News | Published August 11 2019

Javid announces fast-track yearly review on spending

Chancellor Sajid Javid has announced that the Treasury will conduct a one-year spending review to provide “financial certainty” to government departments which will allow them to provide for public services around Brexit.

Javid said that the review for 2020/21 will help “clear the ground ahead of Brexit while delivering on people’s priorities”.

The format differs that of a full multi-year review into spending, which customarily takes place every two to four years, with the most recent having come in 2015.

Roughly 50 per cent of government spending is planned on a multi-year basis, covering spending such as investment into public services like the NHS, police force and schools. These tend to be set three or four years ahead of schedule but will now be done a year before.

Javid also reiterated prime minister Boris Johnson’s vow to get Brexit done by October 31 and “put our country on the road to a brighter future.”

The new government has already stepped up preparations for a no-deal Brexit, with Javid making an extra £2.1 billion of funds available, which has doubled the resources that the government has already set aside over 2019.

The Institute for Fiscal Studies praised Javid’s plans, saying that a spending review has been “long-awaited”, but they have come under fire from Labour shadow chancellor John McDonnell, who claims they are "pre-election panic measures”.

McDonnell said: "Boris Johnson is splashing a little bit of cash as a publicity stunt, but keeping the door open for even more austerity if a no-deal Brexit breaks the economy.”

The shadow chancellor also said that the plans have "gaping holes” and that "nowhere near enough" money has been allocated to the NHS, schools or local government.

Ben Zaranko, a research economist at the Institute for Fiscal Studies, believes that planning spending on a yearly basis will be “quite hard” for public services providers.

Zaranko said: "If you're a head teacher or head of a police force, if you're trying to work out who to hire or whether to invest in a piece of equipment, it helps to know what your budget is going to be into the future.

“If you have to plan this on a year-to-year basis, it’s quite hard”.

Zaranko added that it is “unknown what the economy is going to look like six months down the line, let alone three years”, so despite the difficulties on the ground it is sensible for Javid not to project longer term spending plans at this point in time.

It does, however, restrict government departments from planning long-term.

Her Majesty's Chief Inspector of Constabulary reported earlier in 2019 saying that a one-year spending review would be “incompatible with efficient and effective long-term planning”, causing issues for the police force in England.

Notably, the spending review will be published before the Budget, meaning Javid will be setting spending plans without access to updated economic projections and before setting his tax policies.

However, the Treasury’s chief executive Rishi Sunak believes that the one-year review will benefit by bringing financial certainty to the plans of government departments for 2020.

Sunak said: "We will invest in the priority areas of schools and policing, while delivering our promises on the NHS, defence and Official Development Assistance [foreign aid].”

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Authored by

Scott Challinor
Business Editor
August 11 2019

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