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Fiscal Insight – Spending Round 2019

On 4 September 2019, the Chancellor of the Exchequer announced the UK Government’s plans for departmental spending in 2020-21 in the Spending Round 2019.

This ICAEW Fiscal Insight analyses the effect of this announcement on the public finances and what this means for public services. Headlines include:

Planned departmental spending of £434.2bn in 2020-21

  • Departmental current spending up by £13.8bn or 4.1% to £352.3bn
  • Departmental capital spending up by £3.9bn or 5.0% to £81.9bn
  • This is £13.4bn more than set out in the March 2019 Spring Statement

Increases in current spending

  • £4.1bn for health, including £3.9bn for NHS England
  • £2.2bn for education, including £1.8bn for schools and £400m for further education
  • £1.3bn for law & order, including £750m for more police
  • £1.0bn for social care, with the prospect of a further £0.5bn from council tax precepts

Increases in capital investment

  • £2.2bn for transport, including HS2, Network Rail and Highways England
  • £1.9bn for international development

Effect on the public finances

  • Total managed expenditure in 2020-21 of £878.6bn, 2.4% more than this year
  • With student loan accounting change deficit is £46.2bn or 2.0% of GDP
  • Economic forecasts not refreshed, updating them would likely increase the deficit further
  • The government is likely to breach its fiscal targets for 2020-21

An end to austerity?

  • All departments’ current budgets will increase by at least inflation
  • Welfare spending is still being cut
  • The Spending Round is for one year only

The Spending Round marks a turning point for spending on public services, with all departmental budgets increasing by inflation at the very least. This is a significant change after a decade of cuts in most department budgets.