Labour cuts or no austerity – who will be right?

The IFS stated on 16 April: “Current policy plans imply real-terms cuts to public investment of 2.6% per year over the next parliament. Avoiding those would require increasing spending by £18bn in 2029–30.

It goes on: “Spending on public services is set to grow by 1% per year in real terms over the next parliament, under current government policy. But ‘protecting’ the NHS, schools, childcare and defence budgets will mean that most departments will face real-terms cuts averaging 3% per year. To avoid those would require around £20 billion of extra spending in 2029–30.”

So the £18bn figure appears to be about capital spending. The £20bn figure is for current or day-to-day spending. Perhaps Mr Swinney is under-shooting the figures the IFS has published.

But note the year for this level of cut – five years from now. There could be a build-up to that point, but a lot can happen to knock plans off course, or to improve the public finances. And there is no clarity to Treasury spending plans beyond this year.

Writing on 25 May, the top team at the IFS updated its thinking: “How big those cuts are depends on what happens to the ‘protected’ areas (such as health and defence), among other things.

“The whole point is, there are no published plans beyond this year, meaning that we do not know. A reasonable estimate is that unprotected budgets face cuts of between 1.9% and 3.5% per year (or between £10 and £20 billion by 2028–29).

“Notably, this is before accounting for recent announced increases in defence spending. The precise figures are less important than the fact that there are cuts on the way with absolutely zero sense from the main parties about where those might fall.”