Rishi Sunak launches spending review and warns of ‘tough choices’
Chancellor Rishi Sunak has warned that “tough choices” will have to be made over government spending from 2021 onwards as he launched a comprehensive review of public sector budgets.
The spending review comes as Sunak revises the overall spending plans made in the March Budget to reflect the huge impact coronavirus has had on the economy and the public finances.
Earlier today, the Office for National Statistics (ONS) said government borrowing skyrocketed to a record £128bn between April and June. That was more than double the amount borrowed in the entire previous financial year.
Sunak earlier this month announced another £30bn of spending to try to shore up the UK economy as the government winds down the job retention scheme. Analysts said he will likely have to do more in the autumn Budget.
With an eye to the future, the chancellor today announced a comprehensive review of government spending plans. It will look at government day-to-day budgets for the years 2021-22 to 2023-24.
It will also consider investment budgets for 2021-22 to 2024-25. And it will look at the grants of the devolved administrations of Scotland, Wales and Northern Ireland.
Sunak said the review will prioritise election promises to “level up and invest in people and places spreading opportunities more evenly across the nation”. He did not set a fixed spending amount, citing “unprecedented uncertainty”.
The chancellor also warned that “there will need to be tough choices in other areas of spending at the review”.
“Departments should therefore be identifying opportunities to reprioritise and deliver savings,” he said.
IFS: Spending cuts a ‘real possibility’
The Institute for Fiscal Studies (IFS) think tank said the announcement means the government could again cut spending in some departments after 10 years of austerity.
IFS research economist Ben Zaranko said: “Given the large amounts already promised for priority areas like the NHS, schools and police, and Rishi Sunak’s emphasis on the need for ‘tough choices’, another round of budget cuts for other, lower priority departments is a very real possibility.”
Torsten Bell, chief executive of the Resolution Foundation think tank, said Sunak had given himself “more flexibility to reduce the size of public spending increases over the coming years, rowing back on significant increases announced as recently as March”.
“The planned 2.8 per cent real terms growth a year has now become a far vaguer promise of some growth in real terms,” he said.
The UK’s budget watchdog has said government borrowing could balloon to £370bn this year, around 18 per cent of GDP. That would be by far the biggest peacetime deficit.
Yet the IFS said earlier this month that tax rises or spending cuts to tackle the public debt should not be implemented “any time soon” as they may choke off an economic recovery.
It said there must eventually be a “reckoning,” however. The IFS said it would most likely be “in the form of higher taxes” after a decade of spending cuts.