in putting all their eggs into the tax cuts basket. I believe that the next General Election will be fought on the state of public services. If that is the case then, when married to the increased tax burden, Hunt has just delivered a massive onw goal.
