Whilst the Government might be breathing a sigh of relief now the planned social care reforms and NHS funding deal has made its way through the Commons without the large-scale rebellion from the Conservative benches many had predicted, there’s still a strong chance it could prove to be the first skirmish in a much larger fiscal war with the backbenches and this autumn.
This week the Chancellor of the Exchequer kicked off the process of the much delayed Spending Review which will be announced on 27 October set the course of government departmental funding for the remainder of this parliament. We thought we were having a proper multi-year Spending review two years ago, only to be told Brexit was getting in the way; then we thought we were getting one last year, only to be told (quite reasonably) the pandemic was getting in the way.
So far Rishi Sunak has maintained an impressively long tightrope walk, on the one hand promising voters and MPs in Red Wall constituencies that austerity is dead, whilst on the other promising to businesses and the markets that the Conservatives haven’t lost sight of budget responsibility and that a reining in of spending is coming down the line.
This isn’t a tightrope that can be walked forever though and over the course of the autumn we are set for a series of difficult decisions that will define this Government. For example, there’s a number of manifesto commitments that still need clarity on how they will be funded. In addition to social care reform there’s the net zero transition, levelling-up, and housing & planning reform, that all come with extra costs. But, despite the better than predicted recovery, the UK economy remains extremely fragile, with government debt levels at risk of becoming unserviceable if inflation continues and the Bank of England raises interest rates – a very real nightmare scenario.
With this in mind, the need to balance the books appears to be winning out. We already know that every departmental head has been told to plan for job cuts to Civil Service staff, with Treasury Chief Secretary Stephen Barclay aiming to claw back on the huge increases to head counts that began after the EU referendum in 2016. Similarly, all departments have also been asked to identify at least 5% worth of savings and efficiencies to their budgets, to fund government priorities. This suggests every department is facing day-to-day cuts, with any increases in public spending focused on top-tier projects and reforms.
Spending Reviews are contentious at the best of times, and delivering one that runs the risk of disappointing every single cabinet minister, whilst simultaneously sending a clear message to voters and the MPs who represent them that austerity is in fact very much alive and kicking is undoubtedly a recipe for trouble. But with no road left for the can to be kicked down, who will bear the brunt of the inevitable anger the Spending Review will cause? Will public and political opinion finally turn on Rishi Sunak, or will the blame somehow be shifted to Johnson and his love of big spending for getting us here in the first place? Just like the first wave of austerity after the Financial Crisis saw Labour tarred with responsibility, rightly or wrongly it’s usually those we view as profligate who end up taking the blame when the axe comes down.