Rishi Sunak has cancelled the UK government’s three-year spending review for the rest of parliament to allow Treasury ministers more time to focus on coping with the second wave of the Covid-19 pandemic. The chancellor said he would set out a one-year spending plan that would focus entirely on dealing with the budgeting needs of departments and the devolved governments during the pandemic.
The move is a blow to Boris Johnson’s ambition to reclaim the economic agenda with an upbeat outlook for the UK and the government’s investment plans once the coronavirus has been brought under control. Officials at the Ministry of Defence are also understood to be disappointed after commitments from No 10 that the prime minister would back a long-term strategic plan for military investment. The Treasury said: “While the government would have liked to outline plans for the rest of this parliament, the right thing today is to focus entirely on the response to Covid-19 and supporting jobs – that’s what the public would expect.” Last month the Treasury scrapped plans for an autumn budget that was previously billed as a landmark event that would set out the government’s tax and spending agenda until the middle of the decade. Sunak insisted that long-term capital projects would receive support from the Treasury “to deliver our ambitious plans to unite and level up the country, drive our economic recovery and build back better”. He singled out HS2, the new high-speed rail line from London to Birmingham and Manchester, as a project that would continue to receive long-term spending commitments. He added that the health and education departments would be given special attention by Treasury ministers and offered spending commitments beyond the 2021-22 financial year.
However, there was concern inside other Whitehall departments that without a budget before the end of the year and a single-year spending review, there would be limited scope for long-term planning. Business leaders also said privately that the failure to set out the government’s agenda until the end of the parliament would leave businesses that depend on government contracts unable to make investment decisions. Sunak had already signalled that public sector pay would be held back over the next three years to bring down the Whitehall pay bill. In July he said most public sector workers could expect to have their pay kept low to help reduce the public-spending deficit.