World News – UK – COVID-19: Chancellor’s spending review is today – here are seven things you should know

Sky’s business editor Ed Conway explains what is likely to be covered in Wednesday’s event, and says tax hikes will not be taken into account.

One of the most striking things about policy making this year is that most of the major economic decisions have been taken outside of the usual offset events.

Since the last budget in March, Rishi Sunak has implemented the vacation program, perhaps the most important labor market measure in modern history. He has supported the self-employed in an unprecedented manner. He pushed through further support for mortgage payers and additional grants for small businesses.

It was one of the biggest fiscal moves we’ve seen, but almost everything came off the usual political calendar of tax and spending changes.

All in all, this 2020 spending review is likely to be a bit unusual from all possible perspectives.

With this in mind, there are seven things to consider before the event.

Budgets, the annual event where the Chancellor holds up his red briefcase in front of photographers outside of Downing Street, is usually where the biggest economic decisions are made.

In this case, new tax changes are usually announced. As this is not a budget, we are unlikely to hear much about new taxes or detailed plans on how the Chancellor plans to pay off the enormous debts that have arisen during the pandemic.

The most important thing is that you can split the money that the government spends each year into two pots.

The first pot is the money that is spent on things like welfare, universal loans, pensions, and debt interest. This pot, which accounts for more than half of all government spending these days, is known as annual managed spending (a somewhat ironic name as much of it cannot actually be managed). .

The second pot is what the government has direct control over: departmental budgets, also known as departmental spending limits. The spending review focuses mainly on this second pot.

Why are spending reviews usually separate from budgets? Because they find it helpful to have spending plans that are longer than a year, usually three years, so that they can stop panicking about arbitrary budget cuts and move on to policy making. Except that this year …

The original plan was that this document would have set departmental budgets through 2023/24. However, that ambition was thrown aside when it became clear that the UK will revive in COVID-19 cases.

While this caused some frustration in the Treasury Department that itched to post a long-term strategy – some kind of economic vision – the Chancellor finally decided that the economy was still in the midst of the crisis, which meant a lot for now Spending will only tick for another year.

There are a few exceptions: the defense receives a three-year settlement; Health and schools had set three-year budgets in last year’s spending round (boring distinction: an expenditure review includes a structured Whitehall negotiation process on budgets, a « round » is a much simpler and less procedural way of updating the annual budget) .

While many people have asked the Chancellor to raise taxes to repay debts incurred during the pandemic, he will not use this spending review to collect taxes or come up with a plan to rebalance the UK.

Partly because this is not a budget (see point 1), partly because the Treasury Department recognizes that at some point it will be necessary to balance the books, but that moment has not yet come.

That was the message, after all, from International Monetary Fund executive Kristalina Georgieva when she spoke to Sky News last month. The Chancellor will not set up any new tax rules either.

The overall point he is going to make, however, is that things like this have to come at some point – probably in next year’s budget. And none of that means there won’t be a bit of budget discipline in this review, for example. . .

While this will leave the Treasury Department vulnerable to allegations of reintroduction of austerity measures, the Chancellor will point out that it merely reflects a different reality in the labor market: while public sector wages continued to rise during the pandemic, revenues of the private sector collapsed.

Even a freeze will still give public sector workers a significantly higher weekly income than the median private sector equivalent, according to Treasury Department insiders.

And since the freezes (which will vary by department) only last a year, there is evidence that wage increases may recur after the pandemic ends.

Expect even more infrastructure spending. Expect flashy numbers for the amount invested in new roads, rails, and broadband.

The Conservative Party promised big capital expenditures in its manifesto, and the Treasury Department agrees that the time is right, if ever there is time, to make big expenditures.

As this is the first major budget problem since March, it is also the first time we have a comprehensive set of official figures on the size of the hole the pandemic and lockdown measures have left in public finances.

We’re going to get the Office for Budget Responsibility’s forecast for GDP decline this year – possibly the worst year in decades, if not centuries.

While this may not come as a surprise, as we already know this was one of the deepest slumps ever made, it will still be noticeable to see him there in black and white. This is also the first outing for the new head of the OBR, Richard Hughes, who replaced Robert Chote in the summer.

In short, there is a lot to consider. And don’t be surprised if the Chancellor can pull a rabbit or two out of his hat.

How will the spending review affect you and the country? Sky’s business editor Ed Conway will be answering your questions on the Sky News app and website starting at 5 a.m.. Wednesday 30 p.m.. E-mail questions to news @ sky. com or tweet with the hashtag #AskSkyNews

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Spending Review, Chancellor of the Exchequer, Treasury, Government