Jeremy Hunt looks at policing budget cuts

Jeremy Hunt
Jeremy Hunt’s spending restrictions have been described as a ‘Labour trap’ - Carl Court/Getty Images

Jeremy Hunt is looking at scaling back public spending in next month’s Budget in a move that could shrink budgets for policing, border officials and prison staff by a fifth.

The Chancellor is considering reducing the amount spent each year on public services after the next election from a one per cent rise in real terms to a 0.75 per cent rise.

New analysis from the Resolution Foundation think tank estimates that this would mean a 20 per cent reduction in spending for government departments not traditionally protected from cuts.

It means the Home Office, the Ministry of Justice and the  Department for Levelling Up, Housing and Communities all face deep cuts this decade if the tighter approach to spending is adopted and implemented.

Tory sources have called Mr Hunt’s spending restrictions a “Labour trap”, because Sir Keir Starmer would have to say whether he would keep the plans should he win office or promise more spending.

If Labour promises substantially more public spending – which it has avoided doing to date – that would allow the Tories to argue that it will be funded by tax rises or more borrowing.

The developments come as Mr Hunt and Rishi Sunak continue private talks about the exact make-up of the spring Budget, due to be delivered on March 6.

It could be the last major package of financial measures to be announced by the Government before the general election.

The Tory leadership has been under sustained pressure from many Conservative MPs to announce significant tax cuts that could help change the party’s fortunes.

With less than a year before the election, widely expected to take place in the autumn, the Tories trail Labour by around 20 percentage points in the polls.

Fiscal headroom – the amount of money remaining while hitting the promise to reduce debt within five years – is seen in the Treasury as critical when deciding on tax cuts.

In recent weeks, shifting economic forecasts have reduced the fiscal headroom, leading Number 11 insiders to say tax cuts have been scaled back and new spending cuts considered.

But the Resolution Foundation estimated that the fiscal headroom Mr Hunt has for the spring Budget will be £23 billion, up from £13 billion last autumn. That potentially leaves the Chancellor with a bit extra to spend on tax cuts, although Treasury insiders have been suggesting they do not expect the headroom to be that big.

Mr Hunt had already faced criticism for his insistence that public spending would only rise by one per cent a year in real terms after the election, compared to above three per cent now.

Richard Hughes, the chairman of the Office for Budget Responsibility, the Government’s independent economic forecaster, said the spending plan was worse than “fiction”.

Last week, it emerged that Mr Hunt was considering even tighter spending restraints, increasing public spending by 0.75 per cent a year instead of one per cent.

The Resolution Foundation said that “would mean some public services having their spending power cut by around a fifth over the next Parliament”. That would apply to government departments not usually protected when it comes to spending squeezes and the day-to-day budgets for which they are responsible.

The Home Office budgets for police officers and border guards, the Ministry of Justice funding of the courts and the communities department funding for councils all therefore face cuts.

Mr Hunt has declined to spell out exactly where the cuts would fall, insisting a full spending review would only take place after the election, when Labour could be in power.

Rachel Reeves, the Labour shadow chancellor, has broadly stuck by the Tory approach to spending, save for a few specific areas in which tax changes will fund extra spending.

It remains to be seen whether Mr Hunt will adopt the tighter spending plans being looked at, with much depending on changes to the forecasts for fiscal headroom.