Chancellor Philip Hammond dangled the prospect of a three-year Spending Review with an increased funding envelope later this year – but only if a Brexit deal is reached with the European Union.
The chancellor said that avoiding a no-deal scenario would result in a “deal dividend” from a boost to business confidence and investment, as well as a reduction in the amount the government needs to keep aside to deal with Brexit contingencies.
This, he said, would allow the Spending Review to share extra resources between increased spending on public services, capital spending, and keeping taxes low.
Hammond said: “I can confirm today that, assuming a Brexit deal is agreed over the next few weeks and that the uncertainty that is hanging over our economy is lifted, I intend to launch a full three-year spending review before the summer recess, to be concluded alongside an autumn Budget.
“It will set departmental budgets beyond the NHS to reflect the public’s priorities between areas such as social care, local government, schools, police, defence and the environment, and it will maximise value for taxpayers’ money through a renewed focus on high-quality outcomes.”
However, speaking the day after Parliament rejected Theresa May’s proposed Brexit withdrawal agreement for the second time, the chancellor warned that prospects for increases in an increase in public spending would reduce under if the UK failed to reach an agreement with the EU.
He said: “Leaving with no deal would mean significant disruption in the short and medium term and a smaller, less prosperous economy in the long term than if we leave with a deal.”
Martin Reeves, Solace spokesperson for local government finance, said that if a Brexit deal was not agreed and a three-year Spending Review did not go ahead, it would be “hugely problematic for local government.”
He said: “Local authorities are already in desperate need of long-term certainty about the level of funding they will receive and they need that information as soon as possible so that councils can make informed decisions about their budgets and avoid unnecessary cuts to vital services.”
Reacting to the statement, CIPFA chief executive Rob Whiteman welcomed the news that the Spending Review would happen before the summer recess.
However, he added that “this is conditional on an orderly exit from the EU, and in light of last night’s meaningful vote, this seems far from guaranteed”.
Whiteman dubbed the statement a “dead rubber” due to Brexit uncertainty.
“There was little in the way of real commitments by the chancellor to any re-prioritisation of spending, and despite an “end to austerity” most of the public sector remains under strain,” he said.
Paul Carter, chairman of the County Councils Network, welcomed the announcement that the chancellor intends the next Spending Review to cover a three-year period, saying it would provide “some medium term certainty”.
But Lord Porter, chairman of the Local Government Association, voiced disappointment that the statement failed to provide any extra funding for councils.
He also complained that the chancellor’s announcement that the Spending Review would be unveiled alongside the Budget would hurt councils’ abilities to plan effectively.
“The money local government has to maintain the services our communities rely on is running out fast and huge uncertainty remains about how local services will be paid for into the next decade,” he said.
“Last year’s Autumn Budget was the earliest for a number of years but was still held at the end of October.
“The government’s plan to publish the Spending Review alongside the Autumn Budget this year could exacerbate the funding challenges facing councils and will severely hamper their ability to plan ahead for next year and beyond.”
Peter John, chairman of London Councils, said that publishing the Spending Review in the autumn “means that councils will have no certainty over their funding until December – giving councils a matter of weeks to plan their budgets for 2020/21.
“Councils will now have to set medium term financial plans with an unmanageable level of uncertainty over the level of funding they will receive.”
Alongside the Spring Statement, Hammond released a revised Public Spending Public Value Framework which he said would help guide decisions in the Spending Review.
In another document launching a review on infrastructure provision, Robert Jenrick, exchequer secretary to the Treasury, said that while the government would “explore the options for a future relationship with the EIB, we must and will be prepared for all scenarios”.
Hammond also announced £260m for a growth deal for councils near the Scottish border along with allocations of the £60m Transforming Cities Fund, which will be spread between 10 cities to pay for transport improvements.
