Comment: Victory for Rishi and for pragmatism

A VICTORY for Rishi Sunak in his battle with the Prime Minister over spending plans.

The FT reports that a proposed three-year comprehensive spending review has been scrapped in favour of a one-year review. Boris thought a three-year deal would help him set out priorities post Covid – his Chancellor thinks that would be premature.

We’ll leave the political intrigue to others. From the point of view of the City this is a result for both Sunak and for pragmatism.

Given the extraordinary volatility in public finances, re-iterated today in the latest eye-watering public debt figures, planning more than one year ahead looks somewhere between foolhardy and impossible.

We simply don’t know for how long the state will have to run big deficits to offset the disruption of Covid-19.

One side effect is that we don’t get details on long-dated projects such as HS2 or new hospitals, but that seems a small price to pay, and immaterial given the big price of everything else.

For some industries, notably defence, not having some certainty on budgets beyond a year is frustrating.

But the chancellor wants to bring the runaway bus that is public spending under some kind of control.

At the moment, that does not (and should not) involve slowing the bus down. The economy needs a huge amount of support and the chancellor’s foot will stay on the accelerator. The aim is to stop the bus veering from side to side.

Government department heads need to understand the rules of the game. This is the Chancellor’s chance to lay them out clearly, with a promise that once normality is possible, we can all return to planning a bit beyond next week.