Spending Round 2019 – comment from Institute for Employment Studies

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4 Sep 2019

Tony Wilson, Institute Director

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Today’s Spending Round sets out the government’s plans for day-to-day and capital spending for 2020-21.  However with a general election now looking all-but certain in the meantime, today’s announcements mainly serve to set out the Conservative Party’s stall for that contest: namely to end, although not reverse, a decade of fiscal austerity.

The big winners today, as expected, are the NHS, where spending will rise by £6.2 billion in real terms; education (up £3.8 billion); local government (£2.9 billion), Defence (£2.2 billion) and policing (£750 million).  Underneath this, there is welcome new funding for social care (although still no long-term plan), special educational needs, further education, homelessness prevention, workforce investment and health education.

After a decade of belt-tightening, the major challenge for many of these public services will now be in recruiting and resourcing to deliver on this new investment.  As we set out in July, the plans to recruit 20 thousand new police officers will bring a host of complex workforce challenges – while health, social care and further education already face a range of staffing shortages even without funding being increased.

It is also important to note that while today’s Spending Round may end austerity, it will not reverse the significant cuts that have been made to public budgets since 2010.  Indeed it is highly likely that funding for most public services will still be below the levels seen under the Coalition Government (with the exception of Health, Education and Policing). 

On Brexit, the decision to commit a further £2 billion next year for Brexit looks sensible.  However in the event that we do crash out without a deal, then this will be significantly less than is needed to deal with the consequences.  As we have said previously, if unemployment were to rise by 700 thousand as the Bank of England forecasts, then the costs of maintaining the benefits and employment regime is likely to cost more than £1 billion on its own. 

Finally, today’s Spending Round focused only on Departmental day-to-day and capital spending, and made no changes to social security and other demand-led spending – so today’s announcements swerved any decisions on the benefits freeze, housing support and Universal Credit.  This is somewhat unusual, as previous spending rounds in 2010 and 2015 have included welfare changes, although the one-year 2013 spending round similarly only focused on Departmental budgets.  So while austerity may have ended for public services, it has not yet ended in social security and welfare – and after today, the government will have a lot less room for manoeuvre.

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 Any views expressed are those of the author and not necessarily those of the Institute as a whole.