Spending Review 2019 – A Cicero Group overview

In more run-of-the-mill political times, a new Chancellor’s first big outing in Parliament would be the landmark moment of the week in Westminster. But in the extraordinary times we are currently living through, it’s debateable whether it was even the landmark moment of the day.

Readying for an election

And yet the Spending Round announced by Sajid Javid today was highly politically significant. After a decade of restraint in pubic spending in the aftermath of the financial crisis, the message from Javid was clear: this is “the end of austerity”.

“We must not forget”, Javid said, “that Brexit is not the only thing that matters to the British people.” If anyone had a lingering doubt about the inevitability of a General Election, this remark should have dispelled it. This is a Government that is putting itself on an election footing and is acutely aware that an election campaign can never be fought on a single issue. Brexit delivery will be a potent issue for sure, but Boris Johnson and his team know they must have a sellable message on public services and the economy as well.

The Shadow Chancellor John McDonnell accused Javid of engaging in “grubby electioneering” and “opinion poll politics”. He is unquestionably right that the looming election was at the forefront of the Chancellor’s mind, but he will also know that this is going to present a challenge to Labour’s strategy. With Johnson, Javid et al loosening the purse strings, the potency of Labour’s attack on ‘out of touch Tories’ may be diminished.

In line with the issues on which the Johnson Government has focused during its first weeks in office, the issues of policing, the NHS and education all featured prominently in Javid’s statement. There was also a big boost for defence spending, and that feels like another election battle line being drawn, as Prime Minister Johnson no doubt prepares to contrast his commitment to the armed forces with that of an opposition leader who the Conservatives consider to be ‘soft’ on national security.

Brexit looms large 

It seems no Government economic statement is complete now without the announcement of more funding for Brexit readiness. This Spending Round ticked that box with a further £2 billion for Brexit preparations next year for border force staff at ports and business readiness.

The Chancellor’s statement has been overshadowed this week by Parliament’s latest efforts to take a no-deal exit off the table. But still the Government sticks to its strategy to try to show Brussels how serious the UK is about leaving without a deal if no alternative deal can be struck by 31 October. This latest spending allocation for Brexit preparedness is another building block of that strategy, but the message in the EU is likely to have been lost amidst the drama of the last 24 hours.

Only the beginning

It is important to remember that this was, unusually, only a one-year Spending Round as opposed to the usual multi-year settlement. That means the Chancellor – whether Sajid Javid or someone else – will be back again in a year’s time, by which point the Treasury will hope for a calmer political climate and the opportunity to set out a longer term roadmap for public spending.

Before then, there is also a Budget to deliver later this year, where more detailed announcements will be expected on the Government’s fiscal plans, as well as a new fiscal framework to “meet the economic priorities of today – not of a decade ago”.

There’s no question that we are only at the beginning of a new era in the political and economic history of the UK. But with the Brexit question still unresolved and an election seemingly imminent, it is far from certain what that future might look like, or even who will lead us through it.    

Click here to read Cicero’s overview of the 2019 UK Spending Review

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Omar Rana

Senior Account Executive

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