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Autumn Budget Update

Autumn Budget Update

As he delivered the Autumn Budget yesterday Chancellor of the Exchequer Philip Hammond joked that the decision to address Parliament on a Monday – rather than the traditional Wednesday – was an attempt to avoid Halloween-related headlines.

It didn’t work, as many observers are today pointing out that Hammond is handing out a lot of treats and some are suspicious that this is some kind of trick intended to gain the good will of voters ahead of a rumoured general election.

Hammond had to find funding to make good on an earlier pledge of an extra £20 billion per year to the NHS by 2023 and also ensure that funds are allocated to cover any additional costs associated with the Brexit process. He ticked these boxes and had a few other surprises in store.

Key announcements included:

  • Additional £20 billion over five years for the NHS including £2bn per year for mental health
  • A £30bn investment package for roads in England
  • Extra £1 billion for Defence with a focus on cyber warfare
  • Extra £500m to fund an additional 650,000 homes
  • Additional £500 million for Brexit-related costs
  • No further Private Finance Initiative (PFI) contracts to be signed
  • The National Living Wage to increase by 4.9% to £8.21 per hour as of April 2019.
  • Apprenticeship levy for smaller companies reduced by 50%

What impact will this have on public procurement?

Such substantial spending increases in health, infrastructure and defence will inevitably result in more contract opportunities for suppliers in certain subsectors over the coming years, but perhaps the most notable news is the abolition of the Private Finance Initiative (PFI) procurement model.

The demise of PFI marks a shift in national procurement strategy and will be welcomed by many due to the failure to deliver savings to the taxpayer as intended. Indeed, a National Audit Office report published in January this year found that taxpayers will be liable for almost £200 billion in payments to PFI contractors over the next 25 years.

Hammond made it clear that the government remains committed to the overall concept of Public Private Partnership (PPP) if it “delivers value to the taxpayer and shifts risk” to the private sector, but stated that “there is compelling evidence that PFI does neither”.

We’d like to hear your views about the budget – tell us what you think in the comments below.

Categories: Uncategorized

2 replies »

  1. A well balanced and unbiased summary of the Autumn Budget no doubt that NOA Report will make interesting reading but does it make recommendation to those Trust and Public Sector Organisations tied into the PFI deals.

    It will also be interesting to see how the £500m for Brexit Related costs and how will be be proven as actual true Costs to the Public Sector

    • Hi Ernie,

      Thanks for your comment! The NAO report focused primarily on the problems with PFI rather than offering much in the way of solutions, but we’d hope that now this decision has been taken efforts will be made to mitigate the impact of existing deals.

      As outlined in this piece from the London School of Economics, there are several potential measures that could be taken such as a “windfall tax” on PFI profits: http://blogs.lse.ac.uk/politicsandpolicy/how-and-why-the-states-purchasing-power-should-be-used-to-renegotiate-pfi-deals/

      A joint Labour / Liberal Democrat attempt to impose such a tax by tabling an amendment to the Finance Bill 2018/19 earlier this year was voted down, so it will be interesting to see what measures are put forward by each party whenever the next election comes around.

      John

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