Brexit: Chancellor announces ‘fast tracked’ spending review

Chancellor Sajid Javid Image copyright Getty Images

Chancellor Sajid Javid has announced a one-year spending review to give government departments “financial certainty” as they prepare for Brexit.

Mr Javid said a “fast-tracked” spending round for 2020-21 would “clear the ground ahead of Brexit while delivering on people’s priorities”.

Spending reviews typically tend to happen every two to three years.

But shadow chancellor John McDonnell warned that the Tories were “playing dangerous games with spending”.

“We will get Brexit done by 31 October and put our country on the road to a brighter future,” said Mr Javid.

Mr McDonnell disagrees with this approach, saying it “smacks of pre-election panic measures by the government”.

“Boris Johnson is splashing a little bit of cash as a publicity stunt, but keeping the door open for even more austerity if a no-deal Brexit breaks the economy,” he said.

He added that a one-year spending review would enable the government to halt any additional spending after the first year, and this uncertainty would make it hard for public services to prepare for anything beyond the next year.

Mr McDonnell stressed: “There are also gaping holes in the spending plans – nowhere near enough for our NHS or our schools or our local councils, nothing to lift children out of poverty, nothing to end the pain caused by the Tories’ Universal Credit, or to scrap the bedroom tax or the cuts in support for disabled people.”

Government spending reviews

About 50% of government spending is planned on a multi-year basis, when it comes to things like public services, such as the NHS, schools or the police, which are unlikely to alter drastically from year to year.

Typically, these budgets are set three or four years in advance, in order to help government departments plan their spending more effectively.

“If you’re a head teacher or head of a police force, if you’re trying to work out who to hire or whether to invest in a piece of equipment, it helps to know what your budget is going to be into the future,” Ben Zaranko, a research economist with the Institute for Fiscal Studies told the BBC.

“If you have to plan this on a year-to-year basis, it’s quite hard.”

This time, the spending review will be published in advance of the Budget, which means the chancellor will be making spending plans before he has updated forecasts for the economy, and before he has set tax policy, Mr Zaranko added.

Analysis by BBC political correspondent Tony Bonsignore

Government departments are likely to have mixed views about this announcement.

On the one hand, some public services – for example health and the police – may be offered more money. There may also be extra cash to deal with the potential fallout from a no-deal Brexit.

The government says this decision is about getting Brexit done, and delivering on people’s priorities.

But the decision also makes it harder for public services to plan for the longer term, as they’ll now have to wait another year for the real spending review.

There’s also the risk that the spending taps might be turned off as quickly as they’re turned on. That’s Labour line of attack – they’re accusing the government of playing “dangerous games”, and “abandoning any pretence of a long term economic plan”.

One-year spending reviews are not unprecedented. In 2013, the government set the budget for 2015-16, so as to avoid spending decisions going beyond the next election.

Mr Zaranko thinks that there are both benefits and drawbacks to having a single spending review, over a multi-year one.

He said it makes sense to that the chancellor is unwilling to commit to longer spending plans, because “we don’t know what the economy is going to look like six months down the line, let alone three years”.

However, it would make it much harder for government departments to plan for the future.

Image copyright WPA Pool
Image caption Chancellor Sajid Javid and Home Secretary Priti Patel were given a tour of Tilbury Docks in early August

Mr Zaranko said that Mr Javid’s spending review could benefit from having an extra reserve of money that could be drawn upon by departments that might have new responsibilities in case of a no-deal Brexit.

For instance, HM Revenue and Customs (HMRC) might need more money at the border control in Dover, or the Home Office might need additional resources to provide more immigration services.

Earlier this year, Her Majesty’s Chief Inspector of Constabulary released a report warning that one-year spending reviews would not be good for the police in England.

The HM Inspector of Constabulary concluded that annual funding settlements were “incompatible with efficient and effective long-term planning”.

“When it comes to funding, [police] forces need certainty, stability and predictability. So there is a clear need for multi-year settlements,” it added.

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