Economy report

Spending Review 2019: A Brexit buffer

The scale and significance of the extra £400 million allocated to Northern Ireland under the Chancellor’s 2019 Spending review must be looked at in the context of an imminent general election.

The prospect of the 2019 Spending Review taking a conservative approach to expenditure as the UK scrambles to secure a deal to prevent a crash out of the single market and the customs union on 31 October was always unlikely given Prime Minister Boris Johnson’s desire for an imminent general election.

The Spending Review, which took the unusual shape of a one-year review, instead of the usual multi-year approach, was designed according to Chancellor of the Exchequer Sajid Javid to provide “financial certainty” to government departments as they prepare for Brexit.

UK Government spending reviews usually take place every two to four years but delays in Brexit have meant that there has not been a review since 2015. A multi-year Spending Review is scheduled to be carried out in 2020.

Critics of the Government’s approach, increasing spending by about £14 billion compared with the spring statement in March, and including a claim of delivering the “fastest planned increase in day-to-day departmental spending in 15 years”, have questioned whether the economic outlook for the UK will be strong enough to sustain a renewed phase of growing public expenditure or whether the post-election finances will again be reduced.

Announcing the spending review, Javid outlined that spending is set to grow by 4.1 per cent above inflation in 2020-21 than the previous year and that this would mark, for the first time since 2002, the absence of cuts to the day-to-day budget of any department. This represents a £13.8 billion real term increase in day-to-day spending.

As a Barnett consequential for Northern Ireland, public services are expected to receive a real increase of around 2 per cent.

While additional funding will be welcome in Northern Ireland, where many policy makers and budget planners have grown used to year-to-year budgets, across the UK, many public services have bemoaned Javid’s approach which will force them to wait another year for the real spending review.

With recognition that the Brexit outcome could well see the spending plans quickly reversed, the absence of a long-term economic plan has made planning more difficult.

Javid’s targeted areas for extra expenditure were fairly predictable. He plans to increase funding for schools, which have been largely squeezed over the last decade, including plans to raise the minimum pupil allocation to £5,000 for secondary schools and £4,000 for primary schools. An extra £700 million is allocated for supporting special education needs (SEN) of children and young people above 2019-20 levels and a £400 million allocation to economy-ready skill 16 & 19-year-olds.

For health, the NHS, which Theresa May had indicated was in line for additional funding, is to receive a cash increase of £33.9 billion annually to 2023-24 compared to the 2018-189 budgets and extra money has been allocated for personal development for nurses, midwives and allied health professionals. Councils are to get an additional £1.5 billion for social care.

The Prime Minister’s controversial ‘stunt’ of doing his Wakefield speech surrounded to a backdrop of police officers gets its financial grounding in ambitions to fund the recruitment of 20,000 more officers and deliver 10,000 additional prison places. At the same time the Armed Forces are to get £2.2 billion in additional funding.

Additional measures include funding to transform bus services, a Brexit fund of some £2 billion and almost £100 million towards the decarbonisation agenda.

Described as an attempt to move on from the austerity measures of the Cameron Government, the statement by the Chancellor mostly confirmed statements which had been made by the Prime Minister and Cabinet members in the previous weeks when attempting to rally support in behind Johnson and largely defied warnings by previous Chancellor and Brexit opponent Philip Hammond that such economic pledges should be reserved until the outcome of Brexit was known.

In his speech Javid said that his new economic plan “won’t stop at the borders of England” and “will be a plan for all the nations of the United Kingdom”. Over £1.2 billion of extra funding is to reach Scotland next year, including an extra £160 million for Scottish farmers, whom Javid said “lost out” when the UK Government allocated the Common Agricultural Policy funding within the UK.

Wales is expected to get an extra £600 million and Northern Ireland is to receive £400 million. In his speech Javid referenced attempts by the DUP to secure extra funding “for improved hospice care, and support for those that have been tragically wronged in the contaminated blood scandal” but said that as the matters were devolved, he hoped an administration in Northern Ireland would “use some of the new funding we’re providing today to address those issues”.

He added: “Taken together, today’s announcements will give the devolved administrations the biggest spending settlement for a decade.”

Increased spending to be allocated to public services include:

  • An additional £33.9 billion more per year by 2023–24 compared to 2018–19 budgets
  • A £7.1 billion increase in funding for schools by 2022–23
  • £400 million in 2020–21 for Further Education
  • An extra £750 million for policing 2023, with up to 6,000 officers to be recruited by the end of 2020-21
  • A £2.5 billion commitment to create an additional 10,000 prison places
  • £2 billion of core funding provided to departments for Brexit in 2019-20 to be continued into 2020-21
  • Over £400 million to Northern Ireland
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