Spending

‘More fat to cut’: how spending cuts could affect the UK government | Public Services Policy

After being named leader of the Conservative party and next prime minister, Rishi Sunak warned MPs that the UK was facing “a profound economic challenge”. Jeremy Hunt, the Chancellor, at least for now, has previously said there are no options to fill the £40billion black hole in public finances identified by the Institute for Fiscal Studies (IFS). We look at how government departments would cope with spending cuts.

Department of Health and Social Affairs

How has austerity affected the department?

The NHS in England receives its budget from the DHSC, which remits most of the money it receives from the Treasury to the health service.

Analysis by the charity Health Foundation shows that over the 13 years of the last Labor government (1997-2010), the NHS in England received average annual budget increases of 6%. However, this figure dropped dramatically to 1.1% under the coalition (2010-15) and 1.6% under David Cameron and Theresa May (2015-18), but rose again to 3.4% with the additional funding announced by May in 2018. This is against a backdrop of a growing and aging population.

So in the spring of 2020, the health service began to grapple with the many new challenges posed by Covid after a decade of “stagnation in terms of available resources”, according to think tank Nuffield Trust.

How has the department recovered since then and what is its position today?

The NHS has not recovered. His performance has steadily deteriorated since 2015. Most of his visible problems – particularly his inability to meet key targets for A&E and cancer care, surgery and diagnostic tests – can be directly attributed to limiting its budget for years despite growing demand. The deepening workforce crisis and inadequate social care are inextricably linked to the austerity in the funding of care services and the withholding of social worker salaries. However, social care is funded by the Department of Leveling, Housing and Communities, not the DHSC, and has suffered much bigger cuts than the NHS.

The NHS was already struggling to meet pre-Covid treatment targets and the pandemic has exacerbated this problem and also contributed to a major new problem – the recent collapse in ambulance service response times to 999 calls.

budgets

Who would suffer the most if further cuts were imposed?

NHS bosses are ‘incredibly concerned’ about what further austerity would mean. ‘There is no fat left to cut and patient services will inevitably be reduced if the NHS has to find further savings’ and patients could even die, the NHS Confederation warned over the weekend. It would be a mistake to impose another decade of austerity on the NHS, said confederation chief executive Matthew Taylor.

NHS England’s budget is already under severe pressure due to inflation, its drive for ‘efficiency’, Covid costs and the need to spend £1.8billion to part-fund the salary increase for NHS staff.

Department of Defense

How has austerity affected the department?

Defense spending has been on a steady decline since the easing, then the end, of the Cold War, which led to the “peace dividends” of the 1990s. There was a slight increase in the budget after 9/11 which , as a share of GDP, was 2.6% in 2003, the year of the war in Iraq. Basically, it lasted until the end of the decade.

It was the Conservative-led coalition that, during the years of austerity, further cut defense spending. The budget fell to 2% of GDP in 2015. Meanwhile, many parts of the armed forces were downsized, including more than 20,000 the size of the British Army after combat operations in Afghanistan ended.

Has the department recovered since and where is it now?

There has been relatively little change since, despite two changes of prime minister. UK defense spending now stands at 2.1% of GDP, a total of £48 billion. Money has shifted from personnel to equipment and the size of the British army is set to be further reduced to 72,500, the smallest since 1714.

However, Russia’s invasion of Ukraine and recent governments’ desire to show some form of post-Brexit international leadership has prompted a succession of pledges to undo the cuts and more.

Boris Johnson has pledged to raise the budget to 2.5% of GDP by 2030, only for Liz Truss to raise that commitment to 3%. This makes defense the only major government department to expect its spending to rise, to around £100billion in 2029-30. This includes an increase in real terms of £23 billion (the rest is due to inflation).

It would be the largest budget increase since the early 1950s, during the Korean War era.

Who would suffer the most if further cuts were imposed?

The immediate question is whether the 3% commitment will hold. New Chancellor Jeremy Hunt had said no department would be immune to efficiency savings, prompting Defense Secretary Ben Wallace and one of his aides to threaten to quit on Tuesday last if the 3% commitment was not honored by Truss. Within hours, number 10 said he would stick to the 3%.

Department of Education

The IFS estimates that real spending per student in England will be 3% below 2010 levels within two years. Photograph: David Davies/PA

How has austerity affected the department?

The education sector in England was shielded from the worst austerity measures that followed the global financial crisis. Spending on education had risen sharply under Labour, reaching 5.6% of UK national income in 2010. Subsequent Cameron-led administrations maintained a policy of ring-fencing pupil spending until the age of 16, which largely protected schools from cuts to public spending. services outside the NHS.

Tertiary education has seen something of a boom, after a sweeping overhaul of student funding in 2012 nearly tripled undergraduate tuition fees collected by universities. But the unprotected parts of the sector have suffered badly: adult education budgets have been cut, while funding per student for higher education and sixth form colleges has suffered a decade of steep decline. As a result, spending on education in 2020-21 had fallen to 4.8% of national income.

Has the department recovered since and where is it now?

Johnson’s government has offered the first significant boost to public school funding in England for more than a decade – this year direct funding for pupils aged 5-16 will reach almost £54billion, a £9 billion increase from two years ago. But surprisingly high energy prices and unfunded 5% teacher salary increases mean the extra money has already disappeared, leaving schools no better off than they were in 2010.

The introduction in 2018 of a national funding formula has made matters worse for some: while school budgets in wealthier areas have increased, the most deprived secondary schools outside London have been hit by a drop. 15% of expenditure per student. At universities, undergraduate tuition fees have been frozen at £9,250 since 2016, falling by a third in real terms and no longer covering the cost of many courses.

Who would suffer the most if further cuts were imposed?

For schools and colleges in England, the outlook was already bleak, with the IFS estimating that real spending per student will be 3% below 2010 levels within two years. At the start of 2023, there will almost certainly be strikes over the salaries of teachers and support staff in Britain.

Higher wages and the realities of higher inflation give the Department of Education little room to cut budgets from the Treasury’s 2% target, the bulk of the £95billion of the department being directly allocated to schools, colleges and universities. This leaves the DfE around £10bn to find £1.8bn in savings, with £5bn in capital funding for building a likely target, meaning a further delay in the redesign of England’s creaky school park. Meanwhile, raising money for free school meals from its daily rate of £2.47 is a distant prospect – despite 1.9million children relying on it every lunchtime.

Department of Work and Pensions

How has austerity affected the department?

UK austerity targeted the welfare budget during the 2010s, scrapping £37bn of benefits and introducing high-profile social security cuts such as the two-child limit and benefit cap. Benefits have remained meager, apart from a temporary £20-a-week Covid boost to Universal Credit during the pandemic.

Has the department recovered since and where is it now?

This is the bleak backdrop to the planned cuts in real terms to Universal Credit and other benefits for people of working age next April. It could save £3billion, but it would drive the real value of unemployment benefits down to 1982 levels as inflation soars. Some households would lose hundreds of pounds a year, with an additional 450,000 people pushed into poverty.

Who would suffer the most if further cuts were imposed?

By contrast, the value of state pensions, on which the UK spends £120billion a year, has been buoyed in recent years by the triple lockdown. If the government maintains the lockdown, state pensions would rise by 10.1% next April, or around £442 a year, bringing it to its highest real value on record.