Chancellor Rishi Sunak has announced the government’s spending plans for the coming year, prioritising funding to support the UK’s recovery from Covid-19 and providing £100 billion of capital investment, a real term increase of £27 billion compared to 2021-22.
Overall core day-to-day spending, excluding exceptional funding to fight Covid-19, will rise to £384.6 billion in 2021-22.
The Covid-19 pandemic has caused substantial hardship for many individuals and businesses across the country, with widespread economic insecurity. Output fell by 25% between February and April 2020, according to the Office for National Statistics (ONS).
Following eased restrictions, the economy grew rapidly from late Spring and by September 2020, GDP was around 8% below its pre-pandemic level. However, as restrictions tighten once more, levels of economic uncertainty increase, and the Office for Budget Responsibility (OBR) anticipates that GDP will fall by 11.3% in 2020.
The 2020 Spending Review (SR20) invests in economic recovery, with a focus on kickstarting growth, safeguarding jobs and levelling up all regions of the UK to ensure the Government’s initiatives help to support everyone.
A ‘Green’ recovery
There is a definite focus on a ‘Green’ recovery, as the Spending Review provides funding for the Prime Minister’s Ten Point Plan, which sets out the Government’s vision to tackle climate change. As transport is one of the highest-emitting sectors, there is a prioritisation of transitioning to zero emission vehicles, including £1.9 billion for charging infrastructure and consumer incentives. The SR20 also provides £1.1 billion to make homes and buildings net zero-ready.
Closing the perceived pay disparity
Mr Sunak also focused on closing the perceived pay disparity between private and public sector workers. There will be a temporary pause on headline pay for some public sector workers, however there will be a commitment to a pay increase for over 1 million NHS workers and 2.1 million public sector workers earning less than £24,000 will receive a minimum £250 increase.
New Levelling Up Fund
The Chancellor also announced the launch of a new Levelling Up Fund worth £4 billion for England. This fund will invest in local infrastructure that has a visible impact on people and their communities and will support economic recovery. It will be open to all local areas in England and prioritise bids to drive growth and regeneration in places that need it the most. The Government will set out further details on how to support levelling up across the UK in the New Year.
Here is an overview of some of the main areas of funding from the 2020 Spending Review:
- £55 billion to support the public services’ response to Covid-19 next year;
- £100 billion of capital spending next year to kickstart growth and support jobs;
- £2.9 billion to fund a new three-year UK-wide programme which will provide support to over 1 million long-term unemployed people;
- A new £4 billion ‘Levelling Up Fund’ for England that will invest in local infrastructure that has a visible impact on people and their communities ;
- Increasing core spending power for local authorities by an estimated 4.5% in cash terms;
- Temporary pause on headline pay for many public sector workers, with a pay increase for over 1 million NHS workers;
- £12 billion to support a green industrial revolution, including the transition to zero emission vehicles, low hydrogen carbon production, offshore wind and nuclear power;
- £15 billion for Research and Development, increasing the productivity of innovative businesses;
- A £6.3 billion cash increase in NHS spending;
- A £2.2 billion uplift for the core schools’ budget;
- An additional £400 million to help recruit 20,000 additional police officers by 2023;
- £1.1 billion to support farmers, land managers and the rural economy, and £20 million to support fisheries in Scotland, Wales and Northern Ireland; and
- The UK will spend the equivalent of 0.5 per cent of gross national income (GNI) as overseas aid in 2021.
Employment statistics and Plan for Jobs
According to the Labour Market Overview ONS), unemployment has risen, with the number of employees on payroll falling by 782,000 (2.7%) between March and October 2020. Redundancies also rose to 314,000 in the three months to September, this is the highest level on record. Meanwhile, vacancies this year fell further and more rapidly than during the 2008-2009 recession and in October were still around 35% down on the year.
In order to support economic recovery, an additional £3.6 billion has been allocated to build on the commitments made in the Plan for Jobs, including funding for the Kickstart Scheme for young people, the doubling of work coaches in Job Centre Plus, and investing in a new, three-year programme to help over one million people.
- The Chancellor also announced an increase in the National Living Wage for individuals over 23 years, by 2.2% to £8.91 an hour from April 2021;
- 1 million public sector workers, who earn below the median wage of £24,000, will be guaranteed a pay rise of at least £250; and
- 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 options for further Covid-19 related support through business rates reliefs. In order to ensure that any decisions best meet the evolving challenges presented by Covid-19, the government will outline plans for 2021-22 reliefs in the New Year.
More Start Up Loans
To further boost the employment market, there will also be increased funding for the British Business Bank’s Start Up Loans programme so that it can provide 1,000 more loans in 2021-22 than were originally funded in the March 2020 Budget, enabling more people to access the funding they need to start up their own business.
In summary, the SR20 sets forth a set of determined financial commitments to support confidence and offer wide investment across the economy. These are record levels of capital investment and it is hoped that this can be the funding boost the UK needs to drive its economic recovery and build a stronger future.