What to look out for in the Spending Review

What’s a Spending Review, you ask?

It’s essentially where central government sets out how much money it will spend over a certain period (normally three years) and allocates the budgets for government departments and agencies, as well as the funding that local governments and the devolved administrations will receive for the period.

A Spending Review is distinct from a Budget in that it aims to set out a longer-term plan, and Budgets often contain more policy details (though apparently this announcement will also be combined with a Budget). During a Spending Review, different government departments make submissions to HM Treasury about what finances they need, often wrangling behind the scenes for months. The result of all the wrangling is summed up in the Chancellor’s speech and accompanying documents, which we will get on Wednesday 27 October.

Several spending reviews have been announced (and even partly conducted) since the 2019 General Election, which were then interrupted first by Brexit and then the pandemic. After a period of crisis which has driven short-term decisions, this review could set the stage for how the government will be run as we hopefully start to move out of the pandemic for good. Recent years have seen unprecedented levels of borrowing and spending to manage the pandemic, so analysts will be looking at whether the review overall signals a return to more spending ‘discipline’ (i.e. cuts and or further tax rises).

Some of the implications for charities will likely be indirect, but real.

For example, the Spending Review should set out the budget for the Charity Commission for several years. Will it be sustained, increased, or cut? This could make a difference to what services they are able to prioritise, what guidance they update, or how efficiently they respond to requests from trustees in the future.

Similarly, the situation for local government will be key. Local authority budgets and spending power have massively eroded over the past decade, since the age of ‘austerity’ that began in 2010, when much funding that local government received from the centre disappeared almost overnight. The impact of these cuts was much harder on less affluent areas than more wealthy areas.

‘Levelling Up’

The government’s so-called ‘Levelling Up’ agenda seeks to boost those ‘left behind’ areas in theory, but the methodology for doing so seems flawed since it is based on competitive bidding (and political support), not necessarily an overarching look at country-wide data. The difficulty will be in deciphering whether any additional funding actually gets directed to the places with the most need, and whether the Chancellor is just giving with one hand and taking with the other.

Because successive governments and budgets have not substantially reversed the cuts to local government, many local authorities are now under extreme financial pressure, especially after the pandemic. This matters for charities because for most of them, if they have any funding or other relationship with government will be at the local level. Further, if local authorities have to cut services to balance the books, unmet social needs may fall onto local charities.

The Spending Review and Budget will also have a more direct impact on charity beneficiaries of all kinds. For example, we may hear more about the Universal Credit benefit – cash levels were boosted during the pandemic, but the government recently reversed these to pre-pandemic levels in the face of substantial opposition. Also, social care is likely to feature significantly, as debates are ongoing about the planned 1.25% National Insurance increase to pay for it, as well as the immediacy of any funds being applied to the care crisis.

Finally, with the UK hosting the COP26 environment conference just weeks after the Spending Review, there will likely be some related announcements. On this and many other issues, eyes will be on the Chancellor to judge whether the Government is putting its money where its mouth is.

DSC is part of the charity infrastructure coalition which put a joint Spending Review submission to the Chancellor last month. In it we called for things like a Community Wealth Fund to benefit local voluntary action, laid out key criteria for the UK Shared Prosperity Fund (to replace EU funding post-Brexit), and pushed for a revised focus on Levelling Up funding to include social infrastructure, amongst other initiatives.

We’ll be keenly analysing the Chancellor’s words and texts next week for all these issues and more, so watch this space and keep an eye on @DSC_Charity and our enews bulletin.