Reeves only a ‘gnat’s whisker’ from having to raise taxes in autumn, says IFS – UK politics live | Politics

The Institute for Fiscal Studies has delivered its own verdict on the spending review. Much of what it says overlaps with what the Resolution Foundation concluded (see 9.34am), but some off the language is a bit more colourful. Here are the main points from the opening remarks from Paul Johnson, the IFS’s director.

Ms Reeves is now going to have all her fingers and all her toes crossed, hoping that the OBR will not be downgrading their forecasts in the autumn. With spending plans set, and “ironclad” fiscal rules being met by gnat’s whisker, any move in the wrong direction will almost certainly spark more tax rises.

[The chancellor] also stressed how this was a zero-based review, looking in detail at every aspect of spending. One wonders how effective that was. We can’t find any particular area of spending the government has decided it wants to withdraw from – other, perhaps, than overseas aid. On the efficiency savings one thing is quite striking. It seems that virtually every department is ripe for exactly the same cut in its administration budgets – 10% for all of them over the three years to 2028-29 and then another 5% in one year, 2029-30 – irrespective of how much they might have grown recently, and irrespective of planned spending increase. That is not the result of a serious department by department analysis. I hesitate to accuse the Treasury of making up numbers, but …

Despite some of the rather odd recent claims, neither the economic forecasts nor the public finances have improved relative to the genuinely difficult situation we knew about a year ago. Rather the reverse.

While spending reviews are supposed to provide full and final settlements they rarely do – they are nearly always reopened, especially in the last year of the SR period – and almost always in an upwards direction …

Health spending nearly always gets topped up. Growth of 3% a year is below the historic average. It may not even prove enough to fund the official workforce plan and it is at best marginal whether it will be enough to achieve the government’s waiting list targets.

Defence spending is rising to 2.5% of national income by 2027, but no increase thereafter. Given external demands and government promises to get it to 3% of GDP at an unspecified date in the next parliament there will be pressure to increase it further.

One part of the UK that is going to face some especially sharp choices is Scotland. Its RDEL [day-to-day spending] funding from Westminster will rise not by 1.2% a year over the SR period but by just 0.8% a year. This is a result of the so-called “Barnett squeeze” which, as budgets rise, is designed ever so slowly to reduce the large gap in per capita spending between Scotland and England. (Spending per head in Scotland is still 20-25% higher than in England – hence “free” higher education and social care, higher public sector pay, and so on). Because the Scottish government is prioritising spending on welfare benefits, it could actually be looking at cuts in spending on public services in 2027-28.