Five things to watch out for in Rishi Sunak’s spending review

Five things to watch out for in Rishi Sunak's spending review

The Covid-19 pandemic has forced Rishi Sunak to postpone both his planned autumn budget and the announcement of plans for public spending until the middle of the decade. So uncertain is the short-term outlook that the chancellor will now outline what the government intends to spend for one year only, 2021-22. These are some of the things to look out for.

New forecasts for growth and the public finances

After taking account of any decisions Sunak will make on Wednesday, the independent Office for Budget Responsibility will provide an assessment of the outlook for the economy. During the early stages of the crisis, the OBR said output was likely to shrink by 13% in 2020, making it the worst slump in more than 300 years. The new forecasts will not be as bad as that, but the tightening of restrictions this autumn during the second wave of the pandemic mean the OBR will still be looking at a double-digit fall in GDP of about 11% and a budget deficit in the region of £400bn – a peacetime record.
Watch out for Extent of long-term scarring to the economy.

Public sector pay squeeze

One of the themes of the spending review will be that there will be no return to the austerity programme imposed by George Osborne when he was David Cameron’s chancellor after 2010. But above-inflation spending allocations to departments will be accompanied by a fresh attempt to curb public sector pay.…

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