The Chancellor's Spending Review

Late November should have seen the Chancellor announce his Autumn Budget and a Comprehensive Spending Review covering the next three financial years. Like many other plans, the uncertainty created by the pandemic has put both on hold. In their place was a ‘Financial Statement’, primarily addressing a one-year Spending Review, with a nod to the red ink contained in the Office for Budget Responsibility’s (OBR) Economic and Fiscal Outlook.

Highlights

  • No tax announcements, although the Chancellor noted that “we have a responsibility…to return to a sustainable fiscal position”.
  • Government borrowing projected to be £394 billion in 2020/21 before stabilising at around £100 billion from 2023/24 onwards. Total debt to remain over 100% of GDP.
  • The Office for Budget Responsibility (OBR) says that “a fiscal adjustment of £27 billion” will be needed as a minimum in the medium term.
  • New UK Infrastructure Bank to be established in the north of England to start work in spring 2021.
    Public sector pay to be frozen for a year, other than for NHS employees and those earning less than £24,000 a year.
  • National Living Wage to increase by 2.2% to £8.91 an hour from April 2021 and the minimum age at which it applies is reduced to 23.
  • Overseas aid to be cut from 0.7% of GDP to 0.5% in 2021.




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