Sunak's austerity could be much more damaging than Osborne's - here's how you could be affected

Rishi Sunak and Jeremy Hunt have both warned difficult decisions are ahead. (PA)
Rishi Sunak and Jeremy Hunt have both warned difficult decisions are ahead. (PA)

The chancellor may have promised not to return to the austerity seen in the early 2010s but Rishi Sunak has already made clear that painful decisions lie ahead in the near future.

Although the full size of the black hole in the public finances is not yet known, it is believed around £40bn worth of savings needs to be found, even after the cancellation of most of Liz Truss's mini-budget.

Chancellor Jeremy Hunt has already asked all government departments to find efficiency savings. And, according to the Institute For Government (IFG), that could equate to real-term cuts on a par with the early 2010s, around 2% per year.

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On top of this, there is pressure on health and defence to be protected, meaning others areas like policing, education, and local authorities could be forced to shoulder even more of the burden.

In a report released on Wednesday, the IFG warned: "On any reasonable definition, this would be a return to ‘austerity’."

It added: "The estimated £40bn of departmental savings that Jeremy Hunt needs to find would be much more damaging to public services and harder to deliver than the coalition government’s 2010 austerity programme."

The warnings signal severe economic challenges lay ahead for millions of people. In 2010, the Coalition government under David Cameron and George Osborne initiated a wide range of swingeing cuts that they said needed to be made to reduce the deficit and protect the public finances that were damaged by the 2007-08 financial crisis.

David Cameron and George Osborne's austerity led to a huge reduction in public services. (PA)
David Cameron and George Osborne's austerity led to a huge reduction in public services. (PA)

The impact of the cuts on many was devastating and can still be felt on public services. Research published in recent years has found it had a disproportionately negative impact on the poorest in society.

In 2021, the University of York attributed 57,550 deaths to the cuts to healthcare, public health and social care since 2010. Another study by the Child Poverty Action Group published in 2017 found families who received benefits were thousands of pounds worse off a year due to austerity, with many pushed into poverty.

Austerity also had a disproportionate impact regionally, with poorer areas in the north of England seeing their budgets slashed as they spent more of their money on social welfare and support for the poor.

In its report this week, the IFG warns that public finances are potentially even more vulnerable in 2022. This means any cuts would be harder to find and more damaging to the delivery of public services.

It also said that many of the quick efficiency savings found in 2010 are still being used today, which means they can't be found again.

How could another round of cuts impact you?

If another round of cuts on the same scale as 2010 is needed, then it could have a marked impact on huge segments of society.

The IFG has highlighted seven different areas that could be impacted. You can read the full report here.

1. Cutting public sector wages

Wages make up the majority of spending in the police, healthcare and education and the IFG says cutting wages of all public sector employees by 1% it would save £2.4bn a year.

But this is unlikely to happen due to the threat of strikes, which are already being considered in several public sector industries.

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The public sector, particularly healthcare, is also facing a huge staff shortage so cutting or freezing pay would make filling those gaps even harder.

Any cut to public sector pay could trigger strikes across the country. (PA)
Any cut to public sector pay could trigger strikes across the country. (PA)

These two consequences would make dealing with the backlog in the NHS and other services - general practice, criminal courts, adult social care and prisons even harder - something the government might find too unpalatable to consider.

2. Cutting public sector staff

Similarly to pay, the IFG says that if the government cut staff by 1% it would save £2.4bn - but it faces similar problems

Reducing the size of the workforce would create more backlogs in healthcare as fewer GPs, nurses and specialist see more and more people.

As service standards fall and political priorities change it would likely lead to the need to rehire and retrain staff at huge cost.

All of this could lead to a less experienced and therefore less effective workforce.

3. Make the public sector work harder

Many areas of public work like paramedics, nurses, police and teaching already work far harder than their private counterparts.

It has been well documented how the NHS survives on staff working above and beyond their expected hours and threats by public sector staff to work only their required hours has forced the government to come to the negotiating table in the past.

The IFG points out that if the government was to try and force a further productivity boost it would save more money but would lead to more people leaving their jobs for easier alternatives.

4. Cutting public service capital spending

Capital spending is used to build hospitals and refurbish schools, it is the money used to give public workers the equipment and facilities they need to deliver their services.

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Boosts to public spending and capital investment were a big part of Boris Johnson's 2019 election campaign. (PA)
Boosts to public spending and capital investment were a big part of Boris Johnson's 2019 election campaign. (PA)

It is currently at 2.5% of GDP which is high compared to the previous 30 years, but part of this is because so much demand for repairs in leaky schools and overstretched hospitals built up as a consequence of the Coalition's cuts to public spending in the 2010s.

If it were to happen again a similar pattern would likely play out with short-term savings offset by increased costs a few years down the line.

5. Cutting preventative and early intervention services

This was an area the Coalition cut heavily, with mixed results.

The cuts to Sure Start services for children led to a direct increase in children's social care costs.

Cutting this will be even more difficult now because many of the services that were axed in the 2010 have not returned.

It would also have an even worse effect on emergency services like A&E, which is already hugely overburdened - which in turn will lead to more costs for them.

6. Reducing the scope of services

If the government pulled back from offering some services it could save large sums of money.

These types of cuts fell heavily on local authorities under the Coalition as libraries, free public transport and waste collections were all cut.

If these were to be cut again the IFG predicts it will just push people to other public services as cuts to waste collection could increase demand on tips, and cuts to social care increase demand on the NHS.

7. Finding new income for services

The government could begin charging for some of its services to raise more money.

The IFG says central government has allowed local authorities to do this as its more politically safe for them.

In recent years councils have been able to increase council tax by more than 2% under certain circumstances and charges for green waste collection services have also begun to appear.

NHS parking charges are another example, but creating any more will likely be politically unpopular.

The IFG says that introducing any new charges would likely not raise as much as hoped as people would just opt out of using them.