Government Spending plans for 2021 announced: The Headlines
The finishing line is in sight. With the very real possibility of a Covid-19 vaccine being administered nationwide by the end of the first half of 2021, the expectation by the Treasury to kick-start the economy from now till then was hotly anticipated via the Spending Review, delivered today on Wednesday 25th November 2020.
In normal times, the Treasury sets out government spending plans for a 3-5 year period of taxpayers funds via a Spending Review, with Budgets delivered annually. However, as we didn’t have an Autumn Budget this year, this Spending Review stepped in and outlined government spending plans for the year ahead only.
Overview
Mr Sunak was bold and ambitious in his spending plans despite the weak economy this year due to the pandemic. The Chancellor announced billions of pounds of new funding to stem the flow of unemployment, the NHS and a ‘once in a lifetime’ focus on UK wide infrastructure.
A grand total of £55 billion of pounds has been promised for public health, NHS, transport, local council budgets, rough sleeping and the devolved administrations.
What do the numbers forecast?
This is the first time we heard the economic forecasts from the Office of National Statistics since the pandemic began, particularly important as we did not get a Budget this year, and businesses need to understand the economic outlook to prepare and plan for the year ahead.
The forecast numbers show:
This year the economy contracted by 11.3%, the largest fall in 300 years.
As the restrictions being to ease into 2021, the UK economy is expected to show growth of 5.5% in 2021, 6.6% in 2022, 2.3% in 2023, 1.7% in 2024 and 1.8% in 2025.
The economy is not expected to return to pre-covid trading levels until the fourth quarter of 2022.
By 2025, the economy is expected to be 3% smaller than predicted in this year’s March Budget.
Borrowing and underlying debt is and will continue to be at eyewatering levels, and show the highest record level of borrowing in peace time with UK underlying debt continuing to increase and estimate to be 97.5% of GDP by 2026.
Focus on stemming unemployment
A new 3 year Restart Programme was announced to target those who have been unemployed for over a year.
It is expected that the UK unemployment figure will stand at 7.5% in 2021 equating 2.6 million people, but is expected to fall to 4.4% by the end of 2024.
Public sector pay freeze
The Chancellor has announced a 3 step plan for public sector workers, which does unfortunately mean a pay cut for many in 2021:
1st Step: Pay rises for nurses, doctors and other NHS workers
2nd Step: The rest of the public sector will see a pay freeze in 2021, including teachers, police force etc
3rd Step: Commitment to protect lower income earners earning below £24,000, who will receive a guaranteed pay rise of at least £250 in 2021
There will also be an increase in National Living Wage and National Minimum Wage come the new tax year, from April 2021.
ambitious nfrastructure Spending Plans
The Chancellor announced a ‘once in a lifetime’ plan on nationwide spending on transport, broadband, mobile connectivity, cycle lanes, zero emissions buses and rail.
The full spending plans on infrastructure will be published in a report and will follow the spirit of the government’s ambitious 10 point climate change plan.
There is a planned £15 billion plan to spend on research and development and a new UK Infrastructure Bank will be set-up, based in the North of England, which will finance projects from Spring 2021.
A £7.1 billion home building fund will also be set-up to build more homes nationwide.
Levelling Up - the Tories core manifesto target
A new £4 billion Levelling Up Fund has been announced, which allows for direct biding for funding by local, grassroots groups to fund local projects.
These projects should have a direct and real impact on villages and towns that apply and which command the local community support, as well as the local MP’s.
Mr Sunak has declared this new fund should be considered as targeting the ‘infrastructure of every day life’ - less traffic, rejuvenating high streets, upgrading train stations and transport links, more museums and libraries - whatever a local community needs to thrive.
Surprising?
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