The Treasury revealed its spending review today for the 2020/2021 financial year – but how will it affect your finances?
Chancellor of the Exchequer Sajid Javid unveiled plans for a £13.8bn boost to day-to-day spending for public services including the NHS, schools and the police.
Mr Javid proclaimed the spending review marked ‘the end of austerity’ and the country would be moving from ‘a decade of recovery to a decade of renewal’.
Here, we take a look at the spending review and what it could mean for the pound in your pocket.
What is a spending review?
A spending review looks at the day-to-day budgets for government departments and sets out how much funding each one will get.
In the 2019 Spring Statement Phillip Hammond, who was Chancellor at the time, announced that there would be a three-year spending review this autumn, but this was put on hold due to Brexit.
Instead, today’s review focused on the 2020/2021 financial year, which Mr Javid claimed would ‘clear the ground ahead of Brexit while delivering on people’s priorities’.
Mr Javid also stated that the review would ‘give Whitehall departments certainty over their budgets for next year, and will confirm our plans to fund the nation’s priorities’.
- Find out more: Spring Statement 2019 – what you need to know
What changes will the spending review make?
The Chancellor has announced the following spending changes for the 2020/21 financial year:
Mr Javid pledged an extra £2bn for Brexit and no-deal planning in the 2020/21 financial year.
The Chancellor said that the extra funding will be spent on post-Brexit projects, including money for the Department for Transport to bolster assistance for Border Force protection at ports.
This additional funding will add to the £2.1bn he’s already pledged for Brexit and no-deal preparations.
In a statement before the spending review was announced, Mr Javid said: ‘One of my first acts as Chancellor was to announce £2.1bn additional funding to prepare to leave the EU.
‘We’ve now provided £8.3bn to help departments prepare for Brexit. This new funding will ensure that departments can grasp the opportunities created by Brexit after we leave on 31 October.’
Health and social care
Big increases to NHS spending were expected after Philip Hammond pledged funding would increase by £20bn a year by 2023.
Today, the Chancellor announced a £6.2bn increase in funding for the NHS in the 2020/21 financial year.
The government will give an additional £1.5bn social funding for councils next year, as well as an additional £2.5bn of social care grants.
Mr Javid will also give a £54m funding increase to tackle homelessness in the next financial year.
Schools in the UK will receive £7.1bn in the next financial year. This will form part of a £4.3bn commitment from the government to reduce spending cuts per pupil by 2022-23.
Mr Javid will provide £700m more support for children and young people with special educational needs – up 11% on last year.
He also announced a £400m increase in funding students aged 16-19 in further education.
Mr Javid announced a £750m boost in the 2020/21 financial year to achieve prime minister Boris Johnson’s pledge to recruit 20,000 additional police officers by 2022.
The Chancellor also revealed £45m for this financial year to kick-start the process and bring 2,000 additional officers into the force by March 2020.
He committed £55m for the Ministry of Justice (MoJ) and a further £18m for the Crown Prosecution Service (CPS) to manage the increasing complexity of crime and work with the 20,000 new police officers the government aspired to recruit.
The Chancellor rose MoD spending by 2.6% giving the department a £2.2bn boost for the next financial year.
This includes £1.2bn to modernise the Armed Forces and £700m to address the increased cost of employer pension contributions.
The Chancellor announced infrastructure as one of his biggest priorities for spending, calling for an ‘infrastructure revolution’.
From public transport to high-speed broadband, Mr Javid expressed the need for new development.
Forming part of this was a £200m pledge for the development of a new ultra-low emission bus trial to improve services across the country.
‘Strengthening the union’
In an attempt to bolster the union between UK nations, Mr Javid has announced the following funding commitments:
- £1.2bn for the Scottish Government
- £600m for the Welsh Government
- £400m for the Northern Ireland Administration
The Chancellor will also give an extra £160m funding to Scottish farmers.
When will the Autumn Budget 2019 take place?
The date of the Autumn Budget 2019 was not announced today but it is expected to be held in either October or November 2019.
The last two Autumn Budgets took place on 20 October 2018 and 22 November 2017 respectively.
Last year’s Budget took place later in the year to avoid clashes with ongoing Brexit negotiations.
What can we expect from the Autumn Budget 2019?
This year’s Autumn Budget is expected to follow the same format as the previous two Budgets, in which the Chancellor delivered the latest tax updates.
Following an interview with The Times last month, there was speculation that Mr Javid may make sellers liable for stamp duty land tax rather than buyers.
But the Chancellor later dismissed the suggestion in a Tweet.
More speculation about stamp duty this morning. To be clear, I never said to @thetimes I was planning to put it on sellers, and I wouldn’t support that. I know from @mhclg that we need bold measures on housing – but this isn’t one of them. https://t.co/9OVk3XiqMd
— Sajid Javid (@sajidjavid) August 18, 2019
- Find out more: what is stamp duty?
What happened in the Autumn Budget 2018
In the Autumn Budget 2018 the previous Chancellor, Phillip Hammond, announced several changes for the current financial year.
Not much changed for pensioners and savers but there was big news for people using the shared ownership scheme as well as a pay rise for workers.
Introducing an updated Help to Buy scheme for first-time buyers
A new version of the Help to Buy Equity loans scheme will be launched in just over a year.
The revised scheme will run for two years, from March 2021 to March 2023, and will only be available to first-time buyers.
Prices will be capped at 1.5 times the average first-time buyer price in each region, with a maximum of £600,000 in London.
- Find out more: Autumn Budget 2018: new Help to Buy Scheme launched
Pay rise for millions
The Chancellor increased the personal allowance and higher-rate tax thresholds a year earlier than promised.
From April 2019 the personal allowance, the amount you can earn before paying income tax, rose by £650 from £11,850 to £12,500; while the higher-rate threshold – the amount you can earn before paying 40% income tax – rose from £46,350 to £50,000.
Increasing the state pension by 2.6%
From April 2019, the state pension increased by 2.6%.
The state pension is protected by a triple lock guarantee, which means it goes up in line with whichever of the following is highest: CPI inflation, average earnings or 2.5%.
In September 2018, CPI Inflation was announced to be 2.4%, while average earnings was 2.6%.
If you receive the state pension, your payments will have been boosted as follows:
- The new single-tier state pension will increase to £168.60 a week, up from £164.35. This will leave pensioners £221 better off by the end of the 2019-20 tax year, with annual income up from £8546.20 to £8,767.20.
- The basic state pension will rise to £129.20 a week, up from £125.95. This translates into an annual income boost of £169, taking the total annual income from £6,549.40 to £6,718.40.
For an in-depth breakdown check out our article, Autumn Budget 2018: state pension payrise confirmed.
Banning cold calling on pensions
Last year’s Budget confirmed that the pensions cold-calling ban would be brought in ‘as soon as possible’.
The ban, which came into force on 9 January 2019, makes it illegal for companies to make unsolicited calls offering pensions products.
Companies that break these rules now face fines of up to £500,000.
The Information Commissioner’s Office (ICO) is responsible for enforcing the regulations and any organisation that breaches them will be liable to pay compensation to the victim.
- Find out more: how to stop nuisance phone calls
Increasing the junior Isa allowance
The junior Isa allowance increased in line with CPI inflation.
From April 2019 it rose to £4,368, following the previous rise to £4,260 in April 2017.
- Find out more: Autumn Budget 2018: Junior Isa allowance increases
Decreasing NS&I premium bond minimum investment
The minimum investment for premium bonds decreased from £100 to £25 in March this year, meaning more savers can be in with a chance of winning the premium bonds jackpot.
NS&I has loosened rules on giving premium bonds as gifts to children, too. This means that adults other than parents and grandparents – for example, aunts, uncles and family friends – can give premium bonds as a gift to kids.
For more details, check out 12 things you might have missed from the Autumn Budget 2018.