Lack of transparency from parties about incoming cuts is ‘frustrating’, says top economist

6 Min Read
Lack of transparency from parties about incoming cuts is 'frustrating', says top economist

Economists have warned that Rishi Sunak and Keir Starmer’s budget rules could mean tough cuts ahead. (Alamy)

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Paul Johnson, the director of the Institute for Fiscal Studies (IFS), has told PoliticsHome that the lack of transparency over planned post-election cuts to public services by both Labor and the Conservatives is “frustrating”.

Labor has committed to Chancellor Jeremy Hunt’s pledge to reduce debt to GDP by the end of the next parliament, which includes limiting capital spending on unprotected departments – such as justice and councils – to one per cent.

However, protected departments – such as the NHS and Defense – will receive more investment, with economists warning this will come at the expense of the budgets of other unprotected departments.

Despite this, neither political party has discussed the looming cuts in detail – with both Labor leader Keir Starmer and Conservative leader Rishi Sunak appearing to sidestep the question during Tuesday night’s leaders’ debate on ITV.

When asked whether either would ‘rule out’ cuts of up to four per cent a year to unprotected departments as a result of adhering to budget rules, Sunak said the government would ‘continue to invest record amounts of money in public services’; Starmer responded by saying “we are not going back to austerity”.

However, the director of the IFS did tell us that PoliticsHome it is a “matter of arithmetic” that public services will face cuts under the government’s budget rules, which Labor has agreed to.

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“[Hunt] said that government spending will increase by one percent per year on a day-to-day basis for the next five years,” Johnson said PoliticsHome on Wednesday.

“On the face of it, that doesn’t look that bad, but when you consider that defense spending will increase faster because they’re both committed to that; and you knew that healthcare spending is going to rise faster, partly because they’re both committed to the NHS workforce plan, but also because we know that NHS spending is always going to rise faster and if you know that childcare spending is going to rise… .it’s just a matter of math.

“Other public service spending needs to be cut, because if the overall level goes up by one percent – ​​especially if big things like healthcare and defense go up more than that – other things simply need to be cut. and quite hard cut.”

Neither Labor nor the Conservatives have directly addressed economists’ concerns about the future of government spending, with the IFS previously describing the situation as a ‘conspiracy of silence’ between the two parties.

“It’s very frustrating, but it’s not surprising or unusual,” Johnson said.

“You’ve kind of gotten used to this being the way elections are held… it’s a naive hope, but it would be nice to see this discussed in a more open way.”

Johnson said PoliticsHome he believed that neither party is addressing the crisis facing public finances because it means “raising taxes or increasing debts”.

“[We are] in a situation where we know that the prisons are full; the backlogs in the courts are enormous; local government, local authorities continue to go bankrupt; the social care system is under incredible pressure… pressure on public sector wages and so on,” he said.

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“There’s a lot of pressure, so it’s very – I’m not saying it’s impossible – but it would certainly be difficult to make those cuts.

“And of course neither party is saying anything about where those cuts would come – nor are they saying, ‘Well, we’re certainly not going to make those cuts.’

“Because if you don’t make those cuts, then you have to say how you’re going to balance the books – which means raising taxes or raising debt at the end of this parliament instead of falling.” .

Johnson told it too PoliticsHome there were still some cuts that he considered unlikely – especially after so many cuts had already been made under austerity during the Coalition and Conservative governments in the 2010s.

“There’s a 50 percent chance that we’ll get lucky… but you have to be prepared for the 50 percent chance that things will get worse.”

The Labor Party and the Conservative Party have been contacted for comment.

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