UK curtails spending review in fresh blow to Boris Johnson

Sunak started the spending review in July with a warning that ministers faced ‘tough choices’ in the wake of the pandemic

LONDON • Chancellor of the Exchequer Rishi Sunak cut a planned spending review from three years to one due to “unprecedented uncertainty”, dealing a blow to Boris Johnson’s plans to map out his priorities for a post-pandemic world.

The prime minister had hoped to bolster his agenda of “levelling up” inequalities across the country after promising £100 billion (RM540 billion) of investment in infrastructure projects. Now Sunak will set the budgets of government departments for the 2021-22 fiscal year only as a resurgent coronavirus raises more doubts about the economic outlook.

The announcement came as public finance data showed the budget deficit climbed to a record £208.5 billion in the first six months of the fiscal year, highlighting the cost of supporting the economy through the pandemic. Beleaguered businesses and workers are calling for further aid.

“In the current environment, it’s essential that we provide certainty,” Sunak said in a statement yesterday. “So, we’ll be doing that for departments and all of the nations of the UK by setting budgets for next year.”

The spending review will be published in late November. In order not to disrupt longer-term planning, multi-year plans for the National Health Service and schools will still be funded, as will priority infrastructure projects such as the HS2 high-speed rail project.

Sunak started the spending review in July with a warning that ministers faced “tough choices” in the wake of the pandemic. Departments were told to “identify opportunities to re-prioritise and deliver savings”, dialling back on the inflation-busting increases previously envisaged.

But the ongoing pandemic, with large parts of the country in partial lockdown again, make it hard for the government to predict the state of the economy and the spending power it’ll have in future years.

The areas facing the tightest restrictions are in the north of England, fuelling grievances in places that propelled Johnson to power on the back of his promises to deliver Brexit and tackle economic inequality.

The review will focus on helping departments respond to Covid-19 and deliver the government’s plans to support jobs, as well as providing “enhanced support” for public services, the Treasury said.

Government borrowing in September alone was £36.1 billion, compared to just £7.7 billion a year earlier, the Office for National Statistics said yesterday.

The deterioration will fuel the debate about how much economic aid the government can provide as the virus spreads again and new restrictions are imposed. Sunak has already scaled back his job support plan, leaving local leaders in areas hit by regional lockdowns such as Manchester calling for more financial help.

The latest figures showed debt climbing to 103.5% of GDP — the highest ratio since the financial year ending 1960. The deficit was set to be approaching £400 billion in the current fiscal year even before Sunak announced further measures to support jobs and wages in recent weeks. — Bloomberg