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Chancellor’s Spending Review

Posted: November 25, 2020

There was an absence of specific tax increases announced by the Chancellor in his Spending Review today, but a clear indication that the Government support will have to be paid for in the future. A public sector pay freeze and a cut in overseas aid have been announced – there will be tax rises to follow at some stage.

The key points announced are below, and the full details of the Chancellor’s proposals are in the Spending Review document and his Speech, which are here:




The total funding from policy decisions made since the spring Budget is over £280 billion. The full details of this spending are set out on pages 12 to 14 of the Spending Review, the link to which is above. Around £75 billion is furlough and self-employed grants (middle of page 12), but a huge amount of money in excess of these costs has had to be spent on local authority support, business rate holidays, grants to businesses, etc.


This is part of the projected public sector deficit of nearly £400 billion. To put this in perspective, total tax receipts for the UK amounted to £633 billion in 2019/20.


Key Points

  • Millions of public sector workers will see their pay frozen next year
  • A million NHS workers and those earning less than £24,000 will still get increase
  • The UK economy is expected to shrink by 11.5% this year
  • Unemployment is expected to reach 7.5% next spring, with 2.6m people out of work
  • Overseas aid budget is to be cut by about £5bn
  • A new £4bn “leveling up” fund will pay for upgrading local infrastructure

Public sector pay

  • Millions of public sector workers will see real-terms pay cuts next year as their pay is frozen
  • But more than two million earning less than £24,000 a year will get a minimum £250 increase
  • More than a million doctors, nurses and other NHS workers will also see rise
  • National Living wage to rise by 2.2% to £8.91 an hour
  • 23 and 24-year olds will qualify for living wage for first time

State of the economy

  • Economy will have contracted 11.3% in 2020, the largest fall for more than 300 years
  • Economy forecast to grow by 5.5% next year and by 6.6% in 2022
  • Output not expected to return to pre-crisis levels until the fourth quarter of 2022
  • Unemployment is expected to reach 7.5% next spring, with 2.6m people out of work
  • Borrowing forecast to hit £394bn this year, equivalent to 19% of GDP, the highest ever in peacetime
  • UK debt will be equivalent to 91.9% of GDP this year and rise to 97.5% of GDP in 2025/26
  • In 2025, the economy will be around 3% smaller than was expected in March Budget forecast

Health and social care

  • A total of £18bn to be spent on Covid testing, PPE and vaccines
  • Health budget in England to rise by £6bn, including an extra £3bn for the NHS to cope with Covid pressures
  • £1bn to tackle treatment backlogs and enable delayed operations to go ahead
  • £500m for mental health services in England
  • £325m to replace ageing diagnostic equipment like MRI and CT scanners
  • £300m extra grant funding for councils for social care

Employment and business

  • A new £4.6bn package to help people back to work
  • £2.6bn for Restart scheme to support those out of work for 12 months
  • £1.6bn for the Kickstart scheme to subsidise jobs for young people
  • £375m skills package, including £138m to provide Lifetime Skills Guarantee
  • New £4bn “leveling up” fund to finance local infrastructure improvement projects
  • New UK infrastructure bank to be established in North of England
  • Business rates multiplier will be frozen in 2021-22

International aid and defense

  • Overseas aid budget to be cut from 0.7% to 0.5% of total national income
  • Will see reduction of about £5bn in support for tackling global poverty
  • UK will revert to 0.7% target in 2022-23 if the public finances allow
  • A multi-billion pound increase in annual defense spending over the next four years, creating 40,000 jobs
  • New centre dedicated to artificial intelligence
  • National cyber force to counter terrorists, organised crime groups and hostile states

Schools, transport, crime and councils

  • £2.2bn extra for schools in England, representing 2.2% increase per pupil
  • An extra £2bn for public transport, including subsidies for the rail network
  • £3bn in extra funding for local authorities, representing a 4.5% increase in spending power
  • £250m for councils to tackle rough sleeping
  • £4bn over four years to provide 18,000 new prison places
  • More than £400m to recruit 6,000 new police officers by the end of 2022

If you have any questions on this please contact info@burgesshodgson.co.uk