The Treasury and the Chancellor of the Exchequer, Sajid Javid, today confirmed that the government’s fast-tracked Spending Round will take place on 4th September - where departments will get clarity on their funding for the year 2020/21.
Prior to Boris Johnson’s appointment as Prime Minister, the Cabinet Reshuffle and the extension of the Brexit deadline to the end of October, a full multi-year spending review had been planned for 2019. However, this is now due to take place in 2020.
Spending Reviews - and even one year Spending Rounds - will have an impact on departments managing ongoing large technology and/or transformation projects. Not only this, but given the number of projects in play to untangle the UK from decades of alignment with the EU, Brexit will be front of mind too.
Javid’s announcement regarding the Spending Round in the first week of September coincides with the Prime Minister’s controversial decision to ask the Queen to suspend Parliament days after MPs return to work in September, ahead of a planned Queen’s Speech on 14th October.
Whilst Number 10 is sticking to the line that a Queen’s Speech allows the government to outline its plans to “take this country forward”, it also has the political side effect that MPs will unlikely have time to push through new legislation to block a no-deal Brexit at the end of October.
The idea of suspending (or proroguing) Parliament ahead of the October Brexit deadline has been highly controversial and touted by critics as a ‘constitutional crisis’.
Boris Johnson’s move to suspend Parliament has significantly increased the chances of a no-deal Brexit at the end of October, meaning that organisations and businesses will need to ramp up their contingency planning. Issues such as data transfers, systems to trade goods and services, as well as skills will be front of mind for businesses operating under a no-deal scenario.
The Spending Round
The last full-blown Spending Review was held in 2015, meaning that government departments have been waiting on new funding decisions from the Treasury for a while. A multi-year review always gives insight into the direction of the government of the day and how it plans to invest in.
The planned ‘mini’ review is unlikely to wield too many big surprises, although Sajid Javid and Boris Johnson have already been carrying out a number of large spending announcements in areas that include policing, technology, the NHS and local towns. Critics have suggested that these are being used to distract from the potential negative impacts of Brexit.
A study out this week has said that revenue of around £174 billion generated for the UK as a key hub in the global movement of data will be almost instantly at risk in the event of a No Deal Brexit.
On the forthcoming September Spending Review, Chancellor of the Exchequer, Sajid Javid, said:
We will get Brexit done by October 31 and put our country on the road to a brighter future.
The Prime Minister and I have asked for a fast-tracked Spending Round for September to set departmental budgets for next year.
This will clear the ground ahead of Brexit while delivering on people’s priorities.
However, as a recent Institute for Government report notes, one of the primary risks of Spending Reviews/Rounds generally is that politics will trump strategy. This is even more pertinent in the current Brexit climate. The report notes (although, it’s worth noting that this was written before the recent leadership change in Number 10):
Brexit creates even more uncertainty than usual about economic forecasts. Yet the Government depends on those in deciding its intentions for tax, borrowing and spending. The uncertainty will also affect spending more directly. AME on benefits is sensitive to assumptions about employment and inflation. Economic forecasts affect the future path of important elements of DEL planning and spending too.
For instance, inflation and interest rates affect the costs of equipment and construction in capital spending, as well as the amounts raised from the sale of land and property agreed in departmental settlements (expected to total £4.5 billion (bn) in the 2015 Spending Review1). Rates of unemployment and average earnings will affect whether the Government realises the savings it assumed in two important areas in 2015 – in the Department for Work and Pensions (DWP) settlement from changes to employment programmes; and in the Department for Education settlement from freezing the repayment threshold for student loans.
Brexit also affects other variables in departments’ spending models, such as net migration.
Given the uncertainty, it’s perhaps unsurprising that the Treasury has opted for a one year review. However, whether certainty will have improved by next year is also perhaps a bit optimistic. Whatever happens, it’s not looking like the political turmoil will die down anytime soon.
The risk being that the UK doesn’t think strategically about its investments and rather reacts to whatever drama is unfolding at the time.