Freeze on public spending ‘risks return to austerity’

BRITAIN risks returning to the austerity of the 2010s if the Government freezes public services spending, economists have warned.

While a real-terms freeze would save about £20billion a year by 2026-27, the impact would be huge, the Resolution Foundation said.

Rampant inflation has already reduced public spending power by £22billion in real terms and turned planned spending increases into cuts for some departments.

A freeze would mean departments such as transport, justice and local government – assuming health, education, overseas aid and defence are protected – would be cut by about 9 per cent, the think tank said.

It comes as Rishi Sunak, the Prime Minister and Chancellor Jeremy Hunt attempt to fill a deep hole in the public finances. Sources claim the Treasury is looking for tax increases and spending cuts totalling £50billion.

Cuts to day-to-day public service spending – which amounts to £437billion this year – are under consideration.

James Smith, Resolution Foundation research director, said: “Significant reductions in day-to-day public service spending are on the cards, while protecting areas such as health and defence. This would repeat a key option chosen by Conservative-led governments since 2010. Freezing such spending in real terms would save £20 billion a year... but take Britain into a new era of austerity.”

Meanwhile, Mr Hunt has sought the advice of George Osborne, the architect of austerity in the wake of the 2008 financial crisis, as he prepares next month’s Autumn Budget.