Industry News

Chancellor Delivers Government's Spending Review

Today, Chancellor of the Exchequer Rishi Sunak MP delivered the Government’s Comprehensive Spending Review to parliament, outlining plans to tackle the coronavirus pandemic, strengthen public services and deliver investment in infrastructure.

Mr Sunak began by stating that today’s review delivers on the priorities of the British people, citing the Government’s immediate priority to “protect people’s lives and livelihoods”.

The Chancellor went on to announce that in 2021 the Government is allocating an initial £18 billion to tackle the coronavirus pandemic. He also announced that the Government is allocating funding specifically to support the NHS, keep transport links open, support local councils and end rough sleeping. £2.6 billion of support will also be allocated to the devolved administrations. On top of this, the Chancellor stated that public services funding next year will total £55 billion to tackle the virus.

The Chancellor then discussed the Office for Budget Responsibility’s growth forecasts, remarking that the economy will contract by 11.3% this year, the largest fall in output for more than 300 years. As lockdown restrictions are eased, the forecast expects the economy to begin recovering, however he noted that economic output is not anticipated to return to pre-crisis levels until fourth quarter of 2022, and economic damage is likely to be lasting. He added that the UK is forecast to borrow a total of £394 billion this year, although he stated that, “the costs of inaction would have been far higher”.

On investment in public services, the Chancellor announced a £3 billion three-year Restart programme, although he cautioned that the Government, “cannot protect every job”, quoting that unemployment is forecasted to rise to 7.5% in second quarter of 2021. He confirmed a partial public sector pay freeze, with pay rises for over a million NHS workers and pauses of pay rises for the rest of the public sector in 2020. To counteract this, the Chancellor pledged that the 2.1 million public sector workers who earn below the median wage of £24,000 will be guaranteed a pay rise of at least £250. He also announced that the Government will be increasing the National Living Wage by 2.2%.

Moreover, the Chancellor pledged a “historic, multi-year commitment” on NHS spending, with the core health budget set to grow by £6.6 billion next year, permitting the government to deliver on its promise to recruit more nurses and build more hospitals. He stated further commitments to public services, announcing increased funding for schools and prisons.

It was confirmed during today’s statement that the foreign aid budget will be cut, with the Chancellor stating that "sticking rigidly to spending 0.7%" is "difficult to justify”, although the original figure will be returned to when fiscal circumstances would allow. He added that overseas aid is “only one of the ways we play our role in the world”, citing the previously announced £24bn investment in defence.

Mr Sunak announced that capital spending next year will total £100 billion, including a £7.1 billion National Home Building Fund and a comprehensive new National Infrastructure Strategy accompanied by a new UK infrastructure bank that will be based in the north of England. Digital connectivity and investment in R&D are also priorities, he said, alongside the biggest ever investment in new roads, railways, cycle lanes and buses. He noted that these measures would help deliver the Prime Minister’s 10-point Plan for Green Industrial Revolution. The Chancellor also announced a £4 billion 'Levelling Up Fund', saying that any local area will be able to bid directly for local project funding.

The Chancellor concluded the Review by stating that the Government was taking measures to accompany these investments, including introducing a new immigration system to streamline talent and skills acquisition, simplification of planning systems, protecting wages of those on the lowest incomes and defending free speech and democratic rule.

Key announcements

COVID-19 Response

o The Government is providing £280 billion to get the country through COVID-19.

o £55bn to tackle coronavirus in 2021-22 – with an additional £38 billion for public services to continue to fight the pandemic this year.

o New funding that takes the budget for coronavirus vaccines to over £6 billion, part of over £18 billon to fund preventative coronavirus measures (testing, PPE and vaccines).

o £2.6 billion will go to devolved administrations to support COVID-19 measures.

Employment & Business

o The new £2.9 billion Restart Scheme to help more than one million unemployed people look for work, which will last for 3 years.

o To help businesses, the business rates multiplier will be frozen in 2021-22, saving businesses in England £575 million over the next five years.

Devolved and Local Government

o £4.7 billion for the Devolved Administrations of Wales, Northern Ireland & Scotland in 2021-22. Scotland will receive £2.4bn, Wales will receive £1.3bn and Northern Ireland will receive £0.9 billion in funding.

o Local councils will receive over £3 billion.

Digital Infrastructure

o Over £260 million to continue transformative digital infrastructure programmes, including the Shared Rural Network for 4G coverage, Local Full Fibre Networks, and the 5G Diversification and Testbeds and Trials Programmes.

Environment and Energy

o £12 billion in 2021/22 to help the UK reach Net Zero by 2050.

o £92 million to help plant 30,000 hectares of trees, capturing carbon & boosting biodiversity.

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