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27 October 2021

How generous was Rishi Sunak’s 2021 Budget and spending review really?

Beneath the surface of headline-grabbing announcements, the long legacy of austerity still cuts deep.

By Anoosh Chakelian and Katharine Swindells

When delivering his Budget, Rishi Sunak boasted that the Tories are now the party of public services, which is as much an affront to some Conservatives as it is a challenge to Labour.

Yet when you dig into the spending commitments, it doesn’t quite stack up.

Spending is rising across the board, with total departmental spending growing by £150bn over this parliament.

But, in real terms, the 3 per cent average annual increase in departmental budgets is not the largest rise even by pandemic-era standards, according to analysis by the Institute for Fiscal Studies.

Many of the biggest pledges are for capital investment – rather than day-to-day spending – and a lot of the extra cash will not make up for the previous decade of cuts.

Gone are the days of Conservative prime ministers and chancellors using the word “austerity”, but it’s unlikely even the pledges today will take public services back to their pre-2010 state.

Here are the Chancellor’s main pledges, in context:

Public sector pay rises

Pledge: Ending the public sector pay freeze.

Reality: The rise in salaries for workers like teachers, nurses, doctors and police officers will have to be found from within departments’ existing budgets – squeezing what they can spend on non-wage-related areas.

We will only find out how much these salaries will actually rise by next year, when the pay review bodies report their recommendations.

The spending review warns these salaries will have to “continue to be affordable”. But any pay rises would have to be particularly generous to make up for the real-terms cuts to wages since 2010.

Over the decade prior to the pandemic, average public sector earnings fell by 1.3 per cent in real terms. For example, the average teacher saw a 9 per cent fall in their earnings, according to the Institute for Fiscal Studies, and nurses’ average pay is now 5 per cent less than a decade ago, according to the Nuffield Trust.

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Data by Katharine Swindells

Allowing Universal Credit claimants to earn more

Pledge: Cutting the taper rate of Universal Credit – the amount of benefit you lose with each pound you earn above your work allowance – from 63p to 55p by early December.

Reality: Cutting the taper rate of Universal Credit to 55 per cent by the beginning of December will make a big difference to Universal Credit claimants who are working, particularly over a difficult winter. But only a minority of claimants, 37 per cent, are in work – the £20-a-week end to the Universal Credit uplift, which has not been reversed, affects all claimants. This means those who have the least will lose out the most.

Raising minimum wage

Pledge: A rise in the minimum wage from £8.91 per hour to £9.50 per hour, to come into effect from 1 April next year.

Reality: This is a welcome change for low-paid workers. But it doesn’t make up for the £20-a-week cut in Universal Credit, even with the lower taper rate, because claimants of Universal Credit are not the same people who earn the minimum wage – over five million people are on the benefit, whereas two million earn the minimum wage.

Also, the government’s claim that a full-time worker will be £1,000 better off because of this rise does not factor in rising living costs due to inflation – something that a rise in minimum wage may contribute to, as businesses have to shift the costs of paying their staff more on to the consumer.

Investing in public transport

Pledge: A £7bn boost to public transport.

Reality: Very little of this is actually new money: £4.2bn was announced for local transport networks in eight English city regions in 2019, and is being bumped up to £5.7bn (with some apparently already pre-announced capital spending).

The new new money seems to be the additional £1.2bn of funding for buses. And the reason more spending on buses is needed is because services were cut under previous Conservative governments: between 2010-11 and 2017-18, 3,088 bus services were reduced, altered or withdrawn, according to Campaign for Better Transport.

Boosting NHS funding

Pledge: Bringing down the waiting lists with £5.9bn to tackle the backlog of people waiting for tests and scans – on top of the money already announced in the health and social care levy.

Reality: This extra money is described as “capital investment”, as opposed to day-to-day spending: £2.3bn of it is for investment in diagnostic tests, including community clinics (like in shopping centres) where people can get scans, £1.5bn on hospital beds, equipment and “surgical hubs”, and £2.1bn to improve the health service’s IT.

But without plugging NHS staff shortages, who will man these hubs and machines? One in ten nursing roles are vacant at the moment – meaning recruitment is not keeping up as waiting lists rise.

Increasing council funding

Pledge: £1.6bn of new grant funding for councils each year for the next three years.

Reality: On the one hand, this is the largest sustained rise for councils in over a decade – but on the other, councils have been one of the biggest victims of cuts since 2010.

Central government funding to councils has been cut by 38 per cent (from 2009-10 to 2018-19) overall. So the extra spending announced today will go nowhere near to increasing local government spending power to pre-austerity levels.

Spending more on the justice system and courts

Pledge: An additional £785m in 2024-25 to manage the increased number of offenders being brought to justice and reduce waiting times in the criminal courts.

Reality: This does not make up for Crown Prosecution Service (CPS) funding being cut by a quarter over the past decade. Ten years ago, in the financial year 2010-11, the CPS was given £643m.

Improving youth clubs and community sport facilities

Pledge: £560m for youth services in England, and £205m for grassroots football and sports facility infrastructure.

Reality: While it is difficult to tell how many individual services this investment will pay for, the Budget and spending review documents promise this “will provide up to 300 youth facilities”, roll out “up to 8,000” community pitches, and “refurbish more than 4,500” public tennis courts over three years.

But more than 700 council football pitches have been lost in Britain between 2009-10 and 2017-18 alone, funding for youth services in England was cut by £1bn between 2010 and 2019 with over 1,000 youth centres lost, and almost 800 libraries closed between 2010 and 2019.

Rolling out children’s services

Pledge: The £500m “household support fund” is designed to expand the Supporting Families programme for up to 300,000 families that face multiple issues, rolling out and improving “family hubs” in 75 councils across England, and increasing the rate to be paid to early-years providers for free hours offers.

Reality: These sound like patching up for the loss of New Labour’s flagship Sure Start centres, which were cut in the austerity years. According to a National Audit Office study, Sure Start budgets in England were reduced by £763m (50 per cent) between 2010 and 2017.

At their peak in 2010, there were 3,600 centres, with a budget of about £1.8bn, and between 500 and 1,000 Sure Start centres have closed in England since then, according to the Sutton Trust.

School spending boost

Pledge: A cash increase of over £1,500 per pupil by 2024-25 compared with 2019-20.

Reality: The big boast is that this will return spending per pupil to 2010 levels – not much of an achievement, given the lack of growth in between, which saw a 9 per cent fall in funding since 2009, the “biggest cut in 40 years”, according to the BBC.

More funding for post-pandemic education catch-up spending

Pledge: Covid-19 catch-up fund boosted by £1.8bn.

Reality: This takes spending on the education recovery to almost £5bn. This is still nowhere near the £15bn that the former adviser to the government on schools catch-up, Kevan Collins, recommended before quitting in June over the “half-hearted” approach on education spending.

Providing more for special educational needs and disabilities

Pledge: £2.6bn of capital funding for new school places for children with special educational needs and disabilities (Send) over three years.

Reality: By the end of last year, the annual shortfall in Send funding was £2bn, according to the National Education Union.

Budgets for special educational needs have been stretching councils so much that the combined overspend on “high needs” education budgets among local authorities in England rocketed from £61m in 2015-16 to £195m in 2017-18, according to freedom of information requests by the Observer.

Almost all school leaders (97 per cent) surveyed by the National Association of Head Teachers union say funding for pupils with Send in their school is insufficient to meet their pupils’ needs.

Cladding provision

Pledge: £5bn funding for remediation of the highest-risk buildings with unsafe cladding.

Reality: This is a recycled announcement – and nowhere near the £15bn needed, as calculated by the Communities and Local Government Select Committee.

[See also: Rishi Sunak’s 2021 Budget is one giant U-turn]