Britain’s stretched public services will buckle under the weight of the spending cuts being planned for after the election, economists have warned, as Jeremy Hunt prepares for another round of tax reductions in next week’s budget.
Experts say the level of public sector spending pencilled in for the next parliament would mean cuts equivalent to those undertaken by David Cameron’s government from 2010 to 2015. Some have warned the next government will not be able to implement them, and will be forced either to raise taxes or borrow more to fund emergency spending.
The stark warnings come as the chancellor considers cutting billions more from his public spending plans to pay for further reductions in either income tax or national insurance at next week’s budget. Last week the Resolution Foundation calculated such a move would mean taking a fifth out of budgets for certain departments across the parliament, sparking concern among economists, trade unions and even some Conservatives.
James Smith, research director at the thinktank, said: “We are essentially returning to austerity levels of cuts in terms of the implied spending cuts.”
Referring to the possibility of reducing spending plans even further to pay for steeper tax cuts at the budget, Smith added: “We are talking about going from one set of undeliverable spending plans to something that is worse. How could we take 20% out of the justice budget, for example? It is extremely difficult.”
Stuart Hoddinott, a senior researcher at the Institute for Government, said: “The current state of public services are generally pretty poor across the board. If any government was to try and implement these spending plans, they would lead to a deterioration in performance that would be unacceptable to any government.”
Hunt announced a 2p cut to national insurance at the autumn statement last year, with public spending forecast to rise 1% above inflation each year over the next parliament as a result.
However, much of that money will be taken up by just a few departments where spending is protected.
They include health, where both the government and the Labour party have signed up to a plan to recruit more staff, which would mean budget increases of 3.6% a year. Defence is also protected, given Britain’s commitment to meet the Nato target of spending 2% of GDP on defence, as is international aid, which has to remain at at least 0.5% of gross national income.
As a result, unprotected departments are likely to face swingeing cuts across the next five years unless the next government raises taxes or borrows more. The departments likely to face heavy spending reductions include justice, local government and the Home Office.
The Labour party is planning to relieve some of the spending pressure with particular tax rises, such as ending the non-dom regime, which will raise money to pay for more weekend and evening GP appointments, among other things. Apart from those one-off schemes, however, the shadow chancellor, Rachel Reeves, has ruled out raising income or wealth taxes to fund daily departmental spending.
Unlike in 1997 or 2010, however, the next government will take office with public services already at breaking point.
In the justice system, for example, the crown court case backlog for England and Wales stood at 64,709 by last June – more than 50% higher than three years previously. In 2022 it took an average of 379 days to process an offence from it being committed to the end of a trial, up from 251 days in 2019.
In local government, eight English councils have in effect declared themselves bankrupt since 2018 and a fifth of local authorities believe they are likely to go bust over the next year.
Andrew Goodwin, chief UK economist at Oxford Economics, said: “The problem is that this comes on the back of large real-terms cuts for those departments from 2010 to 2015 and quite restrained spending since then. Efficiency savings have long since been exhausted – you’re now really talking about choosing which services not to provide any more.”
Public sector unions have begun to sound the alarm about the cuts to come. Christina McAnea, the general secretary of Unison, said: “Public services are in the last chance saloon. Years of underfunding mean they’re already close to collapse and slashing spending further still is the last thing anyone needs.”
But some Conservatives are also concerned about whether the plans are possible to deliver. Lord Deben, the former Tory chair, told the Observer last weekend: “The priority for most people at the moment is to improve public services to make sure that those who are least well off are looked after and to make it more attractive to work.”
In a letter on Monday, the party’s One Nation caucus urged the chancellor to prioritise measures to help young parents, workers and students, including a multi-year settlement for childcare.
The group, which has 107 Tory MPs registered with it, recommended eight policies including capping interest rates on student loans to the average rate commercially available, introducing a levy on foreign owners of vacant luxury flats, and abolishing stamp duty for house buyers who are downsizing.
The group also said the chancellor should cut direct taxes for working people and introduce reforms to tax all income at the same rate, whether it comes from earnings, dividends or benefits.
Damian Green, chair of the caucus, said: “This is our chance to demonstrate to voters that we are on their side and that we are taking steps to alleviate pressures they face in all aspects of everyday lives.”
• This article was amended on 26 February 2024. An earlier version said that Christina McAnea was the general secretary of Unite; this should have said Unison.
