Public services face real-terms spending cuts of up to 40% in decade to 2020

Further deep cuts in spending on some public services are already planned to go ahead, whatever the chancellor announces in the autumn budget, leaving departments such as justice and work and pensions facing a real-terms cut of as much as 40% over the decade to 2020.

An analysis by the Institute for Fiscal Studies, confirmed by recent parliamentary answers, shows that for welfare spending, the NHS and the prison system, the budget on Wednesday will not represent an end to the age of austerity experienced since the Conservatives entered government in 2010.

The IFS says that existing plans mean that there will be a further £12bn cut in welfare spending by 2020/21, that the NHS will face its tightest funding period since the 1950s and that prisons will see a real-terms cut of 22%, followed by a tight settlement for the next two years.

“Over the next two years, particularly deep budget cuts are planned for the Ministry of Justice, the communities part of the Department for Communities and Local Government, and the Department for the Environment, Food and Rural Affairs,” says the IFS report, Autumn 2017 Budget: Options for Easing the Squeeze. “This is despite these departments having already implemented relatively deep cuts over the last seven years.”

In the case of the Ministry for Justice, official figures published by the justice minister, Dominic Raab, on Monday confirm that it will have taken a “real-terms cumulative decrease” of 40% since 2010/11. Its budget, which covers prisons, probation and the legal system, will have been cut from £9.3bn in current prices in 2010/11 to £5.6bn by 2019/20.

The IFS predicts the chancellor may come up with extra money, in particular for prisons, saying the government is aware that they are struggling in the face of alarmingly steep rises in prison assaults and prisoners self-harming. Without that extra funding, says shadow justice secretary Richard Burgon, the prisons sector will move from repeated crisis to a full-blown emergency.

The justice secretary, David Lidington, recently acknowledged the “real constraints” he faces on resources, saying: “I would always welcome being given a crock of gold by the Treasury, but I am conscious too that I sit around the table with ministers for departments of health, education, defence and work and pensions – all, like me, could make the argument ‘we could really use some extra money’.”

The IFS said that one reason some departments still face deep cuts is that, although the planned squeeze on public spending implies a real-terms cut of 2% as a share of national income over the next four years, it is by no means evenly shared across government departments.

The first two years of the coalition government saw relatively sharp cuts, after which the reductions were more gradual. The period 2010/11 to 2015/16 saw spending on the NHS and day-to-day spending on schools protected from cuts, while spending on overseas aid was sharply increased.

“Since then, those areas of spending have remained relatively protected, with further protections added for spending on defence and police,” said the IFS. They add that this background explains why “particularly deep budget cuts” are planned for justice, communities and Defra, despite them already having implemented relatively deep cuts over the past seven years.

But it is most likely to be in the areas of welfare and the NHS that the public will notice that the age of austerity is not over. The IFS said that the largest of the £12bn of further welfare cuts already in the pipeline is the freeze in the rates of working-age benefits, which as inflation rises yields an even higher saving of £4bn a year for the Treasury and an even bigger cut to real household incomes than intended.

The fiscal experts say that there are also clear signs of strain in the NHS as, despite real-terms funding increases since 2010, patient demand and activity levels, such as admissions and outpatients’ attendances, have continued to grow with the four-hour A&E target and 18-week waiting period target being missed.

“The NHS is now currently halfway through its tightest funding period since the mid-1950s,” said IFS report author, Carl Emmerson. “If anything, it looks like the funding increases over the next few years get a bit harder rather than a bit easier.”