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Evening Standard
Evening Standard
World
Daniel Keane

Spending cuts made necessary by mini-Budget ‘could spell end of NHS’, top economist warns

Deep spending cuts could be needed after Kwasi Kwarteng’s budget (stock image)

(Picture: PA Wire)

The Government may have to cut public spending so significantly in the wake of the mini-Budget that it could threaten the existence of the NHS as a free service, a leading economic policymaker has warned.

Sir Charlie Bean, a former deputy governor of the Bank of England, warned that the government’s fiscal strategy necessitated deep cuts to public spending – with the health service likely to suffer as a result.

Chancellor Kwasi Kwarteng last week announced budget plans to scrap the top rate of tax and cut the basic rate to 19p in the pound, sending the currency spiralling to an all-time low against the dollar. He has vowed to set out a package of reforms on November 23 in a bid to ease panic in the markets, though this is likely to include a reduction in public expenditure to fund his tax reforms.

Speaking to Sky News, Sir Charlie warned the economic situation would “likely increase inequality” in the UK and would require a major cut in spending.

“Frankly, the only way you can really deal with this is with a very fundamental rethinking of the boundaries of the state.

“So if you want to get the share of government spending to GDP down, you have to be prepared, say, to move away from our own health service, which is free at the point of delivery to one funded by social insurance like they do in Germany.”

He added: “It is serious. And I don't think the government can really afford just to say, 'Oh, this is just a little bit of froth in markets; they'll come to their senses as soon as we lay out our full programme'.

“There are real questions to be addressed about how the government's fiscal strategy hangs together, and how it can ensure that the debt to GDP ratio is back on to a sustainable path by the medium term.”

Any cuts to NHS spending would come as a further blow to the health service as it grapples with a backlog in care as well as record waits for treatment in A&E departments. Prime Minister Liz Truss has insisted the NHS is one of her top three priorities in Government.

Ministers also face a row with trade unions over pay, with the Royal College of Nurses (RCN) set to ballot for industrial action next Thursday. The union have demanded a pay rise of 5 per cent above inflation, claiming that years of real-terms pay cuts have endangered patient safety.

Meanwhile, the International Monetary Fund (IMF) on Wednesday rebuked the Chancellor’s budget,” saying it was “closely monitoring” developments in the UK.

“Given elevated inflation pressures in many countries, including the UK, we do not recommend large and untargeted fiscal packages at this juncture, as it is important that fiscal policy does not work at cross-purposes to monetary policy,” the IMF said.

“Furthermore, the nature of the UK measures will likely increase inequality.”

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