Boris Johnson public spending boosts to leave 2020 funding lower than 2010, influential think tank says

'Very little scope' for tax giveaways or more funds for services without pushing state debt up, warns Institute for Fiscal Studies

Public spending boosts trumpeted by Boris Johnson will still leave funding for services next year lower than in 2010 in real terms, an influential economic think tank has said.

The Institute for Fiscal Studies said that planned day-to-day spending on services will remain 3 per cent below a decade ago, after inflation is taken into account, representing a “truly remarkable” period of retrenchment for the public sector.

In report released on the day of Chancellor Sajid Javid’s cancelled budget, the IFS warned there was “very little scope” for pledges of tax giveaways or spending increases in the political parties’ election manifestos without higher borrowing and higher debt over the next parliament.

This would reverse a trend of reduced borrowing since 2009/10 which has brought the annual deficit down from more than 9 per cent of GDP at the start of the decade to 1.9 per cent in 2018/19.

“Planned increases in day-to-day spending on public services next year are large, and come on top of increases in spending this year,” said the IFS.

“But even if delivered in full, these spending increases would still leave spending in 2020/21 3 per cent lower in real-terms than was the case in 2010/11, representing a truly remarkable period for spending on public services.”

Among the major public spending departments, only health and social care spending will enjoy higher real-terms income in 2020/21 than 2010/11, the report found.

While spending in these areas ends the decade 23 per cent higher after taking inflation into account, public spending areas which have seen real-terms reductions since 2010/11 include justice – taking in the courts, prisons and probation – down 23 per cent, the environment (down 19 per cent), home affairs, including the police (down 12 per cent), local government (down 16 per cent) and education (down four per cent).

Substantial borrowing over the last decade has pushed up public sector net debt from below 40% to almost 75% of national income, said the IFS repot.

“This means that there is very little scope for both offering net giveaways and being on course to have debt lower at the end of the next parliament than it is today,” it added.

“In other words, promises of significant tax cuts or spending increases are likely to lead not just to higher borrowing but to higher debt.“