helping charities helping people


You are not signed in. What would you like to do?


Manage your account

Hello ! You are signed in. What would you like to do?

Your Account
Austerity money bank - Austerity money bank

The “end of austerity”?

Sajid Javid said this month that the government could afford to “turn the page on austerity” as he set out Whitehall spending priorities.

Publishing departmental budgets for next year, the chancellor claimed that a rise in spending of 4.1% over this year and next would “bring about a decade of renewal”. Critics warned that his claims were overblown and that nine years of spending cuts would continue to take their toll. Below assess Javid’s claim that a line is being drawn under austerity.

Why did the government claim that austerity is over? Day-to-day spending on public services will grow by about £13.8bn between 2019−20 and 2020−21. This is above the more circumspect spending plans set out by his predecessor, Philip Hammond, in March. Most of the increase, about £11.7bn, will take effect in the next financial year. Javid rightly said the increase represented the largest increase in at least 15 years and was a turning point after years of spending cuts. He also topped up next year’s capital spending by £1.7bn.

The Institute of Fiscal Studies (IFS) said Javid’s spending plans were enough to reverse about two-thirds of the real-terms cuts to average day-to-day spending on public services since 2010. However, this achievement is even less significant when Britain’s rising population is taken into account. On a per-capita basis, only one-third of the cuts are reversed. The average rise of 4.1% across Whitehall also masks substantial variation within the total. “If we exclude health, the additional spending will only be enough to reverse around a quarter of the cuts since 2010 (or around 15% of the per capita cuts to non-health areas),” the IFS said.

According to the Resolution Foundation, departments such as work and pensions will have suffered cuts of 69% compared with 2010 figures, even if the 2020-21 increases are taken into account. On the same calculations, the justice department has suffered a cut of 31% and local government 77%. Reversing these cuts will take more than Javid was prepared to offer in his spending review.

Avoiding a no-deal Brexit is another way to limit the damage to the economy and government tax receipts. However, Javid said he would review the government’s fiscal rules, which bind the Treasury’s ability to lift austerity because they curb spending. Under these guidelines, borrowing must not exceed 2% of GDP and public debt must keep falling as a percentage of GDP. If they are scrapped, greater progress can be made on rowing back austerity.

Read: the Guardian - Has the age of austerity really come to an end?