Brace Yourselves Spending Cuts Are Coming!

Tough Choices Loom as Government Finalizes Spending Review: IFS Warns of Unavoidable Cuts

As the government prepares to unveil its Spending Review on June 11th, a leading economic think tank has issued a stark warning: tough choices are "unavoidable." The Institute for Fiscal Studies (IFS) highlights the delicate balancing act facing Chancellor Rachel Reeves, with implications for everything from the NHS and defense to schools and the criminal justice system. The review will outline day-to-day departmental budgets over the next three years and investment budgets over the next four.

The IFS points out that while significant funding increases were seen in 2024 for key areas like transport, net zero initiatives, hospitals, schools, and prisons, this level of growth is unsustainable given the government's existing commitments. This "front-loaded" spending strategy means difficult decisions must now be confronted.

The NHS: A Decisive Factor

According to the IFS, the level of funding allocated to the NHS will be the primary determinant of whether cuts are made to "unprotected" areas – those outside of healthcare, defense, and education. With the NHS accounting for a significant 39% of day-to-day departmental spending, any substantial increase in its budget will inevitably squeeze other sectors. The IFS estimates NHS spending to reach £202 billion in 2025-2026, driven by the government's focus on reducing patient waiting times and improving access to dental care.

Key Considerations:

• NHS Spending: Increasing funding at historical rates could necessitate real-terms cuts for other departments.
• Defense Spending: The government is committed to increasing military spending to 2.5% of national income by 2027.
• "Unprotected" Departments: Areas like the criminal justice system and prison services could face significant budget constraints.

Whitehall Insiders Brace for "Ugly" Review

Sources within Whitehall anticipate a challenging Spending Review, with ministers reportedly vying for limited resources for their respective departments. Concerns are mounting that crucial initiatives, such as increasing police numbers to combat violence against women and girls, may not receive adequate funding. The future of policies like capping bus fares also hangs in the balance. Chancellor Reeves's commitment to avoiding further borrowing and tax increases has fueled speculation about impending spending cuts.

Political Fallout

The Conservatives have criticized Reeves, arguing that her fiscal policies have led to "impossible choices." Shadow Chancellor Mel Stride stated, "They have pushed up the cost of living, unemployment is rising, growth is stalling. And yet Rachel Reeves still clings to her tax-and-spend dogma like it's the 1970s."

Defense Spending: A Zero-Sum Game?

The IFS emphasizes that increased defense spending will inevitably require cuts in other areas. As Bee Boileau, a research economist at the IFS, explains, the Treasury faces "some unavoidably tough choices." She notes that after a period of increased spending, the flow of additional funding is now slowing considerably. The government's commitment to increasing military spending further exacerbates this challenge. "Giving more to defence means, all else equal, bigger cuts to something else," the IFS warns.

Everything Can't Be a Priority

While Reeves has freed up billions for long-term projects by adjusting debt rules, the IFS cautions that "not everything can be a priority for further increases." This underscores the difficult trade-offs the government must make in the upcoming Spending Review.

The Spending Review promises to be a pivotal moment, forcing difficult choices and shaping the future of public services for years to come. Navigating these challenges will require careful consideration and strategic prioritization to ensure the most effective use of limited resources.

Tags: UK spending, public spending, government spending, NHS, IFS, Spending Review, UK economy, budget cuts, fiscal studies, Whitehall, Rachel Reeves, Mel Stride

Source: https://www.bbc.com/news/articles/c787385qx62o