Javid delays full Spending Review as Treasury pledges to keep 'borrowing under control'

Written by Beckie Smith on 9 August 2019 in News
News

Treasury announcement shows departments could be expected to make further cuts

Photo:  Aaron Chown/PA

The Treasury’s planned three-year Spending Review has been delayed until next year, chancellor Sajid Javid has said, in an announcement that has long been expected in light of continuing uncertainty about how the UK will leave the EU.

Plans for a three-year review this summer were announced by his predecessor Philip Hammond in March, but the lack of a Brexit deal has made it increasingly unlikely in recent months that the exercise will go ahead.

The Treasury will instead carry out a one-year spending round, which will be completed in September, Javid said.


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Delaying the full exercise would enable the government to focus on preparing for Brexit. He said a shorter review – which would set departmental budgets for 2020-21 – would “clear the ground ahead of Brexit while delivering on people’s priorities”.

Javid said the one-year budgets would set out funding for spending pledges Johnson has made since coming into office last month.

Johnson has so far committed to funding the recruitment of 20,000 extra police officers – reversing cuts made since austerity began in 2010 – and giving more money to the NHS and schools.

The prime minister was sharply criticised this week after saying the Treasury would provide £1.8bn in “new money” for the NHS, after it emerged that hospitals have already been allocated but not allowed to spend around £1bn of that figure.

Hinting that departmental budgets are likely to be constrained elsewhere, the Treasury announcement said the review would “ensure the government continues to keep borrowing under control and debt falling by meeting the existing fiscal rules”.

The statement echoes a warning by Hammond in April that not all departments should expect budget increases, despite his assertion in the 2018 Budget that austerity was “coming to an end”.

Hammond’s Budget set out plans for 1.2% annual growth in day-to-day departmental spending between 2019-20 and 2023-24, but this figure drops to zero when the government’s five-year NHS spending pledge is accounted for.

The Treasury said today it would keep commitments to increase spending on overseas aid and defence, meaning other departments will likely need to find savings.

Last year Ben Zaranko, an economist at the Institute for Fiscal Studies, warned that Hammond’s indicative spending path meant the upcoming period “might still feel like austerity to those departments”.

Today Zaranko said it did not look like government plans to stick to these plans. “It is to be presumed that overall spending will be promised at a level above that implied by the provisional spending plans published by the previous Chancellor Philip Hammond alongside the March 2019 Spring Statement,” he said.

“This spending review looks likely to bring real budget increases for most major spending departments next year, but the outlook beyond that remains highly uncertain. A no deal Brexit could mean that this spending review will mark a pause to austerity, rather than an end.”

Responding to the announcement, Prospect deputy general secretary Garry Graham said the one-year round would “do little to enable organisations to plan and address some of the fundamental challenges that will face the country”.

He said civil service pay was just one area where long-term funding clarity was needed. “This is not fair or sustainable, particularly at a time when there has not been a government in peace time so reliant on the civil service,” Graham said.

Graham’s comments echoed the warnings of several experts in recent years that departments need multi-year funding settlements to enable them to deliver services effectively.

Anita Charlesworth, director of research and economics at the independent charity the Health Foundation told CSW earlier this year that a lack of long-term financial certainty makes it difficult for hospitals to plan long-term capital projects, for example, which she said “pushes us to use the day-to-day spending badly”.

Martin Wheatley, a senior fellow at the Institute for Government and former Treasury and Cabinet Office official, told CSW earlier this year that a one-year review would be a “much more limited and non-strategic exercise” than Hammond had originally planned.

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Beckie Smith
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Beckie Smith is a reporter for CSW who tweets @Beckie__Smith.

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