The UK government has decided to cut its planned spending review to one year from three years as the focus has shifted entirely to Covid-19 responses and supporting jobs.
“The Chancellor and the Prime Minister have decided to conduct a one-year Spending Review, setting department’s resource and capital budgets for 2021-22, and Devolved Administration’s block grants for the same period,” the HM Treasury said.
The treasury said the precise date for the review will be last weeks of November.
While the government would have liked to outline plans for the rest of this Parliament, the right thing today is to focus entirely on the response to Covid-19 and supporting jobs, the treasury said.
The Chancellor of the Exchequer, Rishi Sunak, said, “In the current environment its essential that we provide certainty.”
“So we’ll be doing that for departments and all of the nations of the United Kingdom by setting budgets for next year, with a total focus on tackling Covid and delivering our Plan for Jobs,” said Sunak.
The announcement came after data from the statistical office showed the budget deficit for September widened to the third highest level in any month since records began in 1993 due the measures taken by the government to support the economy during the pandemic.
Public sector net borrowing increased by GBP 28.4 billion from last year to GBP 36.1 billion in September.
In the first six months of this financial year, borrowing was GBP 208.5 billion, which was GBP 174.5 billion more than in the same period last year and the highest borrowing in any April to September period since records began in 1993.
The deficit is expected to reach GBP 390 billion this year or 19.6 percent of GDP, some GBP 18 billion more than the government’s GBP 372 billion projection, Andrew Wishart, an economist at Capital Economics, said.
Last week, Moody’s Investors Service downgraded the United Kingdom’s sovereign ratings to Aa3 citing weaker than expected growth and eroding fiscal strength. The outlook on the ratings was upgraded to ‘stable’ from ‘negative’.
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