Understanding the current UK Budget.
What should the UK do differently following the exit of the European Union? This is a question everyone is asking right now, and with all the uncertainty, no one really knows the answer. To understand our choices, we need to look at what the current UK budget looks like. Let’s analyse the 2020 budget provided by gov.uk.
Bear in mind that 2020 is an unprecedented year of which the budget takes place against the backdrop of COVID-19, one of the worst recessions in history. Therefore, a significant amount of the budget is dedicated towards the support of public services, individuals and businesses that may be affected by COVID-19. Chart 1 displays the public spending by main function in 2021-21.
Chart 1: Public sector spending 2021-21
This budget totals to approximately £928 billion.
However, UK tax revenues only total approximately £873 billion, leaving a large deficit.
The UK’s fiscal health prior to the pandemic was already weak, following substantial uncertainty due to Brexit processes. Therefore, we can conclude that the UK government is already in a tight spot and decision-making bodies are under a significant amount of pressure.
Digging deeper into UK spending, the government has a focus on the longer term, announcing investments into core infrastructure, such as roads, railways and digital networks. These components will always require maintenance and improvements, and an expansion of digital networks are crucial in this day and age. Furthermore, the UK is planning to continue investing in social support, R&D, and and “cutting-edge technologies”.
The investments in infrastructure are at the core of the government’s “Levelling up” strategy. The aim is to invest over £27 billion in English strategic roads. As we can guess, this is mainly to fill all those potholes that should have been fixed years ago. $5 billion is dedicated to the Shared Rural Network agreement, which is aimed at improving mobile coverage in rural areas. This is a required investment needed to prevent the rural towns from falling further behind as they lose their old-economy industries. £5.2 billion is reserved for flood defences, protecting over 336,000 homes from flooding. £10.9 billion is for housing projects, the commitment to build an average of 300,000 homes per year for the next 5 years.
However, the main focus of the current budget, and due to the hosting of COP26 UN climate summit, is the next steps to decarbonise the economy. This is to ensure that the UK economy is ready for the challenges we face of decarbonisation and to create green markets for the future. The UK claims they have already cut carbon emissions by more than any other G7 country? But does this even matter? Why is this a competition? Why are countries always attempting to one-up each other? They should simply focus on maximising emission reductions rather than comparing themselves.