UK public services face cuts of up to £17 billion, says IFS | Institute of Financial Studies
Rishi Sunak It is preparing to introduce cuts to public services of up to £17 billion compared to the government’s previous pandemic plans unless action is taken this summer to increase funding, a leading research bank has warned.
The Institute of Financial Studies He said the government was on track to spend between £14 billion and £17 billion less each year on a range of public services from April 2022 than was allotted before Covid-19.
As the chancellor prepares to allocate funding to government departments against a backdrop of rising Covid-19 infections, the leading Tax and Spending Research Center warned that there are growing demands on public finances that must be addressed head on.
This comes after Sunak was forced to back off the official launch of the Treasury’s spending review as part of the ongoing fallout for him and the prime minister. self-isolation requirement.
The spending review process – which is used to set budgets for government departments – was due to be launched by the chancellor this week before Parliament breaks into summer recess on Thursday. However, sources said that has now been pushed back to later this year after MPs return to the House of Commons in September.
Treasury sources said preparations for the review had already begun and would continue through the summer.
In a report outlining the economic background to the chancellor’s spending review, the Institute of Financial Services said Sunak is on track for a windfall of £30 billion by Budget Responsibility Office (OBR) for public finances this year amid a much faster recovery than initially expected.
The Treasury’s watchdog has forecast a budget deficit – the shortfall between public spending and revenue – of £234 billion this year. However, the IFS and economists from the US bank Citi said a deficit could be expected closer to 203 billion pounds after the Covid vaccine paved the way for Rapid recovery in the economy this spring.
Despite this, the think tank warned that the improvement was unlikely to continue, with Britain expected to suffer lasting economic damage from the pandemic, rising debt interest costs and pressure to maintain higher levels of spending on key public services as the crisis dragged on.
Reflecting the long-term damage, which will have an impact on the public purse, he said the British economy was expected to be 3% smaller by the middle of the decade than official pre-Covid estimates.
The IFS said the chancellor has no further scope to increase public spending if it is to maintain its medium-term goal of balancing daily government spending and tax receipts, with a rule to only allow public borrowing to invest in long-term projects.
However, the think tank warned that current government spending plans include cuts in some unprotected government departments amounting to £17 billion, and did not make provision for any additional virus-related expenditures – which are set to be cut to zero after the end of current funding. 2022, despite the ongoing crisis.
comes after OBR Sunak حذر warned It would need to find an additional £10 billion a year for the next three years to fund the cost of the government’s response to Covid, including maintaining the NHS’s testing and tracing programme, providing vaccination boosters, and responding to the health impact of the pandemic. .
Any higher spending to meet demand and cost pressures from Covid, or to meet pre-existing spending requirements such as social welfare, said Isabelle Stockton, an economist at IFS, said that it may require spending cuts elsewhere, tax increases, or higher levels of borrowing.
“Our expectation is that the chancellor has almost no additional wiggle room for the enduring spending endowment if it is to stay on track to achieve the current budget balance. This points to a very difficult spending review,” she said.
The Treasury said departmental budgets have yet to be confirmed for the coming years, adding: “It is therefore speculative to describe policy pressures at this point.
“As we continue to recover from the pandemic, we remain committed to investing in our vital public services, and will continue to do so in the upcoming spending review.”