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Politics

Autumn Statement: Spending cuts would ‘condemn country to more years of failing public services’

Jeremy Hunt has been told huge public spending cuts in his Autumn Budget will “condemn the country to more years of failing public services”

Leading economists and Tory-run councils have joined the chorus of voices urging Jeremy Hunt to think again about huge public spending cuts in Thursday’s Autumn Statement.

A letter from 120 academics has landed on the chancellor’s desk warning him the expected billions of pounds in cuts would be an act of “economic self-harm” and “condemn the country to more years of failing public services”.

The last-ditch attempt to stop the cuts follows a warning from Kent and Hampshire councils on Monday that they will go bankrupt without proper funding.

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With reports of a £55billion “black hole” in public finances, Hunt told Sky News on Sunday there would be “some spending cuts if we’re going to show that we’re a country that pays our way”. He said a strong economy needed good public services and cuts would be made in a “balanced way”.

But in the wake of a decade of austerity and the pandemic, the NHS has warned the government there is “no fat left to trim”, while the cuts to education since 2010 were described last year as being “effectively without precedent in post-war history” by the Institute for Fiscal Studies. Council budgets have also been slashed by £15bn in the last 12 years and the Local Government Association (LGA) has told the chancellor the financial sustainability of councils and public services is “on a cliff-edge”.

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Those local services can include libraries, youth centres, children’s centres, homelessness outreach – all of which have already been decimated over the last 12 years.

The open letter from economists, organised by the Stop the Squeeze campaign, is signed by leading academics from universities including Oxford, Cambridge, the London School of Economics, University College London, Kings’ College London, York, Leeds, Edinburgh, Sheffield, and Glasgow.

They argue that supporting people with the cost of living should be the government’s priority because household finances are in crisis, while public finances are not. Days after the letter was sent, inflation hit a 41-year high of 11.1 per cent, hitting the poorest hardest.

“While borrowing costs have risen because of poor economic decisions made recently, they still remain low by international standards,” the letter states. “There is significant potential to increase revenue-raising through reforms to the tax system and increasing taxes on wealth. The UK deficit next year will be the second lowest in the G7 as a percentage of GDP.

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“Although the situation is not identical, the lessons from the imposition of austerity in the UK and across Europe post 2008 are clear. Spending cuts applied to an economy attempting to recover from an economic shock worsen the impact of that shock and cause lasting economic and social damage. The International Monetary Fund is amongst those stressing this lesson be learned by those governing advanced economies.”

Analysis by the New Economics Foundation this week has found that even before cuts, the effects of higher inflation will see overall spending on public services drop by at least 8.3 per cent in real terms – or £43bn a year – between 2021/​22 and the end of 2024/​25.

LGA chair James Jamieson also said soaring inflation and energy bills alongside a rise in the living wage have already added £2.4billion onto the budgets set by councils in March. He said many are now dipping into reserves, scrapping major spending projects or cutting already-depleted services. Authorities are also facing a funding gap of £3.4bn in 2023/24.

He added: “In the past decade, councils have done more than their fair share of the heavy lifting when it came to putting public finances on a more sustainable footing, having faced a £15bn real terms reduction to core government funding between 2010 and 2020.

“The government needs to ensure councils have the funding to meet ongoing pressures and protect the services that will be vital to achieve its ambitions for growth and to produce a more balanced economy, level up communities and help residents through this cost-of-living crisis.

“Without certainty of adequate funding for next year and beyond – and given the funding gaps they face – councils will have no choice but to implement significant cuts to services including to those for the most vulnerable in our societies.”

Homelessness outreach workers have also sounded the alarm that their work will become even harder without proper funding, which often comes from councils.

Homeless Link is calling for Hunt to raise their funding in line with inflation, something councils can’t afford to do.

“Without urgent government action to keep doors open, people experiencing homelessness may not have safe, trusted providers to turn to as services are forced to close,” the charity said. “This will lead to a rise in people sleeping on the streets and make it very difficult for the government to meet its manifesto pledge of ending rough sleeping in England.”

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