The chancellor may have no choice but to postpone his multi-year funding settlement. The NHS will feel the consequencesby Anita Charlesworth / September 30, 2020 / Leave a comment
Government has never more resembled the grand old Duke of York—marching his men up the hill only to march them back down again: working from home, back to the office, then back home again…
In July, Rishi Sunak announced that there would be a Budget and multi-year spending review this Autumn. This was to be the chancellor’s moment to chart the economy’s path to recovery as Covid-19 cases fell. Whitehall geared up and began marching up the hill. Just 10 weeks later, the Budget has been cancelled and it looks like the spending review will be watered down to a one-year funding allocation, with decisions about funding for public services for the rest of the parliament postponed.
While these decisions are understandable, the longer the delay, the more serious the consequences.
The last time there was a proper spending review setting out long-term plans was 2015. Brexit, three general elections and a global pandemic have resulted in years of short-term, hand-to-mouth management of public services.
Even before Covid-19, a decade of austerity had taken its toll. The spending review was already looking tough as the gap between expectations of extra spending and the money the chancellor had to distribute was worryingly large. The public have had enough of cuts, and the government promised they would end; declaring before the election that it had “turned the page on austerity.” As recently as June, the prime minister said there would be “no going back to the austerity of 10 years ago.”
But Covid-19 is a huge headache for the Treasury, blowing a massive hole in the nation’s finances. The economy will have shrunk by 10 per cent this year and borrowing is projected to reach £325bn. The path to recovery will take time. The costs imposed by the virus are already very high. This is most obvious in frontline services like the NHS, with £15bn for PPE and £10bn for test and trace alone, but the pandemic’s impact is far and wide, with the Treasury having to step in with billions for transport, employment and business support and education.
With uncertainty about how long and in what form the social distancing and lockdown measures will need to last, there is immense economic uncertainty. The Institute for Fiscal Studies has argued that this makes it an extraordinarily…