New austerity: can public services take any more cuts?

A majority of Britons favour keeping taxes higher if it means more money is spent on public services.

The findings from a new poll are a "major blow" to the government's "hopes of enticing voters with a tax giveaway", said The Independent. Rishi Sunak and Chancellor Jeremy Hunt are believed to be considering cuts to public spending to enable them to announce a reduction in income tax or national insurance at next week's Budget – possibly the last before voters go to the polls in a general election.

But polling by the Fairness Foundation found just 16% of voters favour tax cuts if it means reducing funding for public services, compared to 64% who support keeping taxes as they are or increasing them. Even among Conservatives, half want to see public spending maintained (50%), and almost a quarter would like it increased (23%).

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"Public services are in the last chance saloon," warned Christina McAnea, the general secretary of Unison, the public service trade union. "Years of underfunding mean they're already close to collapse and slashing spending further still is the last thing anyone needs."

What did the commentators say?

Speculation over the chancellor's plans has been growing since the Financial Times (FT) reported earlier this month that Hunt was "considering slashing billions of pounds from public spending plans to fund pre-election tax cuts if he is penned in by tight finances" in his 6 March Budget.

The problem, said Robert Colvile in The Sunday Times, is that economic forecasts have moved "relentlessly against" Hunt in recent months, with the Office for Budget Responsibility calculating that his "fiscal headroom" has more than halved to just £13 billion. To "expand his freedom of manoeuvre", the chancellor is reportedly "considering squeezing future spending, which he already squeezed to pay for the last round of tax cuts" at November's Autumn Statement.

Hunt's widely touted 1% annual real-terms increase in public spending until 2029 would "imply serious cuts to some stretched public services", said the FT. The paper reported that Treasury officials were "considering going further" and reducing projected spending rises to about 0.75% a year.

With some ring-fenced departments such as health and defence earmarked for spending increases, said The Guardian, most public services would likely face "swingeing cuts across the next five years" that are equivalent to those undertaken by David Cameron's coalition government.

The idea that tax cuts are affordable "rests on undeliverable spending plans", said the Resolution Foundation. They "imply requiring real per-capita spending cuts of around 18% for unprotected departments like the Home Office, justice and local government by 2028-29" – all of which are already in a state of crisis. The think tank's research director, James Smith, said this was "essentially returning to austerity levels of cuts in terms of the implied spending cuts" – something the foundation's chief executive Torsten Bell called "ludicrous".

And "this comes on the back of large real-terms cuts for those departments from 2010 to 2015 and quite restrained spending since then", said Andrew Goodwin, chief UK economist at Oxford Economics. These "efficiency savings have long since been exhausted", he added. "You're now really talking about choosing which services not to provide any more."

The proposals have been met with a stern warning from the International Monetary Fund (IMF), which deemed the planned spending cuts as unrealistic following a downgrade in its growth forecasts.

With Britain's economy in recession and living standards suffering the longest sustained fall since records began almost 70 years ago, unions have also taken aim at the chancellor's plans. Sharon Graham, the Unite general secretary, said it was an "outrage" that the government was looking to balance the books by forcing more austerity on to services that were already on their knees, said The Guardian.

"The current state of public services are generally pretty poor across the board," said Stuart Hoddinott, a senior researcher at the Institute for Government. Further spending cuts risk "a deterioration in performance that would be unacceptable to any government".

What next?

With increasingly dire economic forecasts limiting options for the chancellor, "the fate of critical tax cuts – which Conservative MPs are banking on as a game-changing moment before the election – hangs in the balance", said The Telegraph.

The effect of public spending cuts would in most cases not be felt until after the election, which Labour is widely expected to win. Keir Starmer's party has plans to "relieve some of the spending pressure with particular tax rises, such as ending the non-dom regime, which will raise money to pay for more weekend and evening GP appointments, among other things", said The Guardian.

But when it comes to the "major working taxes", Labour "will be in lock-step with the Tories", said The Telegraph. Shadow chancellor Rachel Reeves has already ruled out raising income or wealth taxes to fund daily departmental spending.

The Tories' desire to reduce the tax burden is "storing up huge spending cuts down the line, compounding national decay", said Freddie Hayward in The New Statesman, while also "forcing Labour on to the back foot".

Unlike in 1997 or 2010, however, the next government will take office with public services "already at breaking point", said The Guardian.