IFS says tough public spending choices unavoidable 42 minutes ago Faarea Masud & Michael Race Business reporter, BBC News Tough choices are “unavoidable” as the government finalises spending plans for areas ranging from the NHS and defence, to schools and the criminal justice system, a think tank has warned.
Chancellor Rachel Reeves’s stance on ruling out borrowing more money and not raising taxes again has led to strong speculation spending cuts will be made.
“The consequences of this decision must be confronted,” the IFS warned.
‘More defence spending means cuts elsewhere’ The IFS added the level of health spending was “in some sense, the central trade-off for the Spending Review” and one that would only become starker if defence spending was increased further or faster than currently planned.
The ONS reported in 2024 that productivity in public services is currently below pre-Covid pandemic levels.
Tough public spending decisions are inevitable, according to IFS.
Forty-two minutes previously.
Masud Faarea and Race Michael.
Business reporter for BBC News.
A think tank has cautioned that difficult decisions are “unavoidable” as the government completes spending plans for everything from the criminal justice system and schools to the NHS and defense.
The amount of money spent on health would determine whether or not cuts were made to “unprotected” areas, which are those outside of the NHS, defense, and schools, according to the Institute for Fiscal Studies (IFS).
According to the IFS, despite a significant increase in funding for transportation, net zero, hospitals, schools, and prisons in 2024, the government’s commitments would prevent the funding from increasing annually.
The Spending Review scheduled for June 11 will “scrutinize every single pound the government spends,” according to the government.
Daily departmental budgets for the next three years and investment budgets for the next four will be outlined in the review.
Whitehall insiders have told the BBC that they anticipate it to be “ugly” and that ministers have been squabbling over their departments’ meager financial gains.
There are worries that initiatives like hiring more police officers in an effort to cut violence against women and girls in half might not receive enough funding. Continued funding for bus fare caps is another topic of discussion.
Since Chancellor Rachel Reeves has stated that she will not raise taxes or take on additional debt, there is a lot of conjecture that spending cuts will be implemented.
Reeves “chosen to push borrowing and spending to the limit,” according to the Conservatives, leaving her with only “impossible choices.”.
“They have increased the cost of living, unemployment is increasing, and growth is stagnating,” stated Mel Stride, the shadow chancellor. Rachel Reeves continues to adhere to her tax-and-spend philosophy as if it were from the 1970s. “.
The IFS predicted that spending would slow down because the government had “front-loaded” its expenditures during the first two years of the parliamentary term. The IFS cautioned, “The consequences of this decision must be confronted,”.
A “huge amount depends on the generosity” of funds given to the NHS, which makes up 39% of daily departmental spending, and defense, according to the think tank, when it comes to daily spending on public services.
According to the IFS, the NHS is expected to spend £202 billion in 2025–2026. As the government prioritizes lowering patient wait times and enhancing access to dental care, this spending may require money from other sectors.
The think tank stated that “imposing real-terms cuts on other ‘unprotected’ departments would be necessary if health funding were to increase at any rate comparable to the historical average.”.
It stated that this would be difficult, particularly in light of the government’s goals to address prison overcrowding and enhance the criminal justice system.
“Spending more on defense means spending less elsewhere.”.
Health spending was “in some sense, the central trade-off for the Spending Review,” according to the IFS, and it would only get more pronounced if defense spending were to rise more quickly or further than is currently anticipated.
“Some unavoidably tough choices” were up for the Treasury, according to Bee Boileau, an IFS research economist.
“The flow of additional funding is now set to slow to more of a trickle after turning on the spending taps last autumn,” she stated.
In addition to pledging to reduce the foreign aid budget in order to raise military spending to 2.5 percent of national income by 2027, the government has committed to increasing spending on the army and its estates.
The IFS stated, “Giving more to defense means, all else equal, bigger cuts to something else.”.
The IFS cautioned that “not everything can be a priority for further increases” despite Reeves’ October amending of a self-imposed debt rule, which allowed her to spend billions on long-term projects like energy infrastructure and roads.
The civil service is “totally overstaffed.”.
Concerns about “whether the trade-offs will be confronted rather than wished away” were still present, according to the report.
Jewelry designer and entrepreneur Kiki McDonough stated on the BBC’s Sunday with Laura Kuenssberg show that she thought the public sector could save money.
To her, “I think if you went through it like a dose of salts and tried to find some savings, you could find a lot of savings,” she said, adding that the civil service is overstaffed and not functioning properly.
Ms. McDonough said that the chancellor’s first budget was “like someone had thrown chaos at us” and criticized her for raising the amount that employers pay in national insurance.
As cabinet secretary, Simon Case, the former head of the civil service, acknowledged that he “totally failed” to cut the organization’s size.
He told the show, “I was supposed to reduce the size of the civil service but it actually went up.”.
In all of our public services, it is undeniably true that there is room for improvement in terms of efficiency and effectiveness. “.”.
In order to continue improving public services under strict constraints, the IFS has proposed that the government increase productivity, which would enable it to provide the same or better services with smaller budgets.
However, that would be difficult. In 2024, the ONS stated that public service productivity is currently lower than it was prior to the COVID-19 pandemic.
According to a government spokesperson, it is “addressing the cost of living, gaining control of our borders, and reducing hospital waiting lists—what matters for working people.”.
Maintaining flat pay would “pose serious challenges,” the IFS cautioned, as the decision to reduce public sector pay has recently resulted in strikes.
Although it would be difficult and necessitate “ruthless prioritization,” it was determined that cutting public services would not be impossible.
