Stephenson Smart associate director Kerry Williams reacts to the Chancellor's spending review
Chancellor Rishi Sunak had the unenviable task of delivering a spending statement today that was both optimistic and realistic at the same time.
The much-awaited spending review he announced has been analysed Kerry Williams, associate director of Lynn firm Stephenson Smart accountants.
She comments: "In his announcement in the Commons today, Chancellor Rishi Sunak focussed heavily on public spending, especially in response the Covid pandemic. He referred to the ‘economic emergency’ that our country is in.
"The Office for Budget Responsibility (OBR) forecast was that the economy would shrink by 11.3 per cent this year and not recover to its pre-Covid level until the fourth quarter of 2022.
"In light of this, the Chancellor announced a raft of public spending to try to continue to protect jobs and public services, the only cut back being to pause the pay rise for public sector workers that weren’t nurses, doctors or NHS staff – apart from those currently earning less than the median wage.
"He also announced a drop from 0.7 per cent to 0.5 per cent in spend on overseas aid.
"The areas that were announced in today’s spending review that will most affect local people and businesses were the increase of the National Living Wage by 2.2 per cent to from £8.72 to £8.91 per hour, and also new National Minimum Wage rates, both will apply from April 2021.
"There will also be an increase to the 2021-22 Income Tax Personal Allowance and Higher Rate Threshold, in line with inflation, from April 2021.
"The Chancellor also announced today that he will freeze the business rates multiplier in 2021-22 and is considering further business rate reliefs.
"It had been rumoured that the Chancellor would take this opportunity to start to gently prepare us all for the changes that will inevitably be made to taxes to claw back the £280 billion spent this year alone on support during coronavirus. However, it seems that we have a reprieve, at least for a few months, as it is likely these changes will now be announced in the Spring Budget."
The issue overshadowing everything was, of course, the cost of the coronavirus crisis – not just the historic spending but the funding anticipated.
The public finances remain in a precarious situation, largely because of the corona crisis; some of the figures are eye-watering. The one that was most striking was the £394bn that the government is spending this year to get the country through the pandemic.
There was some equally glum news on employment rates, with the number of those out of work rising to 2.6 million by the second quarter of 2021.
MPs were told the economy is predicted to contract by 11.3% and grow by 5.5% next year and 6.6% in 2022.
As to the NHS, there was a restatement of the government's commitment to build 40 new hospitals but no timetable and a pledge to maintain a pay rise for NHS staff but not for all public sector workers.