25 November 2020 - Spending Review - The Chancellor’s Statement

“Our health emergency is not yet over. And our economic emergency has only just begun” according to the Chancellor as he started his speech. However, anyone expecting Mr Sunak to indicate how he intended to balance the government’s books in his latest statement would have been disappointed. He did acknowledge that the pandemic would lead to long-term scarring, with the economy around 3% smaller in 2025 than expected at the time of his March Budget.   

This statement was always intended to present the 2021/22 Spending Review – shortened from the originally planned three-year period – and that is what it proved to be, with a heavy emphasis on spending: 

There is an extra £38 billion of support for public services in this financial year, bringing the total spending on the Covid-19 response in 2020/21 to over £280 billion. 

In 2021/22 there will be a further £55 billion of support for the response to Covid-19 including provision of PPE, the test-and trace system and the roll out of vaccines. 

There will be £100 billion of capital spending in 2021/22 aimed at kickstarting growth and supporting jobs – £27 billion more in real terms than last year.

As part of a new National Infrastructure Strategy, a UK infrastructure bank will be created “to catalyse private investment in projects across the UK”. The new bank will be headquartered in the north of England and will start work next spring.

A new Levelling Up Fund was announced, worth £4 billion. It will be managed jointly between the Treasury, the Department for Transport and the Ministry of Housing, Communities and Local Government. Any local area will be able to bid directly to fund local projects.

Core spending power for local authorities will rise by an estimated 4.5% in cash terms in 2021/22. Local authorities will be able to increase their council tax bills by 2% without needing to hold a referendum and social care authorities will be able to charge an additional 3% precept to help fund pressures in social care. There will be £254 million of additional funding to help end rough sleeping.

The business rates multiplier will be frozen in 2021/22, saving businesses in England £575 million over the next five years. The government is also considering business rates reliefs.

Public sector pay will be constrained in 2021/22. NHS workers will receive an increase. So too will the 2.1 million public sector workers earning less than £24,000 a year, who will be guaranteed a pay increase of at least £250. Outside these two groups there will be no pay rise.

The National Living Wage (NLW) will increase by 19p from next April to £8.91 an hour, in line with the recommendation from the Low Pay Commission. The age at which the NLW will start to apply will be cut from 25 to 23. The National Minimum Wage rates will also increase. 

£2.9 billion will fund a new three-year UK-wide programme to provide support to help over 1 million long-term unemployed people. 

Spending on overseas aid will be cut from 0.7% of GDP to 0.5% in 2021/22. The cut will be restored ”when the fiscal situation allows”.  

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