Sun, 08 Jun 2025

Sun, 08 Jun 2025 Faisal Islam: After a year of cautious tiptoeing, now the government has to escape its own shadow

This week's Spending Review may be an opportunity for the UK government show investors its vision
The UK government is set to unveil its Spending Review, which will reveal how resources are allocated between departments and indicate the government's priorities. This year's review is expected to be different from previous ones as it aims to showcase the government's economic vision to private sector investors and international partners. However, some businesses have expressed concerns that the government may struggle to convince potential investors of its credibility. The chancellor has focused on long-term capital spending, which accounts for 2.7% of GDP over a five-year average. This is set to be the highest sustained level in nearly half a century, surpassing the levels seen during the Brown-Darling era in 2010 and significantly higher than the 0.5% allocation in 2000. The government's new borrowing rules aim to allocate significant sums for big capital projects while keeping tight settlements on day-to-day spending. The chancellor has promised that lessons have been learned from previous capital spending debacles, such as HS2, and that the money will be spent effectively. However, budgetary pressures remain high due to increased demand for public services and benefits related to ill health and care. The government faces a balancing act between keeping short-term budget numbers in check while unleashing long-term investment to boost growth. The Spending Review is expected to allocate funds to public services for three years and set infrastructure budgets for four years. A major project, the high-speed rail line between Liverpool and Manchester, is likely to be the marquee announcement, but some capital projects may have been squeezed to make room. Critics argue that the government's spending plans are uncertain and may not deliver on its promises of future growth. Research backers call for a long-term plan for science to ensure that the country can compete globally in emerging technologies.
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