Brace for the Government’s spending review on 11 June
The UK Government is set to launch its spending review on 11 June. It could be one of the most consequential we’ve seen since the financial crisis.
Not a day goes by when we don’t see some article or another lamenting the parlous state of the UK’s finances. From rising spending and escalating debt to fiscal rule warnings – the writing would appear to be well and truly on the wall.
With that in mind, the upcoming spending review is looking set to be a big one – with Government departments and whole sectors holding their breath for the outcomes.
What is the spending review?
The spending review works slightly differently to the Budget and Spring Statements we routinely get from the Chancellor of the Exchequer and the Treasury. Those ‘fiscal events’ set broad spending commitments, tax policies and other (often politically set) priorities.
The spending review is a deeper and more technical audit of the Government’s outlays and sets future years’ departmental budgets. It covers major public services such as schools and the NHS. It also allocates investments toward important projects such as research, infrastructure and other areas of the economy.
It is important to take these two aspects separately in light of Chancellor Rachel Reeves’s current fiscal rules and overall predicament.
Areas such as the NHS are protected in these kinds of updates, but others are not. Sectors such as education have warned of imminent “harrowing cuts” to budgets. There is talk of folding departments into each other in order to save money. The Department for Culture, Media and Sport would appear to be the prime target in this regard.
The underlying point here is that anything deemed non-essential is now facing austerity of one form or another – an extraordinary thing for a Labour Government to be proposing.
On the flipside – investment would seem set to get a big boost. This is chiefly because under Reeves’s spending rules the Government is allowed to borrow money in order to fund capital investment without restraint. Reports suggest around £113 billion of investment is coming in the review. This includes in transport, homes and energy.
While we won’t know the detail on the spending review until the 11th, we’re likely to see reams of speculation in the days ahead. The centrist thinktank the IFS has an event looking at possible announcements on 2 June which will be worth paying attention to, for instance.
Westminster insiders have warned the BBC that the review is going to be “ugly”. Things seem bad enough that this could be Reeves’s last roll of the dice to get Labour’s economic narrative back on track. Otherwise the Autumn Budget could start to look like a good opportunity for Starmer to reset with a different occupant of 11 Downing Street at the helm of the Treasury.
What’s coming up in June?
Aside from the aforementioned spending review, there are a number of consequential dates to have in your diaries.
The OECD’s latest Economic Outlook is on 3 June.
The European Central Bank (ECB) has its latest interest rate announcement on 5 June, followed by the latest EU growth figures on 6 June.
In the UK, the latest Office for National Statistics (ONS) UK monthly wages and unemployment figures are on 10 June, while GDP monthly data is on 12 June and inflation on 18 June. The ONS publishes its latest retail sales data on 20 June.
Interestingly, the latest G7 Summit is in Canada from 15 to 17 June. Set against a backdrop of highly-indebted nations such as Japan, the UK and US struggling in the bond market, it could produce some unexpected results.
Finally, the Bank of England announces its latest interest rate decision on 19 June. Fortunately this month it will have all the relevant data already to make what is looking like a vital decision on the bank rate.
All the best, wishing you a warm and sunny start to the Summer months, from all of us here at MRM, Mouthy Money and Octo Members.