UK Budget 'eases, but not ends' austerity - Resolution Foundation
Austerity had eased but not ended for low and middle-income families after Chancellor Philip Hammond's Budget, one respected thinktank said on Tuesday, while another called the new spending plans "a bit of a gamble".
In its post-Budget analysis of Hammond's surprising package of tax cuts and spending measures, the Resolution Foundation said while there was extra cash for the NHS “the chancellor’s numbers imply ongoing cuts in other day-to-day public services, from prisons to local government”.
“Which departments actually get cut – and by how much – will be a matter for the spending review next year. But unprotected departments will still, on average, record cuts in every year from 2020-21,” the foundation said.
“And their per capita real-terms budgets are set to be 3% lower in 2023-24 than 2019-20. If allocated equally this would mean real-terms per capita (departmental) cuts between 2009-10 and 2023-24 of 48%, 52% and 77% for the departments of Justice, Business and Transport respectively.”
Hammond was under political pressure to deliver a Budget that showed an easing to crippling departmental cuts that have lasted longer than expected. Prime Minister Theresa May turned up the heat earlier in October when she told the Conservative Party conference that she would "end austerity".
Unexpectedly higher tax receipts and growth revisions from the Office for Budget Responsibility gave Hammond a cumulative £68bn to splash out over five years to ease the yoke of austerity placed on workers by his sacked predecessor George Osborne in 2010.
Most of the windfall has been dedicated to the NHS, but higher income earners scored an £860-a-year tax cut and there was some help for those left short by the Tories imposition of the universal credit benefit.
However, the foundation noted that 84% of income tax cuts would benefit those in the top half of earners with 45% heading for the pockets of those in the top 10% of that scale.
Bell said there would be “tougher choices for Chancellors in the years ahead”.
“Brexit must be delivered smoothly, public spending will remain tight, forecasts may not always be so rosy, living standards are set to be sluggish and the tax rises to meet pressures in the 2020s from our ageing society will still be needed – as and when there’s a government with the majority to deliver them. Austerity has been eased, but there are still tough times ahead.”
"This budget was a bigger deal than many expected – with a significant easing of austerity. But austerity has not been ended."
Meanwhile, Institute for Fiscal Studies director Paul Johnson dismissed claims that Hammond had upped spending significantly.
"If you look at total spending beyond the NHS it's not really going anywhere," he told the BBC. "If you look at total spending as a fraction of national income, it's not really going anywhere...This is not a dramatic change in the sense of undoing much of the cuts we've had over the last eight years."
He said the reduced borrowing and deficit forecasts from the OBR allowed Hammond to find more money without committing to more borrowing - "but what the OBR gives the OBR can take away."
Overall, he said the budget was "a bit of a gamble".
The IFS pointed out that OBR forecasts for no more than 1.6% GDP growth for the coming five years was a lower medium-term growth rate than almost all forecasts made since 1985.
Looking at the NHS spending pledge, the IFS noted that spending is due to rise from 23% of public service spending in 2000 to 29% in 2010, and set to reach 38% by 2023-24.
"At some point we will need to raise taxes to pay for health. There can’t be much further we can squeeze other public services to pay for it," Johnson said.