Tory austerity is set to continue in key areas of public services “for a long time to come”, a leading economic think tank has warned.
In its post-Budget analysis, the Institute for Fiscal Studies (IFS) signalled that the spending squeeze would be maintained in areas other than the NHS, schools, defence and overseas aid.
The IFS said that while the average annual increase in day-to-day spending unveiled by chancellor Rishi Sunak “sounds substantial”, most of the new cash was already earmarked for Tory priorities and to replace EU income.
With “relatively little” for other departments, the stark assessment suggests that councils, criminal justice, benefits and other key areas of public spending will continue to suffer.
According to the think-tank, current spending per person for most public services will remain well below 2010-11 levels in 2024-25.
Outside of health though spending per person will still be 14% lower, and around 19% lower once the government figures take into account spending that is simply replacing EU funding that ends with Brexit.
“If this spending envelope is stuck to, there are plenty of public services which will not be enjoying much in the way of spending increases over the next few years,” IFS chief Paul Johnson said.
“While austerity is clearly at an end in the sense that spending is rising, spending levels in many areas are set to remain well below 2010 levels for a long time to come. Expectations may be disappointed.”
“Most importantly, the current framework and set of policies do not look likely to deliver the kinds of spending growth that were implied in this budget speech. Outside of health and a few other protected areas it looks like little will be available to increase spending.”
Johnson added that “current spending plans also look suspiciously front-loaded” in the Budget, with spending increases pencilled in for the next two years much bigger than what follows.
With a general election looming in 2024, “this would suggest top ups in later budgets and hence a need for more tax or more borrowing”, he said.
“Raising real day to day spending on public services will eventually require tax rises. Mr Sunak proudly announced that day-to-day departmental spending will enjoy ’an average growth rate in real terms of 2.8% - twice as fast as the economy. That is obviously not sustainable for any prolonged length of time.”
The IFS also challenged the “levelling up” rhetoric of the prime minister which has been used to suggest areas outside London will get a fairer share of spending.
“Levelling up will require a great deal more than investing in capital projects. It will require a consistent industrial strategy, policy on education, local government spending and much more besides over a generation.
“More spending on roads and rail won’t change the fact that in the North East, for example, only 24% of working age adults are graduates while in London it is 47%.”