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.
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.

Martin Wheatcroft, Independent Advisor to the Public Sector Team