Some government departments could be facing real-terms funding cuts of 1.4% in the years to 2028-29, an Institute for Fiscal Studies analysis of the Autumn Budget has revealed.
Chancellor Rachel Reeves yesterday set out public spending plans that include a 4.3% increase this year and a 2.6% uplift next year – after inflation and the additional cost to employers of rising national insurance contributions.
But after two years of "frontloading", resource spending is set to rise by just 1.3% for the following three years, which IFS director Paul Johnson said in a briefing today would "almost certainly mean real-terms cuts for some departments".
Analysing the government's public spending proposals, IFS research economist Bee Boileau said that while an additional £26bn had been confirmed for the current financial year alone, the final three years of the spending window would be "tight".
Boileau said that a 3.4% growth trajectory for health spending implied that other areas would be "basically flat" in real terms in the years to 2028-29. However, she noted that "relatively protected" areas of government spending, such as the Foreign, Commonwealth and Development Office, childcare and defence, meant "steeper cuts" for other areas.
"It in fact looks like unprotected areas will be seeing cuts after next year of around 1.4% in real terms," Boileau said. "To avoid making these cuts in 2028-29 would require a top-up of around £9bn."
She added that £9bn seemed "relatively small" compared with the other figures mentioned in the budget – not least the £22bn "black hole" the government controversially claims to have inherited from the Sunak administration. However, Boileau said £9bn would take up a significant share of Reeves's anticipated financial headroom over the period.
She said the government's plans to rein in public spending after two years of relatively generous settlements and then begin imposing real-terms cuts on unprotected departments seemed "implausible".
Boileau pointed to the track record of New Labour in the late 1990s and early 2000s, when multi-year spending reviews typically received a boost towards the end.
She added that "rapid ramping up" of spending also carried the risk that some of the funds may not be used as well as they might – or may not be spent at all. Boileau said capacity limitations in the construction sector made it particularly hard to accelerate capital spending.
OBR chair dubs frontloading "remarkable"
In a briefing hosted by the Resolution Foundation think tank this morning, Office for Budget Responsibility chair Richard Hughes said it was "remarkable" how much of the public spending outlined in the budget was frontloaded.
"Resource budgets are growing by about 4.5% in real terms this year, 3% in real terms next year, and that supports a set of detailed departmental spending plans which have been negotiated and nailed down over the course of a few weeks," he said.
"What’s notable is the path of public spending then slows quite dramatically after that, back down to 1.3% over the remaining years of the parliament after next year. That’s not much above what was in the previous government’s spending plans, which was about 1%.
"So on the spending side, clearly a big injection of resources into the health service and other public services over the next few years, but then still quite a lot of unanswered questions about what happens over the rest of the parliament."
Hughes said Labour's commitments to increase defence spending to 2.5% of gross domestic product and to increase Official Development Assistance were among those questions.
He said that while yesterday's Budget had "filled in some of the details" of the government’s spending plans, the big task would be making the numbers add up for the spring's multi-year spending round.