The Week, 7 October 2022
This week was the turn of the Tories. With U-turns, frontbench division, and high-profile criticism from former Cabinet ministers, it was one of the more fractious Conservative party conferences in recent memory. The only thing missing was any new policy (possibly best given the fallout from the last round).
Speaking of the mini/maxi Budget, conference was dominated by questions of tax and spend. While the Government was forced to U-turn on scrapping the 45p tax rate, this in reality makes little difference to the fiscal black hole — £43 billion of tax cuts are still to come (rather than £45 billion).
On public services, the Chancellor confirmed what had already been alluded to: departmental budgets will not be increased to balance out inflation, meaning an effective £18 billion cut. Back in August, the IFS noted that rising inflation had sharply eroded the most recent spending round, meaning budgets would increase by 1.9% annually until 2024-25, rather than the 3.3% originally forecast. With backlogs across public services — due to both the short-term pressures of Covid and long-term failures to address the drivers of demand — this looks unsustainable.
To prove the point, the HSJ this week reported that two-thirds of integrated care systems are likely to face financial deficits in just their first year of operation. That gives huge cause for concern given that one of the stated priorities of allintegrated care systems is to “enhance productivity and value for money” in the health system. NHS England’s Chief Financial Officer also warned this week of a possible £7 billion shortfall next year. And remember: public sector pay settlements will need to be met from existing budgets.
In this context, the Government has floated — or rather not denied — cuts to the welfare budget as one way to balance the books. As our Director Charlotte Pickles points out in this week’s IFS podcast, while the size of the welfare budget (£220 billion, if you include pensions) makes it an appealing target for politicians, short-term cuts are not the answer. If the Government really wanted to reduce welfare expenditure it would address the key cost drivers: high housing rents, low pay and a big disability employment gap.
As for the rumour that the Government is considering uprating benefits by earnings (around 5%), rather than inflation (nearly double that), as Charlie says on the podcast: “It means the poorest people in the country are getting poorer… and I think it’s hard to justify in the middle of a cost of living crisis, for a group of people many of whom are already in poverty — many of whom are in quite deep and persistent poverty — to say ‘you know what, we've blown a big hole in the public finances due to tax cuts, we’ll just take it back from the poorest’.”
Onto this week’s recommended reads…
First up, this week saw the publication of the Resolution Foundation’s latest Labour Market Outlook, which focuses on disability. There are some interesting findings here, including a 5% rise in the proportion of working-age people classified as disabled from 2013 to 2022 and that the employment rate among disabled people has grown by nearly 10% over this period. This seems to reflect an increase in mental health-driven disability, with those suffering from depression being more likely to work than those with other, physical health issues. The Resolution Foundation finds that this factor alone has contributed 6 percentage points to the rise in the disabled employment rate.
Secondly, there’s this timely New Statesman interview with Sally Davies, the UK’s Special Envoy on Antimicrobial Resistance (AMR). AMR is one of the great under-discussed threats to our health system, with the prospect of ineffective antibiotics causing up to 10 million global deaths each year by 2050 – especially in low-income countries. Ensuring this message gets through to politicians and clinicians is essential, as the interview points out. Fortunately, Reform is focused on this issue. Next Monday, we’re welcoming Dr Colin Brown from the UKHSA to a roundtable on how the UK should remain a leader in tackling AMR.