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”.
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