What did the Chancellor announce in his latest Spending Review?
In an eloquent 20-minute speech delivered to the House of Commons earlier today (25 November), Chancellor Rishi Sunak, outlined the Government’s three priorities for the British economy for the year ahead.
Priority One: Protecting people’s lives and livelihoods
In the context of a health emergency that is still not over, the Chancellor announced additional recovery funding for the NHS (£3 billion), transport (£2 billion) and local authorities (£3 billion), plus £250 million funding to help end rough sleeping.
The economy is predicted to contract by 11.3% this year and not expected to return to pre-crisis levels until the 4th quarter of 2022. Borrowing (£394bn billion this year) is at its highest level in this country’s peacetime history. Although decisions had been made to protect jobs, livelihoods and incomes, the Chancellor stated that this position was unsustainable.
Unemployment is predicted to rise to 2.6 million people in 2021 and so the Chancellor announced a new ‘Restart Programme’ to help people who are unemployed for more than one year to find jobs.
Also announced was the previously trailed public sector pay freeze. This was being introduced to try and correct what the Chancellor called a deepening disparity between public and private sector wages: public sector wages had risen by nearly 4% in the past year, whereas the figure for the private sector was around 1%. However, nurses, doctors and other NHS workers would still receive a pay rise as would Public Sector workers who earn less than the median wage of £24,000 per annum.
In addition, the National Living Wage would be increased to £8.91 per hour from next year and extended to those aged 23 and over. National Minimum Wage rates will also increase.
Priority Two: Providing stronger public services
Announcements were made to increase Government spending across many departments, including social care, education, defence and criminal justice. A new ‘Shared Prosperity Fund’ will be set up to replace Structural Funding previously provided through the EU and will be aimed at encouraging and piloting community projects.
However, the overseas aid budget (currently set at 0.7% of national income) will be reduced to 0.5% from 2021. The Chancellor stated that in the light of the unprecedented circumstances we are currently facing, he could not justify continuing at the previous level. However, he stated his intention to revert to 0.7% of national income, “When the fiscal situation allows.”
Priority Three: Delivering infrastructure investment plans
In the Government’s final priority area, the Chancellor restated its commitment to infrastructure funding of £100 billion and announced a comprehensive new Infrastructure Strategy that had been published today . A new UK Infrastructure bank is also to be established in the north of England from the spring of 2021 with the purpose of investing in major new infrastructure projects.
A new ‘Levelling Up’ fund of £4 billion will also be established, jointly managed by the Treasury and Departments of Transportation and Housing, Communities and Local Government. Bids will be invited from across the UK for investment in projects with the following criteria: i) they make a real impact, ii) they can be delivered during the lifetime of the current parliament, and iii) they have local support – including from the local MP.
Chancellor Sunak concluded his speech by stating that the measures introduced in the Government’s Spending Review would set the direction of travel for the country, but that it was: “Individuals, families and communities that must become stronger, healthier and happier as a result. That,” he said, “Would be the only true measure of (the Government’s) success.”
The information provided regarding tax treatment or legislation is based on our understanding of current UK legislation law, tax law and HM Revenue and Customs practice (November 2020), all of which may be subject to change.
Brunsdon Financial is not responsible for the content of third party web sites.