Jeremy Hunt and Rachel Reeves are joined in a “conspiracy of silence” over tens of billions of pounds in tough tax and spending choices, with the next government likely to inherit the toughest outlook for the public finances in 80 years, Britain’s leading economics thinktank has warned.
The Institute for Fiscal Studies said the chancellor’s budget on Wednesday had laid the ground for “staggeringly hard choices” due after the general election for whichever party forms the next government.
The experts on the UK’s public finances said Hunt had earmarked cuts to spending on public services outside health, defence and education worth £20bn, while driving up national debt levels within the narrowest of margins to meet his self-imposed fiscal rule.
After the chancellor suggested the Conservatives could abolish employee national insurance after the next election, the IFS director, Paul Johnson, argued it was a claim that was “not worth the paper it’s written on, unless [it is] accompanied by some sense of how it will be afforded”.
Hunt’s ambition would cost more than £40bn, according to the IFS, as the starting point of tens of billions of pounds in further uncosted measures floated by the Tories including an increase in defence spending and planned increases in fuel duty.
In stinging remarks about the government, Johnson said Hunt had laid the ground so that the next parliament “could well prove to be the most difficult of any in 80 years” for a chancellor wanting to bring down debt.
However, he also issued sharp criticism of the shadow chancellor, suggesting that neither party had been upfront with the public over difficult decisions for tax and spending.
Johnson said Labour had been “just as shy” as the Conservatives about spelling out its plans for taxes and spending after the election.
“If I am sceptical about Mr Hunt’s ability to stick to his current spending plans, I am at least that sceptical that Rachel Reeves will preside over deep cuts in public service spending,” he said.
Highlighting near-record NHS waiting lists, councils facing bankruptcy, severe backlogs in the justice system, and struggles in the social care system, the IFS said the challenges in the public sector meant Hunt’s plans for deep post-election cuts in government funding lacked credibility.
The chancellor on Wednesday pencilled in a 1% a year real-terms increase in spending on services, while promising to find efficiency savings in a multibillion-pound productivity drive.
However, the IFS said the plans would entail deep cuts of up to 3.5% a year over the next parliament for unprotected government departments – including prisons, justice and local government. Avoiding these cuts would require a top-up to the government’s spending plans worth up to £20bn.
While suggesting Hunt could find some efficiency savings in the public sector, it warned large increases would be difficult to achieve after more than a decade of austerity that had already squeezed out costs from the system.
Johnson suggested the Conservatives and Labour would need to level with voters over the scale of this challenge, warning that further large tax cuts would mean higher government borrowing and debt, or deeper cuts to services.
“The government and opposition are joining in a conspiracy of silence in not acknowledging the scale of the choices and trade-offs that will face us after the election.
“They, and we, could be in for a rude awakening when those choices become unavoidable,” he said.
