Jeremy Hunt’s autumn statement tax cuts were paid for by allowing the real value of public spending to fall by an extra £20bn a year by the end of the next parliament, compared with his plans back in March – a fresh round of austerity many experts believe will prove impossible to implement in practice.
Here are some of the areas facing an eye-watering funding squeeze, if the chancellor’s sums are to add up:
Courts, prisons and probation
The Ministry of Justice is among the “unprotected” departments for which the government has made no specific spending promises. Independent watchdog the Office for Budget Responsibility (OBR) calculates that these areas would face a real-terms cut in their budgets equivalent to 2.3% a year between now and the end of the next parliament, if the chancellor or his successor were to implement his autumn statement plans.
Yet such a reduction would hit a criminal justice system already struggling to meet the most basic public expectations: illustrated most vividly by the news last month that judges are being urged not to jail criminals – including rapists and burglars – because prisons are full. Unions representing probation officers have warned that their members are under “continual stress and strain and pressure”, in an overstretched and understaffed profession.
Meanwhile, the backlog in crown court cases has already hit a record 64,709, with 28.3% of victims waiting more than a year for their cases to be heard, while the legal aid budget for criminal cases is down by more than 40% since 2011. The OBR, which has to take the Treasury’s spending projections at face value, highlighted court backlogs as one example of why Hunt’s plans would be challenging to enact.
Local government
Councils represent another area of unprotected spending, where no specific pledges have been made, meaning they could face fresh real-terms cuts. A string of local authorities – including the UK’s biggest, Birmingham – have already issued section 114 notices, signalling that they cannot balance their budgets and are effectively bankrupt, with more expected to follow.
Local authorities have struggled to reconcile the rapid growth in demand for the statutory services they have to provide, such as adult social care, with deep cuts in central government funding, and few opportunities to raise extra revenue locally. Many have sought to square the circle through cuts in non-statutory services.
The Local Government Association recently estimated that high inflation meant councils already faced a funding gap of almost £3bn in the next two years, just to continue existing levels of service. Under Hunt’s plans, they would be likely to face another five years of real-terms cuts – despite the fact the underfunding of adult social care is already having significant knock on impact on the NHS.
Defence and overseas aid
The government has pledged to meet the UK’s Nato commitment of spending 2% of GDP on defence, with the prime minister calling it “a floor and not a ceiling” during last summer’s leadership race against Liz Truss. But the mix of weak GDP growth and higher-than-expected inflation over the OBR’s forecast period means the defence budget is likely to be stretched.
The intense demands on other frontline public services also raise doubts about Rishi Sunak’s aspiration to increase defence spending to 2.5% of GDP (a pledge in Hunt’s short-lived leadership campaign too), which the OBR warned would “increase the pressure on unprotected spending”.
Similarly, Sunak’s much-criticised decision to break the UK’s longstanding promise to devote 0.7% of national income to overseas aid appears unlikely to be reversed in the near future. The OBR warned that if both these promises, on defence and overseas aid, were met, unprotected departments would face an eye-watering 4.1% annual squeeze on their budgets.
The Home Office
The central political preoccupation of this department under new boss, James Cleverly, may be to “stop the boats”, but it is also responsible for tackling crime, counter-terrorism and immigration. The Tories claim that Boris Johnson’s promise of 20,000 new police officers at the 2019 general election has been met; but the Home Office’s budget is not protected from the looming spending squeeze.
The Resolution Foundation calculates that unprotected departments, including the Home Office, will be left with an average of 16% less to spend per person in real terms by the end of the next parliament, if Hunt’s plans are followed – an outcome Resolution’s director, Torsten Bell, said was “for the birds”.
As an indication of the pressures the department already faces, Cleverly’s predecessor, Suella Braverman, recently implored police forces to investigate phone and car thefts, amid mounting public concern that such crimes were being ignored. Similarly, the immigration system is marred by lengthy backlogs in processing claims, with 136,779 people awaiting a decision on their case, as of July this year.
Schools and colleges
When he was chancellor, Sunak used his 2021 spending review to promise to restore schools spending per pupil to 2010 levels by 2024-25, adjusted for inflation, and the OBR has assumed it will be held at that level throughout the next parliament. That would see per-pupil budgets flat in real terms for the next five years, saving schools from fresh cuts.
However, the IFS thinktank recently warned that costs for schools were rising more rapidly than economy-wide inflation would suggest; while Sunak has also promised to recruit extra teachers, without specifying how they will be paid for. Falling pupil numbers are also likely to be difficult to manage, especially for smaller schools – while the teaching unions recently claimed it would cost more than £4bn to fix crumbling school buildings.
Meanwhile, there is no future funding pledge for post-16 education, which was already set to face a “significant squeeze,” according to the IFS, with per-pupil spending at school sixth forms set to be more than a fifth lower next year than it was in 2010.
