Rishi Sunak has been accused of repackaging up to £10bn of previously announced government spending to form the backbone of his summer statement plan to save jobs during Covid-19.
Serving the chancellor with a blunt rebuke, the Institute for Fiscal Studies said it was “corrosive to public trust” for the government to reallocate old funds and pass them off as new money.
It said at least £8bn and up to a third of the £30bn coronavirus response package announced by Sunak in his summer statement last week would be funded from underspending on previously planned projects.
David Phillips, associate director at the IFS, said: “It makes scrutiny of plans more difficult and is corrosive to trust. 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 country’s leading tax and spending thinktank said the package of up to £30bn unveiled by the chancellor included £5.5bn in transport and infrastructure projects announced by Boris Johnson, which was in fact money that had been reallocated from other schemes.
The government has been clear that the infrastructure package announced in the prime minister’s “new deal” speech was from old money, representing instead the acceleration of previously planned investments.
However, it also said the £2bn “green homes grant” announced by Sunak to help insulate Britain’s energy-inefficient homes had been allocated from previously announced spending, and that £400m for traineeships, apprenticeships, school leavers and careers advice in England was from an existing funding pot.
The IFS said the discrepancy emerged because the UK’s devolved administrations in Scotland, Wales and Northern Ireland were in line to receive less money than would have been the case if the chancellor’s spending package were entirely new.
It said the Scottish government would have got about about £750m via the Barnett formula – the system for allocating the share of new public spending to the devolved administrations – if the funds were new. Instead, Scotland will receive about £21m.
The IFS said reductions in spending on other areas, as some previously planned projects and investments are deemed less of a priority or infeasible given the coronavirus crisis, was a reasonable way to manage the public finances. However, it warned that a lack of transparency over where spending was now expected to be lower had contributed to confusion about the scale of the fiscal support being provided.
Phillips said: “A lack of illumination leaves significant scope for misunderstanding and even misrepresentation of the UK government’s plans. So, can the UK government please turn on the lights?”
A HM Treasury spokesperson said: “This suggestion is wrong. The Treasury has approved additional activity by departments as part of the plan for jobs.”