Last updated: 25 Nov 2020 03:21 Posted in: AIA
The Chancellor of the Exchequer, Rishi Sunak, has delivered the UK’s Spending Review, setting out the government’s department spending plans for the 2021-22 financial year.
Against the backdrop of an ongoing pandemic and the economic impact of Covid-19, the government had earlier announced that this would be a one-year Spending Review focussing on Covid-19 support, investment in public services and infrastructure.
The Chancellor announced that forecasts from the Office for Budget Responsibility (OBR) show the economy will contract by 11.3% this year and that the economy was unlikely to return to its pre-pandemic size before the end of 2022. The budget deficit will be £394bn this year, or 19% of GDP and borrowing will remain at £164bn next year and stay at approximately £100bn for the remainder of the forecast.
The more controversial elements of the Spending Review were a cut in overseas aid to 0.5% in 2021 with the intention to return to 0.7% “when the fiscal situation allows” and a public sector pay freeze, with some exceptions.
On infrastructure the Chancellor announced £100bn worth of investments and confirmed plans to launch a new infrastructure bank to be based in the north of England, with a new £4bn fund for local projects.
AIA President Shahram Moallemi said: “We are now coming to see the scale of the economic trauma that has been inflicted upon us as we seek to find our way out of this global pandemic. And even as we acknowledge the long-term damage to the economy, it still right that we continue to prioritise the health and jobs of the nation.
“The Chancellor’s announcements lay the foundations of a recovery plan with some elements that will be pleasing to businesses. However, with Brexit on the horizon the Chancellor will need to take further action to sustain economic recovery, build confidence and encourage businesses to hire and invest.”
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“The Chancellor’s announcements lay the foundations of a recovery plan with some elements that will be pleasing to businesses. However, with Brexit on the horizon the Chancellor will need to take further action to sustain economic recovery, build confidence and encourage businesses to hire and invest.”
