The Freshwater public affairs team looks at the recent Autumn Statement and Spending Review.
The chancellor of the exchequer, George Osborne, began his Autumn Statement and Spending Review speech last month by stating that he would deliver on his commitment to ‘put Britain’s security first’. A common theme throughout, given recent events Mr Osborne was keen to see the security of the nation’s economy and citizens as his primary focus.
The headline news was made by two cuts which were not made. Following his July announcement on cut tax credits and a change to who is entitled to them, the chancellor rowed back on this policy in the face of substantial opposition and an ‘upturn in revenues’ which meant he can now afford to keep tax credits as they were. Along the same lines, widely expected cuts to police budgets were not announced; a wise move as, had they been, he would have been roundly criticised given the Paris terror attacks still fresh in our minds.
Two of the major developments, on NHS funding and increases in house-building were leaked to the media beforehand, but one of the more significant announcements consisted of a 50% rise in capital spending on transport over the next five years. Projects such as HS2, TransPennine electrification and Crossrail 2 were name checked by the chancellor and we should expect all of these to benefit from this capital investment boost. However, the expectation that the Department for Transport should cut its budget by a challenging 37% by 2020 is likely to affect the provision of money for more local, and less glamorous, schemes such as community transport funding. And, while £61 billion has been set aside for transport projects over the course of the parliament (£20 billion up on the five years previous), it is worth noting that the Autumn Statement will do little to improve the long term trend in public investment in infrastructure, which is to stay at around 1.5% of GDP - compared to a high of around 8% in the mid-1960s or around 3% before the economic crash of 2007-08.
The chancellor has set out his plans for the next five years and has been able to announce increases in capital investment due to previous departmental efficiency savings and positive growth forecasts provided by the Office for Budget Responsibility (OBR). Given this, Mr Osborne believes he will be able to achieve a surplus of £10.1 billion by 2020. The OBR estimates that, by the end of the parliament, a growth in tax revenues combined with departmental savings will bring the surplus the chancellor so desires.