WHITEHALL is bracing itself for the longest, and deepest sustained period of cuts to public service spending since at least the Second World War, which could see some departments see their budgets slashed by as much as 33 per cent by 2014-15 in real terms.
Leading think-tank the Institute for Fiscal Studies (IFS) yesterday confirmed chancellor George Osborne’s assertion that unprotected government departments would face cumulative real cuts of 25 per cent by 2014-15.
But it said that if spending on schools and defence was only cut by 10 per cent, then other
departmental budgets would need to be slashed by as much as a third.
Robert Chote, director of the IFS, said: “The cut in central government public services spending as a share of national income now planned by the Coalition will more than reverse the entire increase we saw under Labour. We are looking at the longest, deepest sustained period of cuts to public services spending at least since World War Two.”
“We have never seen six years of consecutive cuts to public service spending,” said Rowena Crawford, research economist at the Institute.
And while expenditure on the NHS will be protected such that it accounts for almost a third of total public service spending, the health budget has never had to undergo more than two consecutive years of a spending freeze since 1948.
Crawford’s analysis indicated that if the government could reduce annually managed expenditure (AME) by £13bn in the autumn Spending Review, then departments would only face a 20 per cent cut to their budgets.
However, these savings would have to be found from a pool of just £154bn if state pensions, council tax-financed spending and public corporation spending were excluded from the expenditure able to be cut.