Yahoo Finance UK chancellor unveils spending spree at fastest rate in 15 years despite Brexit
The chancellor has announced the UK government will ramp up government spending next year at the fastest rate in 15 years, vowing to “turn the page on austerity” in his 2019 spending round on Wednesday.
Chancellor Sajid Javid said the country would “deliver on the people’s priorities” such as the NHS and crime, spending more for a “new decade of renewal” despite experts’ fears a no-deal Brexit could threaten the public finances.
Javid faced MPs in the Commons after Boris Johnson faced a heated prime minister’s questions (PMQs) in the middle of a tumultuous crunch week for British politics.
The government is still reeling from a Commons defeat over Brexit and a rebellion by 21 Tory MPs who could now lose the party whip.
The government will increase day-to-day spending in real terms by 4.1% or £13.8bn next year, with Javid saying the “difficult decisions” of his predecessors meant Britain could afford to ease austerity.
The spending round is part of the government’s “ambitious domestic agenda,” with new funds to boost the NHS, improve schools and tackle violent crime, according to a Downing Street statement on Wednesday morning.
READ MORE: Chancellor warned against spending splurge as Brexit could 'blow hole' in finances
Javid said Brexit gave Britain the opportunity to “design smarter, more flexible regulation and cut red tape that stifles innovation,” suggesting the UK could move away from EU rules in future.
But Javid came under fire from speaker John Bercow for not sticking to the spending round and making “immaterial” remarks about the Brexit vote and Corbyn’s policies, while one commentator dubbed the speech “rambling.”
The announcement of a one-year Spending Round had been widely seen as a sign the government was readying itself for a general election, even before prime minister Boris Johnson warned he would go to the polls if MPs sought to delay Brexit this week.
Several new spending pledges had been announced by the chancellor in advance of the speech, giving them airtime and potentially laying the ground for a Conservative election manifesto.
Boost for UK police and the criminal justice system
“Today I can announce a 6.3% real terms increase in @ukhomeoffice spending - the biggest increase in 15 years. That means £750m to fund the first year of our plan to recruit 20,000 new police officers.” @SajidJavid #SpendingRound pic.twitter.com/I21LLir5QZ
— HM Treasury (@hmtreasury) September 4, 2019
Javid announced a 6.3% hike in spending on the Home Office, including £750m to fund the first year of plans for 20,000 new police officers.
The Ministry of Justice will also see a 5% rise in their resources, with £620m capital spending and a further £80m for the Crown Prosecution Service.
The moves could “dramatically improve” the criminal justice system, with more prosecutors, a reformed probation system, more prison security and funding to begin creating 10,000 new prison places.
A further £30m of new funding will “tackle the scourge of online child sexual exploitation,” Javid said.
Ramping up no-deal Brexit plans
READ MORE: Pound leaps as rebels seize control of parliament to block no-deal Brexit
Javid said Britain “will be ready” for a no-deal Brexit. He said he understood people’s concerns over a no-deal Brexit and levels of “uncertainty,” but warned MPs against “delaying what the people have entrusted us to do.”
He pledged £2bn would be spent ramping up government preparations for a no-deal Brexit, bringing total planning costs to more than £8.3bn.
He said the funds will go to preparing UK border staff for the upheaval, as well as helping develop a British global navigation satellite system as the UK could lose significant access to EU projects.
Cash for the NHS, councils, social care and homelessness
The pledges trailed ahead of the speech included a heavy focus on the NHS, seen as a political weakness for the Conservatives made more sensitive by the Leave campaign’s £350m-a-week slogan on the side of a bus.
Javid confirmed a £6.2bn rise in NHS funding next year. He and Johnson pre-announced £210m towards training for frontline NHS staff, and a £1.8bn package to improve patient care including 20 hospital upgrades.
Councils were also offered access to a £1.5bn pot for social care, as well as the biggest increase in local government funding since 2010 after years of drastic council cutbacks.
“Too many people are sleeping rough on our streets,” Sajid added, pledging £54m more towards tackling homelessness.
Money for veterans and defence
Javid pledged a further £2.2bn towards defence spending, with a 2.6% increase in real terms next year.
Britain will also have a new office within government looking specifically after veterans, in a victory for campaigners including Tory MP and former army officer Johnny Mercer.
The chancellor has pledged a £5m budget towards the new office for veteran affairs, and a significant uplift to defence spending.
Boost for schools as ‘engine for social mobility’
Javid said Britain would become a more educated nation in the speech, pledging a £7.1bn rise in school spending by 2022-23.
“A good school, inspirational teachers, are the most effective engine for social mobility there is,” he said.
Every secondary school would receive at least £5,000 per pupil from next year, and primaries would receive at least £3,700 per pupil.
He also confirmed a £400m investment in the “forgotten sector” of further education, as well as higher starting salaries for teachers at £30,000 from at least 2022.
But Labour hit back that the Tories had “driven many schools to breaking point” through years of slashed funding.
You can’t trust Boris Johnson with our schools. The Tories’ cuts have driven many schools to breaking point. Our children deserve better. pic.twitter.com/QNuXqGXkhq
— The Labour Party (@UKLabour) September 4, 2019
Plugging Britain abroad after Brexit
Javid pledged to promote a “global Britain” in his speech, with the government keen to improve Britain’s relationships with countries worldwide as it looks to expand trade ties beyond the EU in years to come.
The chancellor pre-announced a £90m boost for UK diplomats around the world, and a £60m boost for the ‘Great’ campaign promoting British exports.
A further £46m will be spent on the Commonwealth Games in Birmingham in 2022, with hopes it will increase tourism to the UK.
Balancing the books
The chancellor said public debt was falling sustainably as a share of national income “for the first time in a generation,” and accused Labour of leaving behind a “bankrupt Britain.”
He has made clear he plans to stick to his predecessor’s strict budget rules, but his many spending pledges mean difficult decisions could come further down the line about how to balance the books.
Chancellor announces £13.8bn of extra day to day spending on public services next year (a lot). Says he will continue to meet fiscal rules. Well, maybe, but only just on Spring forecasts. Perhaps not if OBR were providing a new forecast today.
— Paul Johnson (@PJTheEconomist) September 4, 2019
The chancellor had been warned ahead of the speech that his commitments risked breaching the government’s spending limits in future or forcing him to hike takes or borrowing.
The Institute for Fiscal Studies (IFS) warned no-deal Brexit could “blow a hole” in UK finances, making the apparent headroom he currently has to raise spending within the rules “more of an illusion than reality.”
Its director Paul Johnson suggested Javid would “only just” meet the existing rules.
