Budget 2020: Rishi Sunak’s spending plans ‘not as generous as they appear’, says IFS Austerity will remain in place for plenty of public services as spending per person will remain ‘well below’ 2010/11 levels

Austerity will remain in place for many of the country’s public services with spending levels by the end of this Parliament at nearly a fifth lower than when the Conservatives first came into power in 2010, a leading think tank has said.

An analysis of the Budget by the Institute for Fiscal Studies warned the Government’s current spending plans are “nothing like as generous as they appear”.

Chancellor Rishi Sunak trumpeted the fact that spending would rise for departmental budgets by an average of 2.8 per cent per year when he delivered his first Budget speech to the Commons on Wednesday.

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Overall spending will rise by £76bn – or 9 per cent in real terms – between now and 2023-24, largely paid for by extra borrowing. It means government spending will amount to 41 per cent of national income by 2023, the highest it has been since the mid-1980s.

Not so big

But IFS director Paul Johnson warned that while the figure sounded “substantial”, once money spent on replacing funding from the EU and planned increases for health, schools, defence and overseas aid are factored in, “plenty of public services will not be enjoying much in the way of spending increases”.

It means spending per person on public services will remain “well below” 2010/11 levels. The analysis shows that excluding health, spending will be 19 per cent lower than 2010/11.

In contrast, Mr Johnson said that the Government’s capital investment plans were “huge” adding they were “genuinely very big”.

He warned, however, that the “really big challenge” will be for the Government to spend the money well, which he added “will not be easy”.

The analysis showed the Office for Budget Responsibility’s growth outlook appeared “very, very weak”, even without taking into account the impact of the coronavirus crisis.

Debt rising

Mr Johnson said: “The key risk is that once again growth disappoints, and that this leaves the Chancellor with the choice of whether to rein back again on spending, or to announce further tax rises, or to abandon his fiscal targets and to allow debt to rise further.”

He added: “It doesn’t matter how hard you review it, though, the iron laws of fiscal arithmetic will assert themselves.

“The only way that a change in the fiscal rules can help justify more spending without tax rises is if the chancellor is happy to see underlying debt rise more quickly.”