The Institute for Fiscal Studies has warned that the chancellor may have to implement cuts to some budgets over the next two years, and that a “difficult two years” for local government “could very easily become a difficult three”.
Ahead of this month’s spending review, the IFS has said that “an ever-growing NHS budget, top-ups needed elsewhere, and the billions of spending likely required to deliver on priorities such as net zero, levelling up and social care reform will eat into what is available”.
Its analysis suggests the recent NHS funding settlement will not be enough, and the new health and social levy added to national insurance could have to more than double to 3.15% by the end of this decade.
The IFS also warned that if the recent NHS funding settlement is unable to deal with medium-term Covid pressures and the health budget is topped up by £5bn in 2024−25 without an increase in the overall envelope, ‘unprotected’ budgets - which include local government funding - would grow by less than 1% per year over the spending review period.
In recent years health spending has grown to account for an ever-growing share of day-to-day public service spending: an estimated 44% by 2024−25, up from 42% in 2019−20, 32% in 2009−10 and 27% in 1999−2000. And there is growing concern that continuing demand pressures on the NHS will restrict the extent to which social care benefits from the health and social care levy in the future.
IFS director Paul Johnson said that “the combined effects of ever-growing spending on the NHS and an economy smaller than projected pre-pandemic mean [the chancellor] is still likely to be short of money to spend on many other public services”.
He added that “on central forecasts, there will be little or no scope to increase spending on things like local government, the justice system and further education, after a decade of sharp cuts”.
Mr Johnson said Mr Sunak will be “hoping against hope that stronger-than-expected growth in revenues over the next few years will help to dig him out of what still looks like a fair-sized hole”.
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October 12, 2021 at 07:03PM
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IFS warns of another 'difficult year' for local government - Local Government Chronicle
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