Rishi Sunak’s spending review confirms that the “end of austerity” never began

Departmental spending will be billions less than previously planned.

Just as we passed the first coronavirus peak in the UK, Boris Johnson began facing questions about economic policy to deal with the aftermath.

At a press briefing on 30 April, he stressed that the government would not make public spending cuts in the wake of the pandemic.

“I’ve never particularly liked the term that you just used to describe government economic policy and it’ll certainly not be part of our approach,” he said. “Austerity, by the way, was the term you just used.”

It sounded plausible. Rishi Sunak had committed the Treasury to doing “whatever it takes” to help the country through the crisis in his March Budget. The Local Government Secretary, Robert Jenrick, told 300 council leaders that the government would do “whatever is necessary” to aid local government’s new coronavirus responsibilities that same month.

The usual Conservative spending rules appeared to have disappeared, as the Chancellor promised this was “not a time for ideology and orthodoxy”.

These pledges came on top of pronouncements from the previous government that austerity was over. In his 2018 autumn budget, the then chancellor Philip Hammond said the “era of austerity is finally coming to an end”. And his successor, Sajid Javid, announced “the “end of austerity” the following year.

Yet it seems even the profound weaknesses in the public realm and public services exposed by coronavirus after a decade of cuts were not enough to bring austerity to an end.

In his spending review on 25 November 2020, Sunak hid retrenchment under a speech that talked up his generosity.

All public sector workers – aside from NHS doctors and nurses, and 2.1m who earn beneath the median wage of £24,000 – will have their pay frozen next year. And those low earners are only guaranteed an extra £250.

In the year 2021-22, there is zero spending relating to Covid-19, and “£10bn to £12bn cuts to departmental resource spending relative to March Budget totals” forecast, according to the Office for Budget Responsibility’s analysis of the spending review.

A long-term plan for funding social care, promised when Johnson entered Downing Street, again failed to materialise. Instead, local authorities have been given “extra flexibility” to raise money for social care through council tax and the adult social care precept – in reality, this means councils will be under pressure to raise council tax by up to 5 per cent just to pay for their increasingly costly statutory duty of caring for the vulnerable.

Although Sunak laboured the point that overall day-to-day departmental spending will rise in real terms, he did not mention that spending will be reduced next year compared with what was planned earlier this year. Paul Johnson, the director of the Institute for Fiscal Studies (IFS), calls this “the crucial long-term spending decision announced today”.

The Chancellor has allocated £55 billion of funding to public services next year to deal with COVID.

But he has removed £10 billion for departments’ non-COVID budgets – more than the amount he has saved by cutting the aid budget and freezing public sector pay. pic.twitter.com/9jGIB59NOI

— Institute for Fiscal Studies (@TheIFS) November 25, 2020

The IFS finds Sunak has “removed £10bn for departments’ non-Covid budgets – more than the amount he has saved by cutting the aid budget and freezing public sector pay”.

The furlough scheme and other coronavirus support packages have been generous and effective. Yet there have been constant signs that they run against the government’s true instincts. There has been persistent reluctance throughout the year to renew and extend such help at the same level of generosity.

Millions of people falling foul of eligibility criteria – including 1.6m self-employed people – have been stubbornly overlooked.

Councils feel let down after early promises of reimbursement for their extra coronavirus spending, with many facing budget black holes and the Local Government Association calling for an extra £8.7bn to plug funding gaps, meet demand pressures and improve services next year.

Penny-pinching elsewhere, including two unsuccessful attempts not to fund free school meals through the holidays, and a repeated refusal to guarantee the £20-a-week boost to Universal Credit beyond April has also been telling of the government’s true instincts.

It appears the long-heralded “end of austerity” has not even begun.