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The Chancellor Rachel Reeves has been accused of playing the “same silly games” as her predecessors after forecasting that public spending will tail off towards the end of this parliament following a short-term spike.
Paul Johnson, director of the Institute for Fiscal Studies (IFS) said the Chancellor had “front loaded” calculations around additional spending in her Budget and it was likely that they “will in fact increase more quickly than supposedly planned after next year”.
“I’m afraid this looks like the same silly games playing as we got used to with the last lot,” he said at the IFS’s breakdown of the Budget today. “Pencil in implausibly low spending increases for the future in order to make the fiscal arithmetic balance.”
According to the government’s fiscal plans, much of the increase in spending will take place in the next two years, with a 4.3 per cent and 2.6 per cent rise planned, respectively. Spending is then forecast to rise only 1.3 per cent from the year after.
In its assessment of the Budget, the IFS warned that front-loading its plans “risks spending ineffectively” and means later years would be “uncomfortably tight”.
The rise in spending will be funded by a £40bn rise in taxes, largely footed by business and the wealthy. Reeves has also allowed herself room to borrow more to fund investment by changing the fiscal rules to account for the value of assets in its calculation of public sector debt.
However, Johnson said it would be “odd to increase spending rapidly only to start cutting back again in subsequent years”.
“[Reeves] is meeting her borrowing target only by repeating the same silly manoeuvres as her predecessors used to make it look as if the books will balance,” he added.
“Let’s pretend we’ll increase fuel duties next time, but not do it this year. Let’s pretend that we’ll really rein in spending in a couple of years after splurging this year. That’s not going to happen. The spending plans will not survive contact with her cabinet colleagues.”
Corralling the cabinet into agreeing a reduction in spending in two years time will be “extremely challenging”, he added.
The IFS, a non-partisan think tank, has launched a series of stinging criticisms today after the government delivered £40bn worth of tax hikes in its first Budget in government.
The body accused the government of peddling “nonsense” after publishing documents which claimed it was “not increasing the basic, higher or additional rates of income tax, National Insurance contributions (NICs) or VAT”.
A rise in employers’ national insurance contributions to 15 per cent was the biggest revenue raiser announced in the Budget.
Helen Miller, IFS’s deputy director and head of tax, wrote on X the Treasury’s claim was “ridiculous”.
