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Chancellor Javid axes spending review to focus on Brexit

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
Britain's chancellor of the exchequer Sajid Javid leaves number 11 Downing Street in central London on 2 August, 2019. Photo: Tolga Akmen/AFP/Getty Images

The chancellor has shelved plans for a three-year review of Whitehall spending to give departments more time to prepare for a possible no-deal Brexit.

The Treasury will carry out a fast-tracked spending “round” rather than a full review to give ministers a quick and clear picture of their budgets for 2020/21, the ministry said late on Thursday.

The spending round will take just a few weeks, with departmental budgets likely to be in place by early September. By contrast, a full spending review, which sets budgets for the next three years or more, would have taken months.

“The prime minister and I have asked for a fast-tracked Spending Round for September to set departmental budgets for next year,” chancellor Sajid Javid said in a statement.

“This will clear the ground ahead of Brexit while delivering on people’s priorities.

“We will get Brexit done by October 31 and put our country on the road to a brighter future.”

The push to focus on Brexit by October 31 comes amid growing signs Britain is heading for a no-deal Brexit. European leaders were told by the government’s chief envoy this week that a no-deal Brexit is prime minister Boris Johnson’s “central scenario.” The pound fell to two-year lows against the dollar on Thursday (GBPUSD) on growing no-deal fears.

Javid has already committed an additional £2.1bn in funding towards preparing for a no-deal Brexit.

Javid’s predecessor Philip Hammond first announced plans for a full three-year spending review in March. The last review took place in 2015 and set budgets up to 2020.

The spending review decides budgets for day-to-day spending in government departments and covers important matters like staff pay, policing, NHS running costs, and schools’ running costs. Larger infrastructure or investment projects are financed separately.

The fast-tracked spending round announced on Thursday will include funding for promises made by Johnson to recruit an extra 20,000 police officers and an additional £4.6bn for schools.

“This Spending Round will give financial certainty to departments’ plans for next year,” chief secretary to the Treasury Rishi Sunak said in a statement.

“We will invest in the priority areas of schools and policing, while delivering our promises on the NHS, defence, and Official Development Assistance (ODA).”

A full spending review setting out multi-year budgets will now take place in 2020 after Britain is expected to have left the EU.

A fast-tracked spending round is not unprecedented. The last one occurred in 2013 under the coalition government.