The headlines have been written, the key points dissected and – already – the news agenda seems to have moved on from Rishi Sunak’s landmark spending review.
At this point you’ve all heard the parts deemed most important – the slashing of the 0.7 per cent foreign aid target, a freeze on public sector pay and a general sense of dismay about the state of the British economy.
But, as with all these things, there is more to Wednesday’s spending review that meets the eye – and many things that the PR-conscious Sunak decided against highlighting in the Commons.
Here’s what you might have missed.
Cuts or tax rises – pick your poison
Despite turning on the magic money tap to battle the pandemic this year, Sunak has repeatedly stressed that “hard choices” – a positively Osbornian turn of phrase – are coming.
Talk of tax hikes at the back end of the summer caused an uproar on the Conservative benches, while cuts would seem out of sync with Boris Johnson’s pledge that the era of austerity is over.
But the chancellor is determined to balance the books, so one of those constituencies is going to be disappointed.
The Office for Budget has estimated that tax rises or spending cuts of between £21 billion and £46 billion could be needed simply to stop debt rocketing above GDP.
And the Resolution Foundation, a think-tank, has branded it “certain” that “tax rises will end up playing a bigger part in any real plan to put the public finances on a sustainable footing”.
Benefits are stagnating
Millions of people will see their benefits rise by just 37p a week next year.
’Legacy’ benefits – as well a those covering carers – will rise by just 0.5 per cent – the equivalent of an additional 37p weekly on top of the £74.35 standard rate of Jobseekers’ Allowance or sickness and disability benefit Employment and Support Allowance.
Two million people – many among Britain’s most vulnerable – claim those benefits. The separate Carer’s Alliance will rise by just 34p, with the rise for children and under-25s even smaller.
Stephen Timms, Chair of the Commons Work and Pensions Committee, said: “The Government has slipped out an announcement on benefit rates that will come as a major blow.”
House price bubble bursts
Confounding experts, house prices have soared since the market was unfrozen in the summer – with a Sunak-inspired stamp duty cut and pent-up demand sending the market into overdrive.
But that stamp duty holiday is set to end in March, and the end of government support schemes like the furlough programme will hit people’s incomes.
That means that house prices are expected to fall again in 2021. They could end up 17 per cent lower over the next five years compared to pre-pandemic forecasts, the OBR said.
Test and Trace costs an arm and a leg
£2.7 billion was set aside for “vaccine procurement” – but £22 billion was allocated to Tory peer Dido Harding’s flailing NHS Test and Trace.
Harding has since clarified that the bulk of that money will go on mass rapid testing. But, with talk now turning towards the distribution of vaccines, that will do little to inspire confidence.
Universal Credit could be trimmed
Since April, six million families relying on Universal Credit had enjoyed a £20-per-week boost. That’s set to end in April next year – and Sunak gave no suggestion whether it might be continued.
While the cost of the hike – £6 billion annually – is high, it’s nothing compared to what the government has managed to find for faulty PPE deals or new gunships.
Struggling families are set to endure even more uncertainty heading into 2021.
The Brexit-shaped elephant in the room
If Britain severs ties with Brussels without a trade deal next month, a full economic recovery from the coronavirus pandemic could be set back by nearly a year – to the summer of 2023 – the OBR estimates.
The fiscal watchdog already predicts that it will take until the end of 2022 for the pandemic to return to pre-crisis levels.
But a no-deal Brexit will compound the damage – shearing off a further two per cent from next years GDP.
No Deal, the OBR said, “has the effect of delaying the point at which output regain its pre-virus peak by almost a year”.
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