Coins placed over a five pound note revealing the Elizabeth Tower.

Spending Review 2020: “Government must make tough decisions”

Rishi Sunak has set out the Government’s Spending Review in Parliament, detailing how the Government will recovery economically from Coronavirus.

The Chancellor announced plans to freeze Public Sector pay from next year, except those who earn under the national median wage of approximately £24,000. The Chancellor promised an increase of at least £250 to those that earn below the median wage.

The Government justified this by citing how private sector wages had reduced by 1% in the past year, with public sector wages rising by 4% in the same period, with the Chancellor being unable to justify a pay rise under those conditions.

£3bn was promised to local councils, with more freedom being given around council tax so that Councils can continue to work effectively despite ongoing restrictions and a shrunken economy.

£3bn more was promised to the NHS to ensure that the hard work of nurses, doctors and other staff are acknowledged, although this will be no consolation to those in the public sector who will see their spending power reduced in real terms.

With Government borrowing and national debt set to rise, there was a noticeable absence of any talk of tax increases, with the Government saying it isn’t the right time to be introducing tax increases.

Mr Sunak also promised £7.1bn to the National Home Building programme, which will see thousands more homes built across England to meet the increasing demand for housing.

Responding to the spending review, Executive Director, Institute of Economic Development, Nigel Wilcock, said:

“There are no surprises in what the Chancellor has had to say, but like the household that avoids opening credit card statements, nobody wants to stare at the hard reality. Nevertheless, the funding review is disappointing in one regard irrespective of the financial black hole.

“The time has come for a different and radical compact between central and local government. Small scale bail out funds for local government are too small to make a difference – but also completely miss the point.

“Covid has shown that local government is essential in delivering services for communities and we need a blank sheet of paper approach in devising the funding mechanisms and terms of reference between our capable local councils and a Whitehall that has long been fearful of losing its control.”

The Government’s spending review was mostly carrot and not much stick, which may be an indicator of things to come in the next Budget.

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