Government's Public Spending Plans Are "Silly Games", Warns Top Economist
Director at the Institute for Fiscal Studies (IFS) Paul Johnson accused the government of "silly games" on public spending. (Alamy)
3 min read
The Institute for Fiscal Studies (IFS) has said while many of the measures taken in Chancellor Rachel Reeves' first Budget are "welcome", the public spending plans for the next few years amount to "silly games".
The Labour Government on Wednesday announced its first Budget since being elected.
Promising "no return to austerity", Reeves set out a package of tax rises worth £40bn and significantly increased public spending in a bid to see off a round of sharp cuts pencilled in by the previous Conservative government.
However Paul Johnson, director at the IFS, said on Thursday one of "the most striking" aspects of the Budget was "how incredibly front loaded" the increase in public spending is, describing the Government's spending plans after the first two years as "implausibly low".
According to the Budget, public service spending is set to increase by 4.3 per cent this year and 2.6 per cent next year, but then by just 1.3 per cent each year, but Johnson believes this is unrealistic and "odd".
"The trouble is I am willing to bet a substantial sum that day to day public service spending will, in fact, increase considerably more quickly than supposedly planned after next year... 1.3 per cent a year overall would almost certainly need real terms cuts for some departments.
"It would be odd indeed to increase spending rapidly this year and next only to start cutting back again in subsequent years.
"I'm afraid, at least on the surface, this looks rather like the same silly games playing as we got used to with the last government: pencilling in implausibly low spending increases for the future in order to make a physical arithmetic balance."
Reeves yesterday said the difficult economic situation inherited by Labour had forced her to take some of the steps outlined in the Budget.
"Any chancellor standing here today would face this reality. And any responsible chancellor would take action," she told MPs.
Speaking to Labour MPs later in the day, she challenged Conservative MPs who disagree with the plans to raise taxes and borrowing to outline where they would make cuts.
“If they disagree with our investments in day to day spending, they would have to cut spending in our schools and in our health service. If they disagree with our taxes on the wealthiest or on business, they will not be able to protect the incomes of working people," she said.
Johnson agreed that the economic inheritance was difficult and had forced Reeves to make "welcome" decisions on tax and spend.
"This was a Budget in which, unsurprisingly, Rachel Reeves — as the first Labour chancellor in 14 years — made some pretty big choices," said Johnson.
"She chose to increase borrowing in order to increase spending on investment — or at least to stop it falling as a fraction of national income, which is what the previous government had planned. Indeed, they had planned cuts in real terms.
"Given that the growth benefits of this choice will take considerable amount of time to arrive, this is a courageous move and a welcome focus on the long-term, one that previous chancellors in similarly difficult fiscal situations are generally not done.
"This was the right thing to do, even if the upfront costs are significant.
"She chose a sensible new primary fiscal rule that the current budget should be in balance in five years time, with that shortening of a three year rolling target after 2026/27."
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