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Boris Johnson’s hopes of regaining political initiative by establishing a three-year spending master plan for the rest of parliament have been abandoned.
The Treasury confirmed on Wednesday that the proposed three-year comprehensive spending review had been scrapped in favor of a one-year review due to the economic chaos caused by Covid-19.
“While the government would have liked to outline plans for the rest of this parliament, the right thing to do today is to focus entirely on the Covid-19 response and support jobs, that’s what the public would expect,” Treasury said .
Instead of establishing three-year departmental spending plans, Chancellor Rishi Sunak will focus on a one-year package to support employment and help public services cope with the pandemic, the Financial Times revealed Tuesday.
Mr. Sunak confirmed that some areas of public spending “crucial to our economic recovery” would have longer-term agreements.
The chancellor told the prime minister that during the coronavirus crisis a comprehensive review should not be carried out, establishing the spending totals in Whitehall.
The issue has created tensions between Sunak and Johnson, and over the past week, including Tuesday night, intense negotiations have taken place over whether a compromise could be reached.
The decision to scrap the three-year review is a setback for Johnson, who saw the event as an opportunity to chart his priorities for a post-Covid world.
It will also be a disappointment to defense chiefs, who wanted certainty about how to plan for a new era of shifting threats against a backdrop of tight budget constraints.
One option would be to publish the separate ‘integrated review’ of foreign and defense policy, which sets the UK’s priorities, without setting a multi-year defense budget.
Last month, Sunak was forced to scrap plans for a fall budget, also because a resurgence of the coronavirus had thrown economic planning into chaos.
One person briefed on the talks said: “You could have a one-year ‘health and prosperity’ focused spending review. But it is a disaster for the military who are already running out of cash by the billions. “
Launching the Integrated Review in February, Johnson called it the largest analysis of UK defense policy since the end of the cold war, and promised it would set a new strategy for “global Britain” while revolutionizing acquisitions.
The Defense Ministry, which is grappling with a £ 13bn shortfall in its equipment budget, is campaigning for a multi-year financial deal alongside the overhaul that would rebalance its spending commitments and allow military modernization to lead to the military into a new era of technological warfare.
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Service chiefs are interested in having political leaders sign a budgeted plan that would retire some traditional equipment to allow investment in autonomous boats, drones and cyber defenses.
Defense officials say they need to be able to budget for the long term. “Without this certainty, all the long-term financial planning that will put us at a strategic advantage is lost,” said a defense official.
Publishing a high-level version of the integrated review even without spending plans would allow Downing Street to articulate a clear post-Brexit foreign policy at a time of great international uncertainty. The Covid-19 pandemic, the growing threat of espionage by hostile powers and the increasing pace of cyberattacks that fall below the threshold of formal armed conflict have increased risks to UK security, defense officials say. and intelligence.
Aviation and aerospace industry executives have been lobbying the government for a dedicated support package to survive what will be a difficult winter and help the industry meet the goal of net zero carbon emissions by 2050.
France and Germany have bailed out their national airlines and announced long-term aid packages worth billions of euros for the development of hydrogen and electric technology.
Meanwhile, the UK has not provided any sector-specific support, raising fears that British companies will lose competitiveness at a time when aviation technology is changing rapidly. The UK has already moved from having the second largest share of the global aerospace market to third place behind France.
The Defense Ministry submitted its offers to the Treasury 10 days ago and is in tense negotiations over the terms of its agreement. Ministers have privately made it clear that since defense equipment plans can last anywhere from one year to 25 years, a multi-year agreement is crucial for effective procurement and planning.
An industry executive involved in talks with ministers on an economic recovery plan said: “The problem of delaying [the spending review] it’s that it will completely halt any of the medium-term investments that will allow companies to recover. ”Those could include some of Johnson’s longer-term green energy plans.
