Chancellor Rishi Sunak will soon announce the government’s spending plans for the next year. This Spending Review will include details on public sector pay, funding for the NHS, and money for the decentralised administration of Northern Ireland, Scotland and Wales.
The chancellor's plans are also expected to quantify the impact of the COVID-19 pandemic and highlight how the government plans to pull the country out of the current economic crisis. The chancellor will make his address at 12:30 GMT today.
While the Spending Review was initially meant to forecast government spending over the next three years, it has been decreased in scope to one year, given the uncertainty caused by the pandemic.
Some updates that the chancellor is expected share in his speech have already been announced, such as an additional £3 billion for the NHS to tackle its backlog of cases. The government has also announced a package of £4.6 billion to help people who have lost their jobs return to the workforce. The UK is also expected to cut its overseas aid budget from 0.7% to 0.5%. Finally, it has also been reported that the chancellor plans on introducing a pay freeze for all public sector workers except frontline staff of the NHS.
The current situation provides a challenging financial backdrop against which the government needs to project its upcoming spend. By the end of the year, the economy is likely to be around 10% smaller than pre-COVID. Tax revenues have fallen since businesses have been forced into closure. Support schemes intended towards providing aid to furloughed workers have significantly increased government borrowing and spending. An additional £372 billion is expected to be borrowed by the government, compared to its initial estimate of £55 billion.
The Spending Review will be accompanied by forecasts on how taxpayer's money will be spent to improve the economy. Some have criticised the government’s hasty and irresponsible actions during the pandemic, saying that it has led to a high level of fraud, and further increased the economic disparity in the country.
The Labour Party’s shadow chancellor, Anneliese Dodds, said, “This prime minister and his government talk a good game but they haven't delivered on their promises - and regional inequality has got worse under their watch. They clapped for key workers - but now they're freezing their pay, and looking to scrap planned minimum wage increases for the private sector.”
The current year's Spending Review will be vital, given current economic conditions, and there are several significant monetary decisions to be made. In the future, once the uncertainty around the coronavirus pandemic, Brexit and the fate of the economy has somewhat lessened, the government should consider making a longer-term spending forecast. By then, when the worst of the pandemic is ideally behind us, the chancellor should wrestle with the drawn-out difficulties confronting the nation.