This ‘spend now, tax cuts later’ Budget will leave you out of pocket

By Head of Health and Social Policy Sean O'Sullivan on 29 October 2021 Maternity Services Midwifery Government Budget Cuts Pay

When it comes to the Budget, it pays to look beyond the immediate headlines, let the dust settle before forming a judgement and, above all, study the small print. Chancellor Rishi Sunak’s Budget, delivered to Parliament on Wednesday is no exception to this rule.

Sure enough, the Chancellor’s statement was laced with eye-catching spending announcements, some of which had been trailed in the week leading up to the Budget and enough popular give-aways to satisfy the Conservative back benches. Among the headline measures were:

  • Rises in spending for all Government departments over the next three years.
  • An increase in the National Living Wage from £8.91 to £9.50 an hour.
  • An end to the public sector pay freeze.
  • Cuts to air passenger and alcohol taxes and a scrapping of a planned increase in fuel duty.

The good news for the NHS is that healthcare spending will increase by £4.2bn a year, and £44bn overall, by the end of this Parliament. This will include funds targeted at 50,000 more nursing posts, new hospital builds and upgrading of existing hospitals, more operating theatres and diagnostic centres and more money for newborn screening. There were as well a series of measures targeted at early years services, including:

  • £300m for the first 1001 days, to include tailored services to help with perinatal mental health services and breastfeeding advice (delivered via new family hubs).
  • £150m for the training and development of the early years’ workforce.
  • £200m for the Supporting Families Programme.

The Chancellor’s largesse has been made possible by stronger than expected economic growth this year and a downgrading of the long-term impact that the pandemic is predicted to have on the economy. Together with the proceeds from the recent hike in national insurance, this has given the Government an extra £50bn to spend, of which £30bn extra spending was announced in the Budget.

Welcome as this boost will be, the spending increases will not be sufficient to offset the impact of years of austerity. With the Chancellor signalling his intention to cut taxes in subsequent budgets, this spending binge will also be strictly time-limited. And with economic growth predicted to slow down after the next year, the likelihood is that any tax cuts will have to be funded by reductions in public spending or extra borrowing.

The Budget was also notable for a lack of measures designed to boost the green economy. If anything, the cuts to air passenger taxes and increased spending on roads, bring into question how serious the Government really is about tackling the climate crisis.

The really bad news, however, is that with inflation predicted to rise to 4.4 per cent in 2022, and with taxes at their highest share of national growth since the early 1950s, there is little prospect of a significant improvement in living standards. In fact, if energy and food costs continue to rise, inflation could top 5 per cent, thereby increasing the risk of interest rate rises and a fall in real terms take-home pay.

Despite the Chancellor’s optimistic language and slick presentation skills, the sad reality is that the financial burden of the Government’s economic policies will once again be falling on working families. That is why the RCM is already gearing up to campaign for all members to receive a decent pay rise next year, one that starts to make up for years of pay restraint. We have written to the Prime Minister that if the Government is serious about moving towards a ‘high skilled, high wage’ economy then it could start by awarding midwives and MSWs a pay increase that reflects their high skills and dedication to the NHS.

We will also continue to press the case for increased investment in maternity services, to tackle the current staffing crisis and ensure that the NHS has enough midwives and MSWs to meet the current, unprecedented demand on services.