Coronavirus: Third of Rishi Sunak’s £30bn was ‘old money passed off as new’

Rishi Sunak has been accused of twisting the figures in his summer statement by repackaging £10 billion of previously committed spending as a new deal to save jobs.

Philip Aldrick, Economics Editor www.thetimes.co.uk 
The Institute for Fiscal Studies said the chancellor’s attempt to pass off old money as new spending was “corrosive to trust”. After analysing last week’s mini-budget, the public finance think-tank found that up to £10 billion of investment in public works and skills would be funded by savings as other projects were cancelled.

The £5.5 billion announced by Boris Johnson for transport and infrastructure before the summer statement, which he presented as a new deal in the vein of the US president Franklin Roosevelt, is not new money at all, it said.

“All that extra money is not quite what it seems,” Paul Johnson, the IFS director, said. “The ‘Rooseveltian’ additional £5.5 billion of capital spending represents an increase of precisely zero this year on budget plans. It is a reallocation from one set of projects to another.”

Last week the chancellor unveiled a package of measures to support jobs, including temporary cuts to VAT and stamp duty and a £1,000 job retention bonus for every furloughed worker that an employer rehires.

The Treasury said the package was worth “up to £30 billion” but the Office for Budget Responsibility, the government’s independent fiscal watchdog, said this week that it was more likely to cost £20 billion because not every employer would claim the bonus.

The IFS said that at least £8 billion and possibly as much as £10 billion of the smaller £20 billion estimate were also recycled funds. A spokesman for the Treasury said the claim was “wrong”.

David Phillips, associate director at the IFS, said: “So the £30 billion package turns out to be more like £12 billion of additional spending plus some £8 billion or so reallocated from previously planned projects. And capital spending is actually left no higher overall than was planned back in March.”

He called on the Treasury to be more upfront in future by declaring where it expected to make savings rather than simply announcing new spending.

“It makes scrutiny of plans more difficult and is corrosive to trust,” Mr Phillips said. “While governments of all stripes will, of course, want to follow the adage of ‘repetition, repetition, repetition’ when it comes to highlighting the goodies they are funding, official policy documents should also be clear about when and where spending is expected to be lower than previously planned too.”

The main saving is on the £5.5 billion infrastructure package. The government did say the investment represented an “acceleration” of previous spending plans but did not disclose that the immediate funds would come from “newly anticipated underspends on other capital projects rather than an increase in overall investment spending this year”, Mr Phillips said.

The IFS also claimed that the £2 billion “green homes grant” announced by the chancellor to help insulate homes had been allocated from previously announced spending, and that £400 million for traineeships, apprenticeships, school leavers and careers advice was from an existing pot.

“It can make sense to re-prioritise and re-profile spending in this way: some of the spending originally planned may no longer represent value for money or could even be infeasible, for example. But it’s important to make clear what is being cancelled or postponed so that politicians, the media and public can scrutinise these decisions,” Mr Phillips said.

A spokesman for the Treasury said: “This suggestion is wrong. The Treasury has approved additional activity by departments as part of the Plan for Jobs.” The summer statement figures were not final and would be properly costed as part of a normal budget forecast process in the autumn, the Treasury said.

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