Autumn Statement reasserts public spending efficiency targets to 2020
The resounding news was that “Britain is open for business,” with the IMF predicting it will be the fastest growing major economy in the world this year. Employment stands at a record high and unemployment at an 11 year low. However, the Office for Budget Responsibility have downgraded the growth forecast for next year from 2.2% to 1.4% largely due to the impact of Brexit. In response to this, the Chancellor has announced a large package of infrastructure spending to help stimulate productivity and tackle the economy’s “long-term weaknesses.” This will require extra borrowing of £23 billion over the next five years.
Hammond credited the work of his predecessor and despite him admitting the government were no longer committed to achieving a surplus by 2020, he clearly outlined that public expenditure must still be controlled, citing that the achievements under the Conservative government demonstrate that “controlling public spending is compatible with world class public services and social improvement.”
The Chancellor reported that public spending has fallen from 45% of GDP in 2010 to 40% now and stressed that more work is necessary to eliminate the deficit. As such, the departmental spending plans shall remain in place until 2020 and thereafter grow in line with inflation. Accordingly, the £3.5 billion worth of savings identified as part of the efficiency review must be delivered in full. He granted an exception that £1 billion of savings identified as part of the efficiency review will be reinvested in priority areas in 2019/20 in order to incentivise departments to drive efficiencies. Owing to these factors, public sector net borrowing is forecast to reach 0.7% in 2021/22 compared to 3.5% this year.
Adrian Brook, Moore Stephens’ Head of Public Sector, comments: “The probability of the economy deteriorating post Brexit heightens the need to find better ways of working and increasing productivity with less. Innovation remains the cornerstone of change given that there is little change in the government’s stance over public spending. The uncertainty of the actual impact of Brexit also means that agile planning and the need to react will go hand in hand going forward .”