Summary of the key announcements in yesterday's Comprehensive Spending Review

Hough Bellis Communications – Briefing paper

Summary of the key announcements in yesterday's Comprehensive Spending Review

Overview of the overarching theme of the spending review:

Spending Review 2021 (SR21) does not draw a line under COVID but looks forward to a post pandemic economic recovery. It aims to bring the UK’s borrowing under control and move towards a higher wage economy. It’s focus was investing in strong public services, driving economic growth, leading the transition to net zero and supporting people and businesses.

Lying at the heart of these plans is the ambition to “level up”, by reducing regional inequality and enabling people to find rewarding work wherever they are in the UK.

SR21 provides for a spending increase of £150 billion a year by 2024-5 in departmental spending (£90 billion in real terms). This includes taking forward plans to deliver over £600 billion of public sector gross investment over this Parliament.

Economic climate:

• The economy is expected to grow by 6.5% (revised up from 4%) in 2021, followed by growth of 6.0% and 2.1% in 2022 and 2023, respectively.
• The OBR now expects the economy to regain its pre-pandemic size around the turn of the year, earlier than mid-2022 previously expected.
• Unemployment will peak at 5.2% in Q4 2021, equivalent to around 2 million fewer people in unemployment than suggested in the central scenario published in the July 2020 spending review.  
• Inflation is expected to rise further from 3.1% in September 2021 to 4.4% in Q2 2022 before returning to target by the end of 2024.
• Global supply issues, increases in transportation and energy costs have also pushed up inflation in many advanced economies.
• The Chancellor has reaffirmed the Bank of England’s 2% consumer price inflation target.

Key headlines:

• Public sector workers to see pay rises over next three years.
• Over 90% of retail, hospitality and leisure businesses will receive at least 50% off their business rates bills in 2022-23.
• £4.7 billion by 2024-25 for the core schools budget in England - £1500 per pupil. Commitments ; Increase teacher salaries. Build 500 schools.
• The Budget and SR launches the UK Shared Prosperity Fund (UKSPF), worth over £2.6 billion, to help people access new

opportunities in places of need. Funding will rise to £1.5 billion a year by 2024-25.

Housing:

• The chancellor announced a £24billion settlement for housing.
• Of that around £1.8 billion is new money for housing supply. This is to “unlock over 1 million new homes” over the SR21 period and beyond.
• This includes £300 million locally-led grant funding that will be distributed to Mayoral Combined Authorities and Local Authorities to unlock smaller brownfield sites for housing and improve communities in line with their priorities, and £1.5 billion to regenerate underused land and deliver transport links and community facilities, unlocking 160,000 homes in total. We can expect more information from Michael Gove and the Dept of Levelling Up, Housing and Communities soon.
• Reconfirms £11.5 billion investment through the Affordable Homes Programme (2021-26) of which £7.5 billion is over the SR21 period - delivering up to 180,000 affordable homes. 65% of the funding will be for homes outside London.
• To reduce the UK’s reliance on gas, the Net Zero Strategy committed to decarbonising the power system by 2035, subject to security of supply.
• The Budget provides an additional £65 million investment to improve the planning regime, through a new digital system which will ensure more certainty and better outcomes for the environment, growth and quality of design.
• It also confirms over £5 billion to remove unsafe cladding from the highest-risk buildings. The fund is partly made up of the Residential Property Developer Tax for developers with profits over £25m, at a rate of 4%. However, the End our Cladding Scandal campaign group has criticised the plans saying they fall billions of pounds short of what is needed.

Decarbonisation:            

• Complementing the regulatory plans set out in the Heat and Buildings Strategy, the Budget and SR commits a total of £3.9 billion for England and Wales to ensure buildings are warmer and cheaper to heat, while supporting jobs across the country.
• The government had previously confirmed it is investing £450 million to grow the heat pump market in England and Wales as part of the ambition to work with industry to reduce the costs of heat pumps by 25-50% by 2025.
• The Budget and SR continues support for heat networks in England with £338 million to encourage private investment. These measures will help meet the government’s target of installing 600,000 heat pumps per annum by 2028.
• £620 million of additional investment to support the transition to electric vehicles, on top of the £1.9 billion committed at SR20. This new funding will be spent on public chargepoints in residential areas and targeted plug-in vehicle grants

Net Zero:

• There is £950 million for the Home Upgrade Grant and £800 million for the Social Housing Decarbonisation Fund. SR21 also allocates £1.4 billion to help decarbonise the public sector estate in England.
• Reaffirming UK-wide investment of £240 million for the Net Zero Hydrogen Fund and £1 billion for the Carbon Capture Usage & Storage (CCUS) Infrastructure Fund.
• Confirms funding for the £1 billion Net Zero Innovation Portfolio, as announced in the Ten Point Plan, which is accelerating near to-market low-carbon technology innovations.
• The £385 million Advanced Nuclear Fund is developing the next generation of small and advanced modular reactor technologies.
• Provides up to £1.7 billion of new direct government funding to enable a final investment decision in a large-scale nuclear project this Parliament, subject to value for money and approvals.
• Provide £120 million for a new Future Nuclear Enabling Fund to address barriers to entry for nuclear projects.
• Provide £380 million for the UK’s world-leading offshore wind sector, boosting jobs and investment across the Union

Benefits and cost of living:

• On 1 April 2022 the National Living Wage (NLW) will rise by 6.6% to £9.50 an hour.
• Young people and apprentices will also see increases in the National Minimum Wage (NMW) rates.
• Apprentice scheme extended.
• Government will reduce the taper rate in Universal Credit (UC) by 8% from 63p to 55p, as well as increasing work allowances in UC by £500 a year. Two million families to benefit by an average of £1000 per annum. These changes will apply across Great Britain, and funding is being provided to the Northern Ireland Executive to implement equivalent measures.
• The government recognised that fuel is a major cost for households and businesses, the government will keep fuel duty frozen at 57.95 pence per litre for 2022-23. However, there were no specific announcements to support those struggling.
• Freezing alcohol duties. Future duties will relate to strength of drinks.

Homelessness:

• £639 million to 2024-25, to reduce rough sleeping and homelessness, an 85% cash increase on 2019.
• Continue funding the Rough Sleeping Initiative, which invests in locally-led, tailored interventions to move rough sleepers into secure accommodation, support for those who are experiencing or at risk of homelessness through the Homelessness Prevention Grant.
• Complete delivery of 6,000 homes under the Rough Sleeping Accommodation Programme to create housing pathways to get people off the street into longer-term accommodation.

Local authorities:

• Core spending power for local authorities is estimated to increase by an average of 3% in real-terms each year over the SR21 period. This follows year-on-year real-terms increases since SR19.
• Providing councils with £4.8 billion of new grant funding over the SR21 period for social care and other services.
• The £4.8 billion of new grant funding includes an additional £200 million for the cross-government Supporting Families programme, around a 40% real-terms uplift in funding for the programme by 2024-25, taking total planned investment across the next three years to nearly £700 million.
• £37.8 million of additional funding over the SR21 period to tackle cyber security challenges facing councils and invest in local authority cyber resilience, protecting vital services and data. Together with maintaining the funding that was announced at SR20, this will bring the total funding for cyber to £85.8 million over the SR21 period.
• Freeze the business rates multiplier in 2022-23, saving businesses in England an estimated £4.6 billion over the next five years.
• A new, one year Retail, Hospitality and Leisure relief, and support for investment in property improvements and green technology.
• Local authorities will be fully compensated for all measures announced in the review.

Social care:

• To support health and social care across the UK, from April 2022 the government will raise around £13 billion per year through the new Health and Social Care Levy.
• £5.4 billion reconfirmed for adult social care. £500 million to pay for skills and qualifications of the care workforce.

Health:

• £8 billion catch up programme.
• £5.6b capital investment to NHS to tackle backlog of non-emergency procedures and modernise digital technology.
• £9.6 billion over SR21 period for Covid-related health spending.
• Health and Social Care Levy Fund will raise £13 billion, to cover £160 billion NHS resource budget.
• SR21 provides £2.3 billion for at least 100 community diagnostic centres across England.
• £4.2 billion over next three years for 40 new hospitals and over 70 hospital upgrades.
• Commitment to recruit 50,000 new nurses.

Skills and employment:

• Extending the £3,000 apprentice hiring incentive for employers until 31 January 2022 and expanding the Lifetime Skills Guarantee so more adults can access retraining opportunities.
• Over £2.6 billion of investment through the UKSPF will enable local areas to invest in people, community and local business, including Multiply, a new adult numeracy programme which will provide hundreds of thousands of people across England, Scotland, Wales and Northern Ireland with essential numeracy skills needed for life and work.

Data and technology:

• The government will improve digital connectivity, continuing its £5 billion investment in Project Gigabit to support the rollout of gigabit capable broadband in hard-to-reach areas across the whole of the UK.
• The government will also provide £180 million over the next three years as part of its £500 million investment in the Shared Rural Network, to deliver 4G mobile coverage to 95% of the UK.
• See under Health: £5.6 billion to NHS to include modernising digital technology.

Police and crime / community safety:

• To allow people to feel safe in their communities, police and crime commissioners and local authorities will receive more support to improve security in areas badly affected by crime, through the Safer Streets Fund in England and Wales.
• Will recruit the final 8,000 police officers to reach the government’s commitment of recruiting 20,000 new officers by 2023.
• To ensure swift access to justice for victims, it provides almost £650 million additional funding by 2024-25 to manage the increased number of offenders being brought to justice by these officers;
• and almost £500 million over the next three years to address the courts backlog and start to reduce the waiting times caused by COVID-19.

Horticulture:

As per the 25 Year Environment Plan from DEFRA, January 2018:

• More than £250 million to protect and restore nature in England in support of the UK’s world-leading target to halt biodiversity decline by 2030.
• A further £625 million for the Nature for Climate Fund, ensuring total spend of more than £750 million by 2025 on peat restoration and woodland creation and management.
• This will support the government’s commitment to plant at least 7,500 hectares of trees a year in England by 2025 and restore 35,000 hectares of peat during this Parliament.
• Setting an ambitious new target to raise at least £500 million in private finance to support nature’s recovery every year by 2027 in England, rising to more than £1 billion by 2030.
• This will be supported by a range of measures, including £30 million public investment in a Big Nature Impact Fund, as well as £140 million to assess the extent and condition of the country’s natural habitats.
• £9 million in 2022-23 to fund more than 100 green spaces across the UK on unused, undeveloped, or derelict land that will broaden accessibility for all.
• More than £300 million to implement free, separate food waste collections in every local authority in England from 2025.