Are we all in for a bright future?
Chancellor’s recent Spending Review explained There’s been a lot of talk about Chancellor Rishi Sunak’s recent Spending Review, but what exactly does it mean?
A Spending Review is the process carried out by HM Treasury – the Government’s financial department – which sets out just how much of taxpayers’ money can be allocated to things like the NHS, schools and the police.
The Treasury agrees with each department how much money they will receive and what they need to deliver.
As well as covering day- to- day spending and costs such as salaries, running schools and the police force, it also covers longer-term projects such as upgrading the rail networks.
The Spending Review – carried out every one to five years – sets targets to deliver the Government’s priorities.
It is vast, and covers about half of all government spending, including defence, welfare, housing, culture, trade and business.
It also covers the income paid to the devolved administrations of Wales, Scotland and Northern Ireland.
Things such as student loans and social security payments are not covered, and tax changes are also addressed in the Budget.
The last Spending Review was carried out in 2015 by George Osborne, so a new one was due.
However, this review will only cover a one-year period to prioritise the response to Covid-19 and focus on supporting jobs.
The Office for Budget Responsibility (OBR) is forecasting the economy will shrink by 11.3% this year – the largest fall in output for more than 300 years.
But it does expect the economy to start recovering once Covid-19 restrictions are lifted, growing by 5.5% next year, 6.6% in 2022, then 2.3%, 1.7% and 1.8% in the following years.
Unemployment is forecast to peak at 7.5% in the second quarter of 2021 with 2.6 million people out of work.
This is when we expect to be at the peak of the financial difficulties.
While the International Monetary Fund (IMF) and Institute for Fiscal Studies (IFS) backed the current drive focusing on supporting health, economic health, lives and livelihoods, Mr Sunak stated that it would have to be reviewed at some point.
He said that in due course, the
Government had a responsibility to create and implement a sustainable fiscal policy for restoring stability to public finances. This will inevitably mean some review of taxation.
However, our economy remains fragile and under the threat of Covid-19 it will take a few years for it to recover.
As the Chancellor himself has said: “Our health emergency is not yet over, and our economic emergency has only just begun.”
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