Sunak Spending Review What To Expect on Wednesday

Published / Last Updated on 23/11/2020

Chancellor Rishi Sunak will set out future government spending plans in the Spending Review due on Wednesday.

The Spending Review usually covers 3 or 4 years but due to economic uncertainty this has been limited to the next 12 months. 

The review details the money Government departments will get to fund the NHS, road, police and education and will only cover 2021-2022 financial year.  It will also set out money for the devolved administrations of Northern Ireland, Scotland, Wales and Wales.

Here's what to expect:

It is expected by the end of this year the economy to be at least 10% smaller than before the pandemic which has left the UK poorer.

Latest forecasts for the economy and public finances from the independent Office for Budget Responsibility (OBR) will be disclosed by Mr Sunak.

The OBR earlier this year forecasted a 13% contraction, although it is not expected to be that bad but the shrinkage is likely to be in the double-digits and public borrowing topping £350 billion.

Despite large tranches of public service spending already having been made, some areas will get more NHS England, Defence and Schools.  Some two thirds of public service spending has been pre-determined according to the Institute for Fiscal Studies (IFS).

The remaining third is almost certainly not enough to go round and the IFS thinks unprotected services like local governments, courts and prisons are vulnerable to cuts, including the overseas aid budget.

Wednesday’s Review main topic for discussion will be saving not spending after last week’s media leaked claims Mr Sunak wanted to freeze public sector pay except frontline NHS staff.

Mr Sunak suggests the public sector's 5.4 million workers should also share some pain given private sector pay has already taken a huge hit.  According to the Institute Fiscal Studies relative to pay in the private sector, public sector pay has fallen to its lowest level in decades.

Public pay performed stronger than the private sector during the pandemic and union leaders have warned industrial action to make sure members pay does not fall any further behind.

Mr Sunak may also publish details of a new National Infrastructure Strategy and also a Research and Development Strategy in his commitment to spend more on large long-term projects.

The government is keen to get its 'north-south levelling up' agenda back on track and infrastructure spending is the key.  The north has claimed for too long that the Treasury’s method used to calculate the cost-benefit of spending money on big projects is biased towards London and the rest of the south east. Expect some changes to these calculations and whether any spending promises are new money or projects brought forward.

Wednesday’s review will be about spending and borrowing, the Chancellor will at some point have to decide how it will be paid for and will no doubt start to address this in next March’s Budget.

The economy may bounce back limiting the need for large tax rises if a Covid vaccine is successful but we suspect the combination of Covid alongside Brexit will inevitablly lead to tax rises.

Explore our Site

Money MOT
T and C