PwC comments on the Spending Review - Economist's view

Jake Finney, Economist, at PwC UK commenting on today’s Spending Review said: 

“Today’s Spending Review sets the tone for the Government’s core priorities - economic stability, better public services, and stronger growth.

“The Chancellor used her speech to spotlight the clear winners: housing, health, and defence. A significant share of the Government’s capital investment has been earmarked for housing and defence, underlining their strategic importance. Meanwhile, NHS spending will rise by 3% a year — more than double the rate planned for the average department, but still below the long-run average of 3.6% and far short of the sustained increases seen in the early 2000s.

“The Review also marked a renewed focus on regional rebalancing. Planned investment in transport and defence is likely to support growth in regions such as the West Midlands and the North East. This is reinforced by incoming reforms to the Treasury’s Green Book, which is likely to try and steer investment towards areas in need of economic catch-up, rather than simply those offering the highest short-term returns.

“While it is clear there will not be a return to 2010s-style austerity, the combination of a tight spending envelope and reasonably generous settlements for health and defence means some departments are likely to face real-term cuts in the second half of the decade. Maintaining the quality of public services under those constraints will make the Government’s drive to boost public sector productivity even more critical.”