Rishi Sunak is right to delay the spending review – but was wrong to delay this decision

Setting out multi-year spending plans for government departments, the devolved administrations (DAs) and local authorities (LAs) is normally good practice, as previous IfG research has argued. In normal times, providing certainty about future budgets allows departments, DAs and LAs to make longer-term plans and to enter into multiyear contracts that provide better value for money. But these are far from normal times. Any spending settlements made this year would very likely have to be revised as the demands placed on departments by the continuing coronavirus crisis become clearer. While the government is right to acknowledge this reality, it should have done so earlier.  

The difficulty of doing a multiyear spending review has been clear for months

The Treasury had originally intended to conduct a three-year spending review in autumn 2019, but that had to be postponed in the face of the looming possibility of a ‘no deal’ Brexit. That was replaced with a one-year roll-over settlement, allowing the government to conduct the full spending review this year instead.

This means that most parts of government have faced uncertainty about their future budgets for a long time, which will have made it harder for them to make longer-term strategic choices or to manage their budgets most effectively. It is, therefore, understandable that ministers wanted to go ahead with the full review this year.

However, the wide-ranging impact of Covid on the UK economy, the public finances and public services means that it has been equally clear for months that conducting a full spending review this year did not make sense. As my colleague, Thomas Pope, wrote in July: it is impossible to know this autumn what the appropriate overall level of public spending should be over the next few years or what demands different parts of government will face.

Delay has put avoidable pressure on departments

Boris Johnson’s government was keen to use the spending review to set out its vision for the UK beyond Brexit and coronavirus – using the three-year spending plans to put flesh on the bones of the pledges made in last year’s manifesto. But the coronavirus crisis changes everything. By pressing ahead for so long with the original plan for a spending review, the government will have diverted officials’ attention away from dealing with other pressing demands. Civil servants’ and ministers’ time could have been better spent if the government had acknowledged earlier that it was not possible to carry out an effective multiyear spending review this autumn.

There are some costs to delay but it is the right decision

There are some downsides to delaying the spending review, particularly for areas of policy that require longer-term thinking and that have already been delayed – such as decisions on the UK’s nuclear deterrent that were expected to be resolved in the integrated defence and security review. But it was the right decision to delay.

It has been clear for months that there is too much uncertainty this year to allow the Treasury to set meaningful multiyear spending plans; it is welcome that the prime minister has now acknowledged this reality.