Rishi Sunak’s government is hiding £28bn of “stealth cuts” to public services over the next five years, according to a report warning that a renewed austerity drive at next month’s budget would further damage the economy.
Calling on the chancellor, Jeremy Hunt, to change course at next month’s tax and spending set-piece speech to the House of Commons, the Trades Union Congress said a boost for public spending could help keep Britain out of a recession this year.
Paul Nowak, the general secretary of the TUC, said: “With a recession already expected this year, a new round of austerity would make a bad situation worse. The chancellor should instead use the power of government to lift us up and out of Britain’s economic slump.
“Good schools, hospitals, childcare and transport are vital, not only for families but for businesses, too. But the Tories keep attacking them – that’s a big part of why our whole economy is falling behind.”
The report by the New Economics Foundation (NEF), a leftwing thinktank, showed that Hunt’s spending plans outlined at the autumn statement in November included cuts to public services worth £1,000 a household by 2027-28.
Hunt promised in the autumn statement to increase spending by 1% a year after inflation. However, this was underpinned by Office for Budget Responsibility forecasts, which had assumed inflation would fall below zero.
The thinktank said this was unlikely to happen because the Bank of England would be expected to intervene to keep inflation close to its 2% target rate. NEF said that if inflation remained close to 2%, this would imply real-terms cuts – not growth – to spending worth £28bn.
Alfie Stirling, the chief economist and director of research at NEF, said the government was “exploiting a curious feature of the OBR’s forecast” to make its promise. “It allowed the chancellor to play smoke and mirrors with the future of public services last autumn,” he said.
“There is no serious or credible justification for the government’s current plans. Consecutive UK chancellors have already put the country through a decade of austerity, which means we know exactly how it ends: near-stagnant earnings growth, threadbare public safety nets and the first stall in life expectancy on modern record.”
A Treasury spokesperson said: “Total departmental spending will continue to grow in real terms over the spending review period. The efficiency and savings review announced at the autumn statement will help departments manage pressures where necessary.”
