Spending Review – The Key Facts
Rishi Sunak yesterday outlined the Government’s spending plans for the coming year. These areas included health, transport, education and other public services. There was also a briefing on the state of the UK economy and the latest forecasts.
Despite concerns around potential tax increases, Sunak instead opted to keep those under wraps until Spring’s Budget.
So what was covered?
The Office for Budget Responsibility (OBR) has reported that the economy is predicted to grow by 5.5% next year, but economic output will not return to pre-crisis levels until Q4 2022.
- Economy set to contract by 11.3% in 2020, the largest fall for more than 300 years.
- Unemployment is expected to reach 7.5% next spring, at 2.6 million people unemployed, before falling to 4.4% by the end of 2024.
- Borrowing is forecast to hit £394bn this year, equivalent to 19% of GDP, the highest ever in peacetime.
- Borrowing is forecast to be £164bn next year and to remain around £100bn annually for the remainder of this Parliament.
- UK debt will be equivalent to 91.9% of GDP this year and rise to 97.5% of GDP in 2025-26.
- In 2025, the economy will be around 3% smaller than was expected in March Budget forecast.
Sunak said the government had provided some £280bn to help get through the Covid crisis, noting that ‘as high as the cost are, the costs of inaction would have been far higher’.
Next year the government will allocate an initial £18bn for PPE and vaccine purchases, along with £3bn for NHS recovery, £2bn for transport investment, £3bn for local councils and £250m for rough sleeping.
There is also £2.6bn earmarked for the devolved administrations.
Sunak described his priorities as, firstly, protecting people’s lives and livelihoods; secondly providing strong public services; and finally making what he called a ‘once in a generation’ investment in infrastructure.
Employment and Business
- A new £4.6bn package to help people back to work.
- £2.6bn for Restart scheme to support those out of work for 12 months.
- £1.6bn for the Kickstart scheme to subsidise jobs for young people.
- £375m skills package, including £138m to provide Lifetime Skills Guarantee.
- New £4bn “levelling up” fund to finance local infrastructure projects, like by-passes.
- New UK infrastructure bank to be established in North of England.
- Business rates multiplier will be frozen in 2021-22.
- The Office for Budget Responsibility has estimated the UK’s economy could shrink by a further 2.1% – on top of the projected impact of Covid – if there is no trade deal with the EU.
- In its latest forecast, issued alongside the Spending Review, it warned of “various temporary disruptions to cross-border trade” if current talks ended without an agreement, affecting growth for up to five years.
- Trade deals with other countries, like the US and Japan, are “unlikely to compensate”, it adds.