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are we turning the page on austerity?

Graham Davies
Graeme Davies writes for Investors Chronicle

07 October 2019 | Graeme Davies

Is the age of austerity over? Graeme Davies finds out.

Is the age of austerity over? On the face of it, chancellor Sajid Javid’s Spending Review at the start of September would suggest that it is. In his first set piece in the role, Javid said he was “turning the page”’ on austerity and opening the taps of public spending, stating that his pledges were the biggest daily increase in public spending in 15 years, where no single government department would miss out. 

Alongside a bump in spending for schools and the NHS was a pledge to renew the UK’s infrastructure as well as the start of a reversal in the swingeing budget cuts imposed on local authorities. Combined, this should lead to significant opportunities for firms in the FM sector that have suffered through recent years as continued budget cuts ate into their markets. 

But can the Spending Review really be taken at face value? Probably not. Viewed through the prism of the political situation in the UK, it must be taken with a huge dollop of scepticism. With Parliament in upheaval and Brexit dominating every element of the political world, the review could be viewed as a pre-election gambit by the Conservative Party that might never see the light of day. Indeed, such is the current short-termism gripping UK politics that the chancellor was only able to commit to spending plans across most departments for the 2020-21 fiscal year as any view beyond that is so beholden to our future economic relationship with the EU as to make any pledges and predictions pretty meaningless. 

With the economic consequences of our future relationship with the European Union still unknown, pledging vast sums to expand public spending for the first time in more than a decade has to be viewed as risky, if not downright irresponsible. 

But for sectors such as FM, which have hefty exposure to public spending, the expressed desire to end austerity from the party that was its architect has to be seen as positive. We all know that an alternative government led by Labour would seek to open up the coffers and renew the country’s infrastructure, but seeing the party of fiscal prudence also signal an end to austerity suggests that the mood swing in Westminster is one of the few things on which there is political consensus. 

Brexit remains the elephant in the room that will dominate the UK’s politics for years. Even a no-deal exit on Halloween would merely lead to months and years of trade talks with our nearest neighbours. 

But with years of belt-tightening having restored the UK’s finances back to an even keel, the scope for growth in public spending is more positive than it has been for a long time. 

Graeme Davies writes for Investors Chronicle