Rishi Sunak’s Budget is set to cause a “second, sharp dose of austerity” thanks to £4bn of hidden cuts, according to new analysis by a leading economic think tank.
The Institute for Fiscal Studies today said there were extensive public service cuts buried in the Budget, which will see funding for the Home Office, HM Revenue and Customs, the Crown Prosecution Service and local government squeezed.
The influential think tank found that some departments will have funding cut by 3 per cent in 2022-23 from current levels, which would mean an 8 per cent cut from planned levels of spending pre-pandemic.
The report said the local government cuts are “something that would be difficult to reconcile with a coherent ‘levelling up’ agenda”.
IFS research economist Ben Zaranko said Sunak’s spending plans are “even tighter than they first appeared” for “departments not fortunate enough to be protected by a pre-existing agreement with the Treasury” like the Health Department, Education Department and Ministry of Defence.
“Spending on those unprotected services in 2022−23 is set to be 3 per cent lower than a year earlier, and 8 per cent lower than what was planned prior to Covid-19,” he said.
“This poses clear and obvious challenges, not least because of the new pressures created by the pandemic.
“Plans can change, but as things stand, for many public services, the first half of the 2020s could feel like the austerity of the 2010s.”
Sunak has spent more than £400bn on the Covid crisis, which has led to the UK’s largest relative Budget deficit since World War II.
He said in his Budget that it would be the most well off parts of society that will do the heavy lifting in paying this back, with corporation tax set to rise to 25 per cent for businesses that have profits of over £250,000 in 2023.
Companies with profits of less than £50,000 will remain on the 19 per cent corporation tax rate, while there will be a sliding scale for companies with profits between £50,000 and £250,000.
Stealth tax rises were also levelled at middle and low-income earners during the Budget.
Shadow chancellor Anneliese Dodds said the hidden cuts show that “mask slipped for Rishi Sunak and the Conservatives at this month’s Budget”.
“It was the moment it became clear they want a return to the same weak foundations that led to the worst economic crisis of any major economy,” she said.