£266bn approved cash to ease coronavirus cash flow issues

27 Mar 20

Government has increased the amount available to Whitehall departments for contingency funding to £266bn for 2020/21 in response to the Covid-19 pandemic.

Under normal rules, the increase is limited to 2% of the previous year’s spending through the fund – which would have meant an increase of £10.6bn for the forthcoming year.

However, the government rushed through legislation this week allowing the normal rules to be waived, allowing a rise of 50% over last year’s bill.

Speaking to the House of Commons, financial secretary to the Treasury Jesse Norman said: “Quite simply, this Bill is about cash flow and the need to deliver the support we have announced without delay.

“It allows the Treasury to provide cash advances where they are urgently needed, and it provides for a safety net between supply estimates.”

He said that the money is “not new spending and it is not a blank cheque” and did not represent new government borrowing.

He said: “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.

The Contingencies Fund is used to finance payments for urgent services before they have been approved by Parliament, and to provide cash to allow government departments to operate working balances and deal with temporary cash shortages.

Responding to the announcement, acting Liberal Democrat leader Ed Davey questioned why the government had arrived at the figure of £266bn.

He said: “It does not seem unreasonable, given the pressures on Departments, but it is quite a big change.

“I am not against it—let me be clear that I will be supporting the Bill today—but it would be good to put on the record, for the House and for history, why that figure has been chosen.

“When people look at this situation in the future, they will need to know why that decision was taken.”

The Bill passed all stages of the legislative process within a day and was granted Royal Assent.


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