Up To £10 Billion Of The Chancellor's plan For Jobs Will Be Funded By Underspends On Previously Planned Projects

21st July 2020

David Phillips writing for the Institute for Fiscal Studies.

The UK Government is spending big on supporting public services and the economy through the COVID-19 recovery and beyond. There are, for example, ‘up to £30 billion pounds' of measures counted in the ‘Plan for Jobs' announced in the Summer Economic Update last week, although the OBR thinks they will ultimately cost around £20 billion.

However, alongside this - but with much less fanfare - are reductions in spending on other things as some previously planned projects and investments are now deemed less of a priority or infeasible given the COVID-19 crisis. The Treasury's decisions on funding for the devolved governments suggest they expect these underspends to amount to almost £8 billion; the OBR expects more like £10 billion.

A lack of transparency over where spending is expected to be lower is contributing to confusion about the overall scale of fiscal support being provided, as well as the amount that the devolved governments in Scotland, Wales and Northern Ireland should receive to fund their own measures. It makes scrutiny of plans more difficult and is corrosive to trust. While governments of all stripes will, of course, want to follow the adage of ‘repetition, repetition, repetition' when it comes to highlighting the goodies they are funding, official policy documents should also be clear about when and where spending is expected to be lower than previously planned too.

A multi-billion pound ‘Plan for Jobs’ - but the Treasury now expects to spend £8 billion less on other investments this year

Reading A Plan for Jobs it is not clear that, for example, the £2 billion Green Homes Grant scheme for England is funded from within pre-existing spending limits. Nor is it clear that almost half of the £400 million or so of cash for traineeships, apprenticeships, school leavers and careers advice in England is funded by reallocating funding within existing spending envelopes. This begs the question of what the government is now planning to spend less on than it previously was.

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