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Jeremy Hunt’s Tax Cuts are Paid for by Slashing Public Services – So Why is Labour So Silent About It? 

The Government’s ‘slash and crash’ Budget was left largely unscathed by Keir Starmer’s party. Why?

Chancellor Jeremy Hunt alongside Prime Minister Rishi Sunak. Photo: Xinhua/Alamy

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Chancellor Jeremy Hunt attempted to salt the earth for Labour in his Spring Budget – stealing the party’s policy on scrapping the so-called non-dom tax status and launching tax cuts the party will struggle to oppose.

The 2p cut to National Insurance contributions, however, is funded by big cuts to departmental spending under the next government, and mysterious “productivity gains” from the public sector. 

Today’s Office for Budget responsibility forecast states that the Budget is based on there being “no real growth in departmental spending per person over the next five years”, with a real cut in many departments’ budgets of 2.3% a year from 2025 to 2026. In other words: most likely when this Government is out of office. 

Cutting public services alongside tax cuts is “a political con trick – giving with one hand while taking with another”, the head of the Trades Union Congress argued.

It’s early days, but Labour has been studiously quiet so far on the plans for future spending cuts. 

TUC General Secretary Paul Nowak said in a statement: “This is a deeply cynical Budget. The Chancellor knows he won’t have to live with the consequences of the savage spending cuts he’s already imposed across large parts of our public services.”

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I asked a Labour spokesman what the party thought of the cut to National Insurance contributions. “We supported the NIC cut last year and we will be supporting the NIC cut today,” he said.

Labour’s response when reporters asked if it would oppose anything in the Budget was this: “We’re not going to oppose for opposition’s sake. And given that many of the policies seem to come from our own side, we’ll obviously be supporting those. But at the moment, there’s not a specific measure we would say we oppose.”

Now, the language around the budget was of course negative – with Labour branding the non-dom policy shift a “humiliating U-turn”. But it was a U-turn that Labour clearly supported. The party’s reaction looks thin, at best, when the facts from the OBR are considered.

According to the OBR’s March 2024 Budget analysis, the Government plans “no real growth in departmental spending per person over the next five years. Within this envelope the Government has committed to, among other things, an NHS workforce plan that implies real [spending] growth of 3.6% each year and holding defence spending constant at 2% of GDP, with ambitions to raise it to 2.5% of GDP. Meeting these and other commitments on schools, childcare, and overseas aid spending would imply a real cut in all other departments’ budgets of 2.3% a year from 2025 to 2026.”

To illustrate the scale of the trap, in a normal year under the current Government, departmental expenditure was topped up “by an average of [more than] £32 billion a year” the OBR states. Now the Government is planning cuts of tens of billions per year, mañana

Labour chose not to echo the Scottish National Party in its rhetoric – despite it being Labour that’s likely to face the fall-out from the Chancellor’s pledges. The SNP’s economy spokesperson, Drew Hendry MP, said the Government is “cutting public services to the bone” – noting that Jeremy Hunt had “ushered in another decade of austerity cuts at the UK budget”.

The progressive IPPR think tank dubbed it a “slash and crash” Budget, with today’s tax cuts implying “unfeasible and undesirable public spending cuts in the future”. 

Harry Quilter-Pinner, its director of policy and politics, said “no one believes” that future cuts to day-to-day spending are possible, or that squeezing public investment further is sensible. 

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“The Government chose to slash taxes today at the expense of crashing public services tomorrow,” he added. “With the NHS, pensions, childcare and defence spending likely to be protected, future spending plans imply big cuts across other key public services.”

That means areas like education, local councils and the environment are facing further catastrophic cuts.

Health figures themselves – despite NHS budgets being protected – recognise the risks. As the Health Foundation has noted, while some extra cash for the NHS is welcome, “other public services are still likely to take a substantial hit, with the OBR stating that unprotected departments will receive a 2.3% a year real-terms cut in funding from 2025/2026”.

That, in turn, will “leave the wider public services that support good health, including local government, under significant pressure”. 

Dr George Dibb, associate director for economic policy at IPPR, added that almost 50p of every £1 of the Budget will go to the richest fifth of households, with just 3% going to the poorest fifth. 

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Of course, it was unsurprising that Labour welcomed reforming the non-dom tax system and higher tax on holiday rentals. A further levy on first-class air travel is also unlikely to be reversed by Keir Starmer’s party.

But what of the Chancellor’s cuts to capital gains tax on property wealth or the never-ending freeze on fuel duty? 

Gideon Salutin, senior researcher at the Social Market Foundation think tank, said the continued freeze – which will cost around £5 billion – will “fuel more inequality”. The richest tenth of households in the UK will save an extra £60 a year from the freeze, while the poorest receive only £22. 

It has calculated that the Government has lost £130 billion on cuts and freezes to fuel duty over the past 13 years – while only decreasing the average household’s motoring costs by £13 a month.

“Achieving a more meaningful reduction in transport expenses requires the Government to invest in cheaper, greener alternatives like public transport and electric vehicles, but today’s Budget did little to enhance those options for low income households,” Salutin said.

The Conservatives have, perhaps ironically, left the door open for Labour to scrap the fuel duty freeze. Why? Because much of the Budget’s ‘success’ in meeting Hunt’s fiscal rules stems from the sly accounting wheeze of claiming that fuel duty will rise in future years… a stark contrast to the decade-plus of constant freezes. 

But for all the traps, the Government is unlikely to reap many electoral rewards from the Budget. Even the bosses’ club, the Institute of Directors, noted that it was obvious Hunt’s plans were “aimed at rallying political support rather than addressing the UK’s longer-term economic issues”.

“It fell short of delivering a comprehensive plan for sustainable growth and investment,” a spokesperson added. 

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It’s there for everyone to see, from boss to worker. Average GDP growth has been just 1.5% since 2010 – the worst for any government since the Great Depression. This year, real-terms pay for workers is still below the level it was in 2008.

Councils are literally collapsing, while having to hike regressive council tax to the highest levels ever. The latest Local Government Information Unit research found that half of councils believe they could face bankruptcy within the next Parliament. 

Again, Hunt has effectively placed that in Labour’s camp to worry about. Or, if by some sorcery the Conservatives are re-elected (the polls are consistently not projecting this as a likely outcome), they will attempt to blame it on ‘profligate’ local authorities. 

When public services continue to be on their knees, it’s likely most people would choose having a functioning society over a 2% tax cut. 

Polling last month for the The Fairness Foundation by Opinium showed that two in three Brits oppose tax cuts if they result in cuts to spending on public services. And nearly two-thirds (64%) support maintaining or increasing taxes. By contrast, only 16% support cutting taxes if it means cutting public services. 

Is Labour now in that minority – that 16% – supporting tax cuts funded by spending cuts?

Starmer’s party is ruling out tax rises and pinning its hopes on growth, growth, growth. Should that not be forthcoming, the sunlit uplands may start to look a lot shadier. 

Do you have a story that needs highlighting? Get in touch by emailing josiah@bylinetimes.com

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Josiah Mortimer also writes the On the Ground column, exclusive to the print edition of Byline Times.

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