Jeremy Hunt’s Budget failed to address ‘the real challenges’ facing UK, IFS warns

Institute for Fiscal Studies director Paul Johnson laid bare the chaos facing the NHS, local authorities, social care and the justice system, and said the chancellor had not been ‘transparent’ about the scale of the problems

Jeremy Hunt’s Budget failed to address the “real challenges” facing Britain, the boss of Britain’s most influential economic think tank has warned.

Paul Johnson, director of the Institute for Fiscal Studies (IFS), laid bare the chaos facing the NHS, local authorities, social care and the justice system, and said the chancellor had not been “transparent” about the scale of the problems.

And, in a damning assessment of the Conservative government and Labour, he said both are engaged in a “conspiracy of silence” about just how bleak the outlook for the country is.

Chancellor Jeremy Hunt gave workers a 2p national insurance cut on Wednesday (PA Wire)

In his widely-watched post-Budget analysis, Mr Johnson said: “This was not a budget which addressed the real challenges we are facing because it was not transparent about what those challenges are.

“Government and opposition are joining in a conspiracy of silence in not acknowledging the scale of the choices and trade-offs that will face us after the election. They, and we, could be in for a rude awakening when those choices become unavoidable.”

As the impacts of the chancellor’s Budget became clear:

• The IFS said Jeremy Hunt had failed to address the “real challenges” facing the country
• Its director accused Labour and the Conservatives of engaging in a “conspiracy of silence” about those challenges
• The Resolution Foundation said living standards would fall this parliament for the first time on record 
• Rishi Sunak doubled down on Jeremy Hunt’s suggestion that the Tories would seek to scrap national insurance, a move branded “reckless” by Labour 
• Mr Hunt claimed he was bringing down the tax burden “in a way that is responsible and protects our public services”
• Shadow chancellor Rachel Reeves said the government had “given with one hand and taken much more with the other”

Mr Johnson said Mr Hunt’s Budget “did not change anything very significantly… which is a shame”.

The economist said the national debt is at its highest in 70 years and “showing no signs of falling”, while interest payments soar. And he highlighted a “worrying increases in the number of individuals moving onto health and disability related benefits”, which brings its own “huge challenges” to the public purse.

And, after Mr Hunt offered voters a pre-election bung in the form of a 2p national insurance cut, Mr Johnson said the Budget came with “big implicit cuts in public investment spending overall and cuts to many areas of day-to-day spending on public services despite very obvious signs of strain in many areas”.

Rachel Reeves accused the chancellor of giving with one hand and taking ‘much more’ back with the other (PA Wire)

“One only has to look at the scale of NHS waiting lists, the number of local authorities at or near bankruptcy, the backlogs in the justice system, the long-term cuts to university funding, the struggles of the social care system, to wonder where these cuts will really, credibly come from,” he added. Mr Johnson warned that cuts to day-to-day spending on a range of public services outside of health, defence and education, will have to fall by around £20 billion.

The damning verdict came as the Resolution Foundation warned that Rishi Sunak and Mr Hunt will oversee the first ever fall in living standards between elections despite Wednesday’s tax-cutting Budget, the Resolution Foundation has warned.

In its own withering assesment of the state of the economy, the think tank said this has been a parliament of “flatlining growth” and falling living standards.

And, even accounting for the chancellor’s national insurance giveaway, the Resolution Foundation said that by the next election, households’ disposable income will have fallen by 0.9 per cent - the first parliament in modern history to see a fall in living standards.

Chief executive Torsten Bell said: “Budgets are always a big day for Westminster, but the big picture for Britain has not changed at all. This remains a country where taxes are heading up not down, and one where incomes are stagnating.”

And he told BBC Radio 4’s Today programme: “If you look over the course of the last 15 years, what we see is that our wages today are back where they were in 2008.

“In fact, the Office of Budget Responsibility (OBR) says we won’t get back to 2008 wage levels until 2026.

“That’s 18 last years of wage growth.”

Rishi Sunak doubled down on the chancellor’s plans for the Conservatives to scrap national insurance (Carl Recine/PA Wire)

The think tank also pointed to the “implausible” post-election spending cuts pencilled in by Mr Hunt to give him room for the tax handouts without breaching his so-called “fiscal rules”.

Mr Bell added: “Big tax cuts may or may not affect the outcome of that election, but the task for whoever wins is huge.

“They will need to both wrestle with implausible spending cuts, and also restart sustained economic growth – the only route to end Britain’s stagnation.”

It comes after Mr Hunt used Wednesday’s Budget, likely the last before an autumn general election, to cut 2p from national insurance, saving a person on an average £35,000 salary around £450 a year. Combined with a cut last autumn, the chancellor said average earners would now be £900 better off.

But despite the handout, which Mr Hunt and the PM had hoped would boost the Tories’ dire poll ratings, experts warned the savings for voters had been eclipsed by the amount taken back through so-called stealth taxes.

The highly respected Institute for Fiscal Studies (IFS) said for every £1 handed back to voters by the chancellor, the decision to freeze tax thresholds would claim £1.30 as taxpayers are dragged into higher brackets.

Defending his Budget on Thursday, Mr Hunt said he was bringing down the tax burden “in a way that is responsible and protects our public services”.

“That’s what I have done in the autumn statement and the spring Budget, if you want to see that continue then it is only the Conservative Party that wants to bring down the tax burden,” he told Sky News.

Mr Hunt also doubled down on the suggestion he wants to phase out national insurance as a tax altogether, describing it as an “unfair” levy. He admitted it will not happen “any time soon”, but suggested one option would be to merge income tax and national insurance.

Pressed on whether Wednesday’s Budget set the stage for a May 2 election, Mr Hunt insisted it was a decision for Mr Sunak, whose current plan is to go to the country this autumn.

It came as shadow chancellor Rachel Reeves savaged the Budget, highlighting Labour analysis of OBR figures which show average families will be left £870 per year worse off by Mr Hunt’s measures.

“The government have given with one hand and taken much more with the other,” she told Today.