HMT Spending Round – An end to austerity… again?

By Ben Stetson

Wednesday 04th September

While today’s fast-tracked Spending Round may have been the new Prime Minister and Chancellor’s first set piece fiscal event, it has been dwarfed by the past twenty-four hours and the anticipated sequence of events in the hours to follow.

In a dramatic move, Parliament defeated the Government in a vote last night allowing MPs to take control of the order paper this afternoon. Later today, Parliament will debate a new Bill, which would require the Prime Minister to seek an extension to Article 50, to 31st January 2020. In response, the Prime Minister very clearly set out his intention to ask Parliament to consent to a snap General Election.

Prior to this week, Boris Johnson has been the one fronting up a series of voter friendly spending pledges spanning health, education, defence and infrastructure. The question must be asked: what did the Prime Minister even leave for the new Chancellor to announce?

Due to there being no budgetary or economic forecasts to be announced, Mr Javid could not offer MPs a glimpse into his economic vision for the future. In fact, today’s Spending Round simply outlined the Government’s spending priorities for the twelve months ahead. However, even within the next twelve months, the Queen’s Speech – likely now to take place after a General Election – will overshadow and possibly repurpose some of the commitments made today. That’s before we even factor in the potential financial ramifications and adjustments that may be required in early November, should the country be adjusting to a no-deal Brexit.

So, what did we learn today?

Not a lot that we didn’t know already. When Mr Javid got to his feet following a boisterous Prime Minister’s Questions, we were largely treated to a list of spending commitments heavily trailed and briefed to the media since Boris Johnson first spoke on the steps of Downing Street as Prime Minister.

What we did hear was a Conservative led Government once again announce the end to austerity. Almost a year on from Prime Minister Theresa May making the claim at the Conservative conference, Chancellor Javid re-heated it and – to be fair – backed it up with a significant boost in spending.

All told, £13bn of spending was announced across departments with the Chancellor majoring on the Government’s refashioned retail offer: the NHS, schools and policing, while also committing an extra £2bn in funding to Brexit preparedness projects. There was also one rabbit that the Chancellor was able to pull from his hat, announcing £1bn of extra funding for local government to begin to resolve the social care crisis.

The Headline Announcements

  • An austerity-busting 4.1% increase in day-to-day spending, taking the spending figure to £13.8bn
  • £2bn of funding dedicated to Brexit and No Deal preparedness
  • £54m of new funding dedicated to reducing homelessness and rough sleeping
  • £6.2bn increase in NHS funding for the next year, with £2bn of new capital funding. This will start with an upgrade to 20 hospitals this year, with £250m dedicated to artificial intelligence technologies
  • Councils will receive new funding of £1bn to support social care next year
  • £432m of funding to improve environmental standards, with £30m dedicate to tackling the air quality crisis and another £30m dedicated to biodiversity

What happens next?

In theory, at some point after the Spending Round, probably before the end of the year, we can expect to see a Budget. This will flesh out the Spending Round’s plans, and the accompanying forecasts from the Office for Budget Responsibility will allow us to see how well they follow the fiscal rules. The Budget will likely be the first opportunity that MPs have to scrutinise the plans presented in the Spending Round – Select Committees may also look at plans in their areas.

In reality, today’s fiscal event was little more than the groundwork for a General Election campaign.


When the Shadow Chancellor rose to respond, he pulled no punches. John McDonnell attempted to publicly humiliate the Chancellor by saying the commitments announced today were straight from the General Election campaign being orchestrated by the Prime Minister’s principal adviser and deputy chief of staff, Dominic Cummings.

The Director of the Institute for Fiscal Studies, Paul Johnson, highlighted the victory for local government in light of the £1bn commitment to social care. However, he was keen to point out that  while departmental spending was up, rising with inflation, spending in most Departments was still well below 2010 levels and a no-deal Brexit could spur on another “dose of austerity”.

Elsewhere though, one must question how many commentators and analysts were really paying attention. Observers immediately turned their heads towards the next 24 hours and ever closer reality of a General Election. For example, the BBC’s Political Editor, Laura Kuenssberg, was tweeting about the Labour Party’s internal battle over whether to back a snap general election rather than focusing on the Spending Round.

Maybe on the other side of a General Election, Chancellor Javid will have his big media moment. Today, however, he was sadly a sideshow.

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