‘Today government has funded the priorities of the British people, and now the job of delivering them begins’ Closing words from the Chancellors first spending review which sets the direction towards better schools, more homes, safer streets and overall stronger public services.
The Immediate priority is to protect peoples lives and livelihoods, but Rishi Sunak has promised to invest in new hospitals and continue supporting businesses through the Covid-19 Pandemic as the Chancellor warns that ‘our health emergency is not yet over and our economic emergency has only just begun’.
Today’s figures showed a spending of £280bn to get our country through Covid-19 this year with the furlough scheme, support for the self-employed, loans, grants and tax cuts. A further 55bn has been allocated for 2021-22. Rushi announced that the majority of public sector workers will see pay increases next year, however he could not justify higher wages across the board at a time when many in the private sector have had pay and hours cut.
Labour shadow chancellor Annelise Dodds said in a response to the spending review statement: ‘Earlier this year the Chancellor stood on his doorstep and clapped for key workers’. ‘Today his government institutes a pay freeze for many of them. This takes a sledge hammer to consumer confidence’
Here is a glance at some of the main points from todays statement:
- Government committed to the existing four-year plan to increase schools funding with an increase of £2.2bn next year. ‘every pupil in the country will see a year on year funding increase of at least 2.2%’ said the Chancellor as he promised on the prime minister’s pledge to rebuild 500 schools over the next decade.
- Largest economic fall in 300 years as the Office for Budget Responsibility forecast the UK economy will contract 11.3% this year. As restrictions ease they forecast growth of 5.5% in 2021 and 6.6% in 2022. Sunak announced that we should return to pre pandemic levels by quarter 4 2022, however the pandemic will have likely caused ‘long term scarring’ as the economy in 2025 will be 3% smaller than expected.
- Public sector pay will be frozen next year, except for NHS workers and those on lower incomes. However, there would be pay rises for more than 1m nurses, doctors and other NHS workers.
- In line with the Low Pay Commission’s recommendation, Government have accepted that the main adult rate of national minimum wage should rise by 2.2% to £8.91 per hour from next April.
- Departmental spending to rise the fastest rate in 15 years including £6.6bn for the core health budget, £2.3bn for capital spending in the NHS and a rise in the above mentioned schools budget of £2.2bn.
- At a time of such domestic fiscal emergency, Rishi has announced a reduction in overseas aid to 0.5% of Gross National Income but pledged to increase this back to 0.7% once the domestic fiscal position is eased.
- The Chancellor also announced plans for a National Infrastructure Bank to channel £600bn into capital projects over the next 5 years. This is in part designed to replace funding obtained from the European Investment Bank, which the UK is leaving after the Brexit transition period.
Written by Alex O’Neill, IFA at Beesure Ltd
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