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Rishi Sunak Spending Review: A Roundup

11th Dec 2020
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On the 25th November, Rishi Sunak gave his crucial Spending Review to MPs. Here’s we’ve outlined the key points.

Rebuilding the economy post-COVID

On the 25th November, Rishi Sunak gave his crucial Spending Review to MPs in which he made clear the "lasting damage" the coronavirus pandemic is continuing to wreak on UK finances. Indeed, the Chancellor revealed his forecast that the economy is likely to shrink by 11.3% over the coming year, bringing about the deepest recession in three centuries.

Before COVID-19 turned the world upside down, the government had planned to borrow around £55 billion this financial year (April 2020/2021). However, at just over half way through this figure has ballooned to £215 billion. Worryingly, the Chancellor confirmed that borrowing is expect to top £394 billion this year - a figure never seen before in peace-time history.

But despite this grim if not unexpected news, Mr. Sunak also laid out his plans for jobs, growth, R&D and infrastructure. Here we’ve looked at the key points but the Spending Review 2020 speech in full can be found on the Gov.uk website.

Setting the scene

With GDP currently far lower than expected, the Chancellor forecasted the country’s economy to grow by 5.5% next year, followed by 6.6% in 2022, 2.3% in 2023, 1.7% in 2024 and 1.8% in 2025.

Economic output is not expected to return to pre-coronavirus levels until the last quarter of 2022.

COVID-19 recovery

With its large package of coronavirus support for businesses, the government has already ploughed an eye-watering £280 billion in pulling the country through the crisis. Mr. Sunak is planning to continue this spending into 2021, pumping in another £55 billion over the next twelve months. Around £18 billion of this will be spent on vaccines, testing and PPE next year, and £3 billion will go towards supporting NHS recovery. Another £3 billion will go to local councils, with transport including rail subsidies receiving just over £2 billion.

Employment

Earlier in the year the Chancellor promised a £4.3 billion package to get those who have lost their jobs in the pandemic back to work. In this most recent Spending Review, he went into further detail, disclosing that this would include a new £2.9 billion, three-year Restart Employment Scheme that is hoped will assist 1 million people out of unemployment. An additional £1.4 billion has also been earmarked to expand Jobcentre Plus.

Those who are already in work are set to benefit too. A rise in the national living wage was announced that will see it increase to £8.91 per hour from next year (a rise of 2.2%). In real terms, this move will see an estimated 2 million people benefit to the tune of around £345 a year if they work full time.

Infrastructure

Mr. Sunak repeatedly highlighted his ambition to make spending on infrastructure a top priority. In the months and years to come, he vowed to make a ‘once in a generation’ investment into new roads, better broadband and mobile connectivity, sustainability improvements and house building.

He also unveiled a new UK Infrastructure Bank which will be launched in the spring. Headquartered in the north of England, it will collaborate with the private sector in financing a range of national infrastructure programmes.

Public sector pay

This one is more of a mixed bag. Under his new plans, the Chancellor has revealed that over a million doctors, nurses and other NHS staff will receive pay rises in 2021. Furthermore, any public sector worker who earns £24,000 or less will receive an annual wage boost of £250. However, all other public sector workers will have their pay frozen.

£400 million has also been set aside to fund a police recruitment drive. It is hoped that 20,000 extra police officers will be employed by 2023.

Schools, prisons and defence

The schools budget has also been increased to £2.2 billion next financial year. This marks the government’s pledge to rebuild some 500 schools across the country.

The Ministry of Defence will further benefit from an additional £16.5 billion over the next four years, with £1.25 billion of new funding set aside to create new prison places.

How will the budget be allocated across the four devolved UK nations?

Most of the Chancellor’s announcements only affect England as Scotland, Northern Ireland and Wales are led by devolved administrations.

However, Mr. Sunak confirmed that the three nations will receive a collective £2.6 billion of COVID-19 Barnett funding in the financial year to come. How this pool of resource will be spent is down to each of the devolved nations in growing their respective economies and supporting their citizens.

R&D spending

One big positive that came out of the Chancellors’ speech was his clear commitment to funding UK research and development to the tune of an additional £15 billion.

The majority of Mr. Sunak’s announcements made on the 25th November look at the coming twelve months only. But he made clear the government’s intension to supportive innovative business R&D long term, pledging to inject over £400 million on average per year over the next three years for UK research and development.

At Myriad Associates we take this as very good news indeed. By investing in valuable R&D projects, the country can build back a more competitive, dynamic economy for the future. Indeed, the importance of scientific and technical R&D could not be more starkly shown with the UK now being the first country to achieve regulatory approval for COVID-19 vaccination.

We know that for every £1 a company spends on innovative R&D £7 is made in economic and social benefits. This in turn helps to attract investment, create new jobs, increase productivity and allow the UK to better compete on a global stage.

We also understand that the Government has previously committed to spending £22 billion on R&D in 2024-25. This will make a huge difference to how well our economy will bounce back once the pandemic is over.

Contact us

Myriad Associates is a leading specialist in R&D funding, including R&D Tax Credits and R&D Grants. Speak to our team about partnering with us and helping your clients achieve their R&D goals today.

We also recommend reading through a couple of our recent blog pieces for more information: