Hunt budget means spending cuts will be even more painful than austerity era, top economists warn

Public sector cuts will be ‘more painful’ than under Cameron and Osborne, says IFS – accusing Hunt of leaving ‘mother of a headache’ for next government

Jeremy Hunt’s economic plans have put Britain on course for drastic public sector cuts even more “painful” that the austerity period of the 2010s, top economists have warned.

The Conservative chancellor boasted of handing out the biggest tax cuts since the 1980s – but experts say he offered no credible plan to deliver the huge spending cuts now required.

The Institute for Fiscal Studies (IFS) said “sharp” and “harsh” budgetary reductions were now needed, accusing Mr Hunt of leaving a big problem for whoever is chancellor after the next general election.

The influential think tank’s director Paul Johnson said the austerity ahead would be even more severe than the Tory programme delivered by David Cameron and his chancellor George Osborne between 2010 and 2016.

Mr Johnson said: “George Osborne managed to get the size of the state back down after the financial crisis. That was painful. Doing it again will be more painful still.”

“Mr Osborne made his cuts after a decade of big spending increases. Mr Hunt – or his successor – will have no such luxury,” he added.

The IFS expert said Mr Hunt’s “successor is going to have the mother and father of a headache when it comes to making the tough decisions implied by this statement in a year or two’s time”.

The institute said the Rishi Sunak government’s tax cuts – including a 2p cut to national insurance and £11bn-a-year-tax break for businesses – were “paid for” by “pretty serious cuts across other areas of public spending”.

“How did Mr Hunt afford tax cuts when real economic forecasts got no better? He banked additional revenue from higher inflation, and pencilled in harsher cuts to public spending,” said Mr Johnson.

Economists say Hunt’s tax cuts did not offset rising tax burden (AFP/Getty)

Leading economists have been scathing about the impact of the tax giveaway – warning that Mr Hunt had left the next government a “ticking time bomb” of austerity cuts to public services. Those departments not ringfenced face cuts of over £20bn by 2027-28, said the IFS.

Ben Zaranko, an economist at the IFS, said councils, prison services and courts and benefits at the Department for Work and Pensions could be “squeezed”. He added: “It seems inconceivable that you could make cuts of 2 per cent or 3 per cent per year to those services and not have some impact on quality.”

The Office for Budgetary Responsibility (OBR) warned that Mr Hunt’s plans left £19bn-worth of real-terms spending cuts ahead, warning that it would “present challenges”.

The watchdog said it meant a 2.3 per cent a year real-terms cut to spending in the decade ahead. Unprotected departments – those outside of health and defence – would face cuts of 4.1 per cent a year in real terms.

OBR chief Richard Hughes said on Thursday that Mr Hunt had pumped only £5bn extra into public spending – but insisted that the chancellor would have had to have added £25bn “if he wanted to keep them the same in real terms”.

Liberal Democrats’ Treasury spokesperson Sarah Olney MP said Mr Hunt had stored up a “disaster” for hospitals, schools and local authorities with the spending cuts. She said he had set out “no plan for the future, leaving our crucial public services in a dire state”.

The Resolution Foundation described the cuts as “completely undeliverable”. Chief executive Torsten Bell said Mr Hunt’s pre-election “giveaway” offers tax cuts today at the price of “implausible spending cuts tomorrow”.

And the Institute for Government said the chancellor has “abdicated his responsibility” by failing to address the spending black hole.

Chancellor has denied being ‘fundamentally dishonest’ about tax cuts (Getty Images)

Mr Hunt suggested more tax cuts could be on the way ahead of the general election. The chancellor said he was able to “make a start” and hoped he will be able to “reduce the tax burden still further in the future”.

The chancellor has denied being “fundamentally dishonest” by claiming his new tax cuts were the biggest since the 1980s and “the biggest in history”.

A Tory social poster claiming the tax cuts were “the biggest ever” was slapped with a clarifying “community note” on X, which stated that the tax burden is on course to reach a post-war high.

Official spending watchdog the Office for Budget Responsibility (OBR) also stressed that taxes are on course to reach the highest level since the Second World War.

The IFS said Mr Hunt was “taking more from us than it gives back”. The think tank said the national insurance cut had was not quite “offsetting” the “greater than expected fiscal drag” – the freezing of tax thresholds for which have pulled millions into paying higher rates.

The IFS’ findings also revealed that for every £1 the Treasury has taken from taxpayers, less than 25p is coming back in tax cuts. The analysis showed that Mr Hunt’s tax cuts give back to taxpayers less than £1 for every extra £4 being paid in tax rises since 2021.

The chancellor clashed with Nick Robinson, host of BBC Radio 4’s Today programme, after the broadcaster told him the claim was fundamentally dishonest and “downright misleading.”

Mr Hunt said he strongly disagreed and defended his package. “I did make a start in bringing down the tax burden. I’ve never said that we were going to get there all in one go.”