Coronavirus: Quarter of a trillion set aside for emergency spending by government departments

A staggering quarter of a trillion pounds has been set aside for emergency spending by government departments as a result of the coronavirus crisis.

Emergency legislation rushed into law last night makes £266bn available for Whitehall departments to spend on “contingencies” over the coming months without getting advance approval from parliament.

In a sign of the gigantic impact of the Covid-19 outbreak on the UK’s public finances, the two-clause Contingencies Fund Act increased the total cash available from 2 per cent of normal annual spending – around £10bn – to 50 per cent.

The figure – passed with cross-party support – was described as “extraordinary” by the director of the Institute for Fiscal Studies economic think tank Paul Johnson.

Treasury minister Jesse Norman ​revealed that ministers are considering the possibility that parliament will not be able to return after its Easter break on 21 April as planned, telling MPs that the Act “accommodates the possibility of a delayed restart” by allowing departments to keep on spending beyond the usual date in July when resources for the coming financial year are delivered.

He insisted that the money did not amount to new spending or additional government borrowing and should not be viewed by departments as a “blank cheque”, as any sums spent will have to be approved in retrospect by parliament as would normally happen in the summer.

He said it would allow departments to deliver “the extraordinary package of support” announced by chancellor Rishi Sunak.

Mr Norman said that the legislation was designed to deal with “an anticipated escalation in the need for cash under … conditions of radical uncertainty”.

He added: “Departments need money from 1 April, and they need more than the house has already allocated to them. The government cannot afford to wait until July to deliver the resources needed for the next financial year, and the bill seeks to close that gap.

“The house has long recognised that the government sometimes need to act without recourse to the normal processes, which is why parliament has historically provided for the existence and use of a contingencies fund.

“But parliament has wisely limited the amount that can be issued from the fund to 2 per cent of the previous year’s cash spend. For 2020-21, that amounts to some £10.6bn, which would be more than adequate in a normal year.

“But, as we have discovered, we do not live in normal times. These times are without precedent in the modern era. Through this bill, the government therefore asks the house temporarily to raise the limit on the amount that sits in the contingencies fund to 50 per cent of that expended last year; I should be clear that that is approximately £266bn.”

Mr Norman stressed: “This is not new spending and it is not a blank cheque. All advances will have to be repaid once the main supply estimates are voted on in the summer, when the house will have the opportunity to scrutinise and debate where the resources have been allocated in the normal way.

“Nor does this represent additional government borrowing … Quite simply, this bill is about cash flow and the need to deliver the support we have announced without delay.”