Brexit: Chancellor announces one-year spending review

Chancellor Sajid Javid
Image copyrightGETTY IMAGES

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

‘Gaping holes’

Labour’s Mr McDonnell said the approach “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.

Mr McDonnell said there were “gaping holes” in the spending plans, with “nowhere near enough” allocated to the NHS, schools or local government.

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.

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Tony Bonsignore, political correspondent

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’s line of attack – they’re accusing the government of playing “dangerous games” and “abandoning any pretence of a long-term economic plan”.

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“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.

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.

Chancellor Sajid Javid and Home Secretary Priti Patel visiting Tilbury DocksImage copyrightWPA POOL
Chancellor Sajid Javid and Home Secretary Priti Patel were given a tour of Tilbury Docks in early August

The IFS’s Mr Zaranko said it made sense that the chancellor was 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.

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.

But James Jamieson, chairman of the Local Government Association, welcomed the one-year spending round, saying councils “urgently need some certainty about how local services will be funded next year as they begin their budget-setting process”.

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