Think tank warns of further public sector cuts if Tories stick to spending plans

Public services face a fresh round of austerity cuts within two years, according to a think tank.

Vital areas that do not have spending protections are in line for real-terms cuts of 2.1% after 2020, the New Economics Foundation (NEF) claimed.

Its analysis found prisons, public health and housing are all among services set to be squeezed.

Chancellor Philip Hammond (pictured) has said he will carry out a full spending review in 2019.

Alfie Stirling, NEF head of economics, said: “The decade of austerity so far has arguably been the worst policy error in a generation.

“As a consequence, the economy has suffered substantially.

“If the Chancellor fails to take the opportunity to learn from the lessons of the past by taking action at the spending review, we could be living with the consequences of deteriorating service quality and lost living standards for years if not decades to come.”

Funding for schools and the NHS has been protected in recent spending rounds.

The NEF used its own economic modelling and looked at the likely spending in ring-fenced areas and the implications that could have on other budgets.

Its “core” assessment of the Government’s most likely plans would mean an average real terms cut of 2.1% in some areas during the first half of the 2020s.

Annual cuts of £70 million for prisons, £80 million for public health and £30 million for housing could be imposed by 2024, it found.

The Government could borrow a further £24.1 billion per year by 2023/24 to bolster overstretched services and still meet its deficit reduction targets, it said.

Shadow chancellor John McDonnell said: “This report lays bare the fiction of any end to austerity under the Tories, with massive cuts to prisons and public health budgets a huge danger to our communities.

“The New Economics Foundation also makes plain the options open to the Chancellor at the forthcoming Budget. He can still change tack, ending austerity and even repairing some of the damage he and George Osborne have already done to our economy.”

The report was funded by the TUC but the think tank said all the research was conducted independently by NEF staff and they had editorial control.

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