Kwasi Kwarteng has been warned it would be an “act of national vandalism” if he imposes austerity measures on the NHS and other public services to calm the turmoil caused by his tax giveaways to the rich.
The chancellor is expected to use a statement on 23 November to announce belt-tightening measures in a bid to persuade the markets that he can get the UK’s public finances back under control following last week’s mini-Budget.
Treasury sources confirmed that cabinet ministers are to be asked to find “efficiency savings” in budgets, with neither health nor any other department exempt.
Independent economist Paul Johnson, director of the Institute of Fiscal Studies (IFS), said that Mr Kwarteng could opt for a freeze on public spending for five years – amounting to a sharp cut when inflation is taken into account.
But NHS Providers said any such move would represent a “huge setback” to a service already stretched by a decade of austerity, warning it would risk choking off desired growth.
The British Medical Association said it was “vital” that the chancellor stick with promises made only last week to maintain spending on health following his abolition of the Health and Care Levy.
The head of the TUC, Frances O’Grady, also told The Independent that any move to limit resources to health, education and other public services in Mr Kwarteng’s fiscal plan would amount to an “act of national vandalism”.
Speaking to BBC Radio 4’s World at One, Mr Johnson said Mr Kwarteng had sparked market anxieties by announcing £45bn worth of tax cuts – largely directed at corporations and the wealthy – without explaining how he would pay for them.
“The difficulty the government has got itself in is that it is cutting taxes so dramatically without any kind of plan of what it is going to do on public spending,” said the IFS chief.
Mr Johnson added: “If I had to guess now what that plan might look like, I would suggest that it will be that he will look five years into the future and he’ll say ‘I’m going to freeze spending over the whole of that five-year period’.
“The problem with that is that, particularly after a decade of austerity and cuts in public services, there are serious questions as to whether there is any credibility associated with a freeze in public spending for such a long period of time.”
NHS Providers director of policy and strategy Miriam Deakin told The Independent: “NHS budgets are already severely stretched. The combined impact of inflation, the unfunded staff pay award and Covid testing costs mean the NHS is facing a significant real-terms funding cut with very stretching efficiency savings factored in.
“We are already seeing services for patients being affected with the rising costs of living also impacting people’s health.
“And at a time when the latest data from the ONS shows that rising waiting lists are having a knock-on impact on people’s ability to return to work, the last thing patients, the NHS – and the economy – need are further hits on the NHS budget. This would be a huge setback”.
NHS Confederation chief executive Matthew Taylor said the chancellor had promised that spending on health and care will not but reduced by the abolition of the levy.
But he added: “As inflation levels and interest rates threaten to rise ever higher, the NHS is already struggling to stay afloat and properly meet the needs of the public and the local communities it serves.
“Inflation has already eroded the government’s previously allocated investment in the NHS to the tune of £4bn this year and has left NHS leaders having to make unenviably stark choices about which health care services to cut back first.”
Dr Emma Runswick, deputy chair of BMA council, said: “Just last week, the chancellor promised to maintain the additional funding for NHS and social care at the same level. It is vital that he does not row back on that promise.”
Ms O’Grady said: “Our public services are already at breaking point – with NHS waiting lists a mile high and school buildings literally crumbling.
The TUC leader added: “It would be an act of national vandalism to slash vital services to fund tax cuts for the super-rich. Strong public services are essential to our nation’s health and our economy. They need extra funding – not savage cuts.”
The general secretary of public sector union Unison Christina McAnea called on the chancellor to “dump his dangerous gamble before he brings the country to its knees”.
“Public services are the bedrock of a decent society,” she told The Independent. “The idea that public spending might be slashed to fund the government’s reckless tax cuts for the rich is beyond obscene.”
Geoff Barton, head of the Association of School and College Leaders, said the union was “extremely concerned” about the bleak prospect of “a new era of austerity for public services, including education”.
He told The Independent: “Schools and colleges are in fact already facing a new funding crisis … we are deeply concerned that children and young people will be left with a legacy of paying back the nation’s debts in their adult lives.”
Gary Smith, GMB general secretary, said the government was “destroying the economy in front of our eyes” – warning against a return to the austerity which “made the country poorer and utterly failed to deliver growth”.