Another Frustrating, But This Time Understandable, Government U-Turn

October 23, 2020 | by Field Team

Another week, another Government U-turn - this time with the delay to the planned multi-year Spending Review. Field offer our analysis that, whilst frustrating, this time it’s hard to argue with the Government’s logic for changing tack.

To the surprise of very few, but the frustration of absolutely everyone, the Treasury this week announced it was delaying the planned multi-year spending review due to take place next month.

The last three year review took place in 2015. The anticipated 2018 review didn’t take place, and instead departmental budgets were “rolled-over” by one year. Last year, the same thing happened with the Government citing Brexit uncertainty (oh to have simply Brexit uncertainty!), and instead committed to holding one this Summer. That was then pushed back to this Autumn, when it was thought we would be over the worst of the Covid economic shock.

However, with cases still rising, job support schemes being extended, and regional bailouts being agreed on an almost daily basis, it’s hard to imagine how the Treasury could credibly map out long term departmental spending budgets anytime soon. Any review would have either been too vague, or would have been ripped up and redrawn in a matter of months.

Instead, the Government will conduct a one year review and use this to “focus entirely” on the response to Covid and supporting jobs. Treasury officials confirmed some areas of public spending “crucial to our economic recovery” will have longer term settlements like building hospitals and schools and other “priority infrastructure projects” like HS2.

The planned multi-year review had long been seen by the Prime Minister as a chance to map out a strategic, upbeat, swashbuckling vision for a post-Covid and post-Brexit Britain, moving on to ground that plays to his strengths. It’s no wonder then that Downing Street pushed as hard as possible to make it work, but this can be chalked up as another win for Rishi in the tussle between No 10. and No. 11.

Whilst few can argue with the logic behind the decision, this is another blow for businesses, public service providers and local government who had been banking on much needed long term certainty.

Specifically, what does this mean for businesses involved in infrastructure projects (other than HS2) and technology programmes that span years if not decades, which obviously require commitments beyond 12 months? Rather than focus on making the case for them to be deserving of special treatment, Treasury officials have advised businesses to consider thinking about what they need over the next 12 months to keep their projects and programmes on track, and pitch in suggestions along these lines.

That said, we should expect some projects to be supported by multi-year commitments, especially those being driven by Downing Street. Take Dominic Cummings’ focus on next generation tech, his personal involvement in the Government’s “integrated defence review” launched earlier this year, and indeed the Prime Minister’s very public backing of offshore wind and ports infrastructure in his conference speech earlier this month.

The defence review, for example, was supposed to revolutionise military procurement and take the armed forces into a new era of technological warfare, setting spending priorities for the next decade. The Government have said they will “consider the implications” of this week’s announcement on this review, and it’s hard to see how No. 10 will let the Treasury put this pet project on hold for a year.

So, another week, and another U-turn. But this time it’s hard to argue with the Government’s logic for changing tack. And all is not lost. The game hasn’t changed. It’s just got harder, again!

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