has said
that both tax rises and spending cuts are on the table ahead of
this month's Budget. One route to reducing public spending is to
make cuts to departmental spending plans. The challenge is that
detailed department-level spending plans up to 2028–29 were
published very recently, at June's Spending
Review.
The Chancellor could reopen the
settlements agreed over the summer and cut back departments'
budgets for the next few years, but would then have to accept
reduced public service performance, a backlash from Cabinet
colleagues, and potential damage to the Spending Review process
itself (which is supposed to provide certainty to public service
leaders).
Alternatively, she could pencil in
unspecified cuts to day-to-day spending for the next Spending
Review period, and avoid having to spell out where the cuts will
fall. That might be the path of least short-term resistance, but
a consolidation package that relied heavily on unspecified future
spending cuts would likely receive a sceptical reaction from both
bond market investors and the Office for Budget Responsibility –
who might reasonably look at past experience and conclude that
such cuts are simply unlikely to
happen.
Bee Boileau, a Research
Economist at the Institute for Fiscal Studies,
said:
‘Cutting departmental
spending plans is one of the
levers has at her disposal in order
to stay within her fiscal rules at the
upcoming Budget. But it's a particularly
challenging time to do
this: departmental spending settlements for
the next three years were only just agreed in
June. Reopening them so soon would undermine the
certainty and stability they were intended to provide to
departments. And simply pencilling
in sizeable cuts to day-to-day spending in 2029–30
– beyond the Spending Review period and when
spending has not yet been allocated to
departments – would stretch
credulity. All options for cutting departmental
spending plans therefore come with unavoidable
costs – although spending cuts could in
principle considerably reduce the
need for tax rises.'
ENDS
Notes to Editor
Changes to departmental spending at the upcoming
Budget is an IFS briefing by Bee Boileau, Max Warner
and Ben Zaranko.
