This is no normal UK spending review
Wednesday's departmental spending plan will offer a glimpse of what kind of chancellor Rishi Sunak wants to be.
Sonia Khan is a director at Cicero/AMO and a former special adviser in Sajid Javid’s Treasury.
LONDON — The spending review is usually the lesser-known sister of the U.K. government’s annual budget — and a bump in the road on the way to something much bigger.
For the seasoned Treasury official, it normally means it’s time to dust off the battle wear and stock up on heart-pumping treats to keep the blood sugar up. Against the backdrop of COVID-19, however this year’s spending review means so much more.
Chancellor Rishi Sunak’s big moment marks the first time we will get a sense of what domestic policy making could look like beyond the pandemic. And it’s as much about what the chancellor doesn’t say today as what he does — the policies that aren’t announced and the departments that are rarely spoken of.
Spending reviews are dedicated to the allocation of government spending for the next year, without the distraction of a discussion on taxes. So we will get to see which policy areas are being prioritized, which are being put on the back-burner, and which are on their way out.
In this review, the green revolution, infrastructure and defense are clearly set to do well. But what about overseas aid? How will we bolster our trade capabilities post-Brexit? How will our welfare system cope with the steep rise in unemployment? Small, local infrastructure projects seem to be in favor, but what of the High Speed 2 railway project and other major schemes? How will the future of 5G figure alongside plans for greater connectivity? The answers to these questions will give us a sense of the big policy trends and an indication of the government’s priorities: Will this be a government of smooth roads and better local services, or of big, nationally-driven innovation projects?
It’s the spending review which will sow the seeds of Boris Johnson’s promised reset — and commentators will be looking at who has had an influence on the review as much as what’s been decided. Fiscal hawks will consider whether the Treasury has been emboldened to return to its conservative ways on public spending — now that some of the alleged proponents of higher state spending are no longer in government.
For both the prime minister and the chancellor, then, the spending review marks the first time their politics will be defined. Are they libertarians who want to devolve power to the regions and give people more control over their lives? Or do they think state intervention is needed to make us more prosperous? Which of their political heroes will they emulate — Churchill, Thatcher — or someone else?
It’s a challenge both men know well, having tried to maintain balance in a political party which is divided along similar ideological lines.
For Sunak, it will go deeper still. With the independent forecasting body, the Office for Budget Responsibility, expected to publish gloomy forecasts on the nation’s economy, the chancellor will have to decide what role he wants to play. Will he remain the chipper chancellor willing to spend our way to success — or will he become the more melancholy caretaker, taking on the role adopted by chancellors past who have prioritized curbing spending and debt?
Businesses will look to Sunak to set a path — and the part of his speech focused on the macroeconomics will be more important than ever. It will offer the first sign of how our economy moves forward, of the difficult choices ahead, where the burden for revenue-raising will fall, and the timeline to the next budget.
This year, we can clearly see how these decisions will impact our own lives. Will our shopping become more expensive if interest rises? Will there be a stampede for house-buying next year when the stamp duty freeze ends? Will the COVID-19 employment schemes reach a new cliff edge — and what will that mean for jobs?
This is not a normal spending review because we’re not in normal times. Decisions on the political path ahead, so far left unanswered amid the pragmatic response to COVID-19, will now be pressing. Sunak has experience in making tough choices — the COVID-19 business support schemes included clear losers as well as winners. But this time, we’ll be looking out for winners and losers on a bigger scale.
The spending review could well be the “last hurrah” before trickier decisions are made. But the main questions for this government still stand. Who do they want to be? How will Johnsonism and Sunakism be defined in the history books — and how will that differ from the platform on which they were elected?