Schools and hospitals ‘must find £11bn of cuts’ after Kwarteng spending freeze

Local councils told there is ‘fat to be trimmed’ from their budgets – despite a decade of austerity

Schools and hospitals must find a whopping £11bn of cuts after the chancellor refused to protect their budgets from rampant inflation, experts say.

Kwasi Kwarteng is being warned that his decision to stick to 2021 spending allocations – despite prices now rising by 10 per cent – spells bad news “for stretched public services”.

The chancellor sparked fresh fears when he confirmed he has rejected pleas to reopen the settlement, saying it was vital to “stick within the envelope of the CSR [the Comprehensive Spending Review]”.

The respected Institute for Fiscal Studies (IFS) has already warned an extra £18bn was needed next year to restore “the real-terms generosity intended” when the allocations were made.

Now it has calculated the pain ahead for key services such as health and social care (£7.5bn), education (£3.4bn), the home office (£0.7bn), justice (£1.4bn) and defence (£1.4bn).

“That will pose obvious challenges for stretched public services,” Ben Zaranko, a senior research economist at the IFS, told The Independent.

The warning came as the local government minister insisted there is “fat to be trimmed” from town hall budgets, despite hundreds of billions of cuts during the decade of austerity.

“To be fair, the spending review provided a generous settlement [for councils]. So there is fat to be trimmed,” Paul Scully told the Local Government Chronicle.

He added: “I know that is a moral dilemma, but I think there is fat to be trimmed in all areas. It’s a case of moving things around a bit. There are a number of councils who have a Covid overspend.”

Departmental allocations were made when inflation was forecast to peak at 4 per cent next year. It is now expected to rise to 11 per cent in the autumn, remaining at a similar level through most of 2023.

There is already growing alarm over the record NHS patient backlog, existing cuts to school spending, the crisis in social care and massive delays in the justice system.

Mr Zaranko added: “Higher inflation makes the government’s plans for public service spending less generous than they were originally intended to be.

“Next year, overall departmental funding will be about £18bn lower in real, inflation-adjusted terms than under the government’s original plans.

“That’s how much the chancellor would need to top up his plans by to compensate. If, as seems likely, no such funding is forthcoming, departments will have to absorb these cost pressures from within existing budgets.”

Tulip Siddiq, a Labour treasury spokesperson, said: “Public services are already struggling after 12 years of low growth and austerity under the Tories.

“They should be looking instead to not just reverse their budget but their whole discredited trickle-down economic strategy.”