Larry Elliott Economics editor 

IFS criticism of budget spending plans could have been far worse

Thinktank expressed some disapproval but Sunak can count himself relatively lucky
  
  

Rishi Sunak outside Downing Street before delivering his budget.
Rishi Sunak outside No 11 Downing Street before delivering his budget. Photograph: Barcroft Media via Getty Images

It is part of budget tradition that the chancellor gets a kicking from the Institute for Fiscal Studies 24 hours after presenting his package to parliament. By that token, Rishi Sunak can count himself relatively lucky.

The UK’s leading tax and spending thinktank certainly had its criticisms of the budget but, given Sunak’s decision to spend and borrow hundreds of billions of pounds extra over the coming years, it could have been a lot worse.

It could prove only a temporary respite. If the impact of the coronavirus proves to be more severe and longer lasting than expected or the Brexit trade talks founder, borrowing will rise still further and the IFS will not hold back. For now, though, the IFS says the Covid-19 measures pass muster and it is too early to say how things will develop.

Even so, the thinktank still provided an antidote to some of the hype generated by the budget. Yes, it said, the increase in investment spending was “genuinely very big” but much of it had already been announced and there was an issue over whether the money would be wisely spent.

Even if it was, building new roads would not be enough on their own to end Britain’s north-south divide. The IFS director, Paul Johnson, said it would take more than capital projects to level up the economy, noting that 47% of the working population of London has a degree compared with 24% in the north-east.

Nor was the thinktank overimpressed by the apparently large increases in day-to-day spending. The chancellor said such spending would be rising by 2.8% a year.

That looked a lot less chunky, however, once account is taken of the need to replace EU funding and of the planned rises in spending on health, schools, overseas aid and defence. There wasn’t much there for departments – such as the justice department, for example – that have been savaged by austerity.

Finally, the IFS said Sunak could have done a lot better with his green measures. It correctly pointed out that the failure to raise fuel duty even as oil prices are crashing, and the exemption of farmers from the scrapping of lower duty rates on red diesel, are inconsistent with the aim of having a carbon net-zero economy by 2050. It expects the chancellor to do a lot better in 2020’s second budget in the autumn.

 

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