Treasury insiders said Hunt was considering freezing day-to-day public spending in real terms for three years after 2025 in next Thursday’s autumn statement, saving around £27 billion a year until 2028. A chancellor ally said she was likely to accept the plans set out in last year’s spending review, which was intended to deliver an average increase in real terms of 3.3 per cent to Whitehall departmental budgets between 2021-22 and 2024-25. “But for the next three years there will be much more restraint,” he added. Although the overall amount of Whitehall spending will be frozen in real terms rather than cut, many ministers are expected to find deep savings because only certain parts of Whitehall are likely to be protected, such as health. Sir Charlie Bean, former deputy governor of the Bank of England, said: “Austerity 2.0 will be even more difficult because public sector budgets are already under severe pressure.” During the 2010s, the then chancellor George Osborne introduced sweeping cuts in public spending across many government departments as he sought to overhaul public finances after the financial crisis. Many public services are struggling after Osborne’s cuts and the recent rise in inflation. Nurses have voted to strike over wages and many other wage ballots are coming up, including for teachers. In March’s Spring Statement, Rishi Sunak, then chancellor, set an annual cash increase in day-to-day public spending of 3.7 per cent in the three years after 2024-25. This was 2 percentage points in inflation-adjusted terms and 1.7 percentage points in real terms of government spending growth. Now Hunt is drawing up plans to reduce government spending growth in those three years after 2024-25 to 2 percent or lower, according to people familiar with the discussions. Financial Times calculations show that if the assumed growth rate were reduced to 2%, the government would save £23bn by 2027-28, the final year of the forecast to be published by the Office for Budget Responsibility alongside the Autumn Statement . . Officials are looking at increasing cash spending by just under 2 percent to keep everyday spending levels in line with consumer price inflation. This will save around £27bn by 2027-28, covering half of the £55bn budget hole the Treasury is forecasting by that year. Paul Johnson, director of the Institute for Fiscal Studies, a think tank, said no one should be fooled that real-terms government spending plans would be acceptable. Recommended “Healthcare costs are always rising and will continue to rise during this period [after 2025],” he added. “Given that it is the bulk of spending on public services, the result will be significant real cuts for many services.” The Resolution Foundation, another think tank, said that if the government protected the health, education, defense and foreign budgets from the expected real spending freeze, other parts of Whitehall would face cuts of almost 10%. Whitehall insiders said ministers hoped they would not have to impose another round of austerity if the government’s borrowing costs fall, and delaying a spending freeze until after the next election allows them to change course if the economic outlook improves. Meanwhile, former chancellor Kwasi Kwarteng said he had warned Liz Truss to “slow down” her plans to boost economic growth as he admitted a more “measured approach” could have been taken. In an interview with TalkTV, Kwarteng, who was sacked by Truss after just 38 days as chancellor, said the former prime minister wanted to “hit the ground running” with the fast pace of her reforms. The Trust’s “mini” budget in September focused on £45bn of unfunded tax cuts, which sent shockwaves through financial markets, and was abandoned last month after the Conservatives saw a dip in the polls. Kwarteng, a longtime Truss ally, admitted her government “tried to do too much too quickly”, saying she had warned Truss of his concerns. “I said . . . we were going at breakneck speed. And I said, ‘You know, we’ve got to slow down, slow down.’
