■ The overall level of government spending, shown as total managed expenditure (TME), is unchanged from estimates published by the Office for Budget Responsibility (OBR) back in March. TME in 2015-16 is expected to be £744.7bn, up from £693.6bn in 2011-12 – the coalition’s first full year in power. Chancellor George Osborne said yesterday that it would be £120bn higher if spending was allowed to rise at the average rate of the last three decades.
■ Of that £744.7bn, £694.2bn will consist of current expenditure (day to day state spending) while gross investment – also known as capital spending – will be £50.4bn. Despite the emphasis placed on capital spending in Osborne’s speech, the £50.4bn figure is the same as in March’s projections by the OBR. The claim that the department cuts “allow a further £3bn per year to be spent on capital” reflects changes made between December 2012 and March of this year. In December the OBR said gross investment would be £47.3bn in 2015-16, which was pushed up to £50.4bn in March’s forecast.
■ Gross levels of investment tend to be significantly lower than net levels, which deduct for depreciation of the government’s capital. Yet the spending review only mentions gross investment. Public sector net investment will be just £25.8bn in 2015-16 according to the OBR’s March forecast. By comparison, December’s forecast – before the government pledged to boost capital spending – was for net investment of £25.6bn in 2014-15, while in 2011-12 it was £26.7bn. So March’s changes have stopped net capital spend falling too much – but will not bring new highs.
■ The Treasury says that without £11.5bn in departmental cuts that it announced yesterday, then either capital spend would have been hit, or the total amount of spending would be (£11.5bn) higher than £744.7bn in 2015-16, thus putting more pressure on public finances.
■ Details of capital projects the government will invest in are to be revealed today by chief secretary to the Treasury Danny Alexander.
JOBS AND PUBLIC SECTOR PAY
■ Savings of £1.3bn will be made by capping public sector pay rises to an average of up to one per cent in
2015-16, Osborne said. And a loophole in the system will be closed, by scrapping so-called “automatic time-served progression pay” – a method by which staff would be promoted to higher pay grades. The armed forces will be exempt from the changes.
■ Citing the OBR, Osborne said that the total number of people working for the government will fall by a further 144,000 by 2015-16.
WELFARE AND PENSIONS
■ From April 2015, total government welfare spending will be capped – in cash terms, but allowing for expected levels of inflation. Each year’s Budget will set the level of the cap for the following four years. Osborne wants to enshrine the cap in law. One big exception, though – the state pension will not be included in the cap.
■ Claimants, particularly of jobseeker’s allowance, will face tougher measures. “We’re going to make sure people turn up with a CV and register for online job search,” Osborne said. Claimants will have to wait seven days before being eligible. People with a poor grasp of English will have to improve their language skills, according to the changes.
■ Pensioners who live in warm places abroad – typically where the winter is warmer than in the south west of England – will, from 2015-16, not be eligible for Winter Fuel Payments.
■ The Department for Business, Innovation and Skills, known as BIS, will have its day to day budget cut by 5.9 per cent in real terms. But its total budget, including capital investments, is only down from £15.7bn to £15.5bn.
■ Osborne made a big play of investing in science, with a pledge of £4.6bn of cash terms and £1.1bn on capital spending. And £185m was put aside for the Technology Strategy Board which is tasked with supporting innovation.
CABINET OFFICE & TREASURY
■ The Cabinet Office, which has been on a mission to iron out inefficiencies in government spending since the coalition came to office in 2010, has found a further £5bn in savings for 2015-16, Osborne said. This involves, for example, government buying goods centrally, and making better use of IT.
■ The budget of the Cabinet Office itself is being slimmed from £0.4bn in 2014-15 to £0.3bn in 2015-16. And the Treasury’s own administration budget will be trimmed from £115m to £106m in 2015-16.
COMMUNITIES & LOCAL GOV
■ The freeze on council tax, originally due to expire next April, will be extended for a further two years, while a rebate on water bills in the south west is also to be extended.
■ £3bn will be committed to “capital investment in affordable housing” while £200m will be added to a programme designed to help vulnerable families.
■ The Department for Communities and Local Government’s own budget was cut by 10 per cent for day to day spending and an eye-watering 35.6 per cent for capital spending. The overall budget comes down from £6bn in 2014-15 to £4.3bn in 2015-16.
■ “We will not cut the number of soldiers, sailors or airmen,” Osborne said, meaning that savings would have to be found elsewhere.
■ Around £750m can be saved by renegotiating contracts, the review says. The civilian workforce and their allowances will also be cut.
■ The overall budget for the Ministry of Defence remains largely unscathed, changing only slightly from £32.7bn in 2014-15 to £32.6bn the following fiscal year.
■ A commitment of one per cent real terms annual growth in equipment spending.
■ Education has had its real terms budget protected, and so it will rise from £57.3bn in 2014-15 to £57.5bn.
■ Free schools will continue to pop up, with Osborne saying another 180 will appear in 2015-16. There will also be funding for 20 new Studio Schools and 20 new University Technical Colleges a year.
■ The pupil premium, championed by the Liberal Democrats in opposition, will be extended to more students, Osborne said. They will also look into how to introduce a national funding formula to ensure that some schools do not unfairly miss out.
ENERGY AND CLIMATE CHANGE
■ Shale gas exploitation will be encouraged by tax and planning changes to be announced today.
■ Overall the Department of Energy and Climate Change’s budget will remain static between 2014-15 and 2015-16 at £3.3bn. But due to capital spending, its day to day budget will fall by eight per cent in real terms.
FOREIGN AND DEVELOPMENT
■ The Department for International Development’s budget will shoot up from £10.3bn in 2014-15 to £11.1bn in 2015-16, due to the government trying to match a pledge to spend 0.7 per cent of GDP on foreign aid.
■ The Foreign Office has not been so fortunate, however, with its every day spending coming down 6.3 per cent in real terms, while its capital spending is down 1.8 per cent.
■ The NHS is another ringfenced area, and therefore the Department of Health’s total budget is expected to climb from £113bn in 2014-15 to £115.1bn in 2015-16.
■ The chancellor also announced £2bn of funding to join up health and social care services. The reforms “will save the NHS at least a billion pounds,” he said.
■ Despite an overall cut in the Home Office budget from £10.8bn to £10.3bn, some areas are protected.
■ “Protecting Britain from the terrorist threat remains a top priority, so I can confirm that the police counter terrorism budget will not be cut at all,” he said.
■ The criminal justice system will be reformed to help the police, Osborne said, adding that £180m in savings can be made on the cost of prison services. Legal aid reforms can save an extra £220m a year, he also said.
■ Funding for rehabilitation services will cut reoffending rates, the chancellor said.
■ The cost of courts will be cut by £200m by 2015-16, the review says.
■ The Ministry of Justice sees its budget fall from £7.1bn in 2014-15 to £6.6bn in 2015-16, a real terms reduction of around seven per cent.
■ The department will enjoy a £9.5bn rise in its capital budget as the government tries to deliver investment in roads and railways.
■ However, it will be expected to follow through with efficiency savings in order to make up for a strong reduction in its day to day budget. This is coming down from £3.5bn in 2014-15 to £3.2bn in 2015-16.
CULTURE, MEDIA AND SPORT
■ Museums will have more freedom from central government, leading some commentators to question whether they might begin charging for entry.
■ Elite sport will be protected, Osborne pledged, to build on Britain’s success in the Olympic Games.
■ Yet cuts will fall elsewhere, with the department’s budget coming down from £1.4bn to £1.2bn.
■ Lord Heseltine’s proposal for a so-called single local growth fund will receive cash, but far less than he was hoping for. Local Enterprise Partnerships will be able to bid for £2bn per year, Osborne said.
■ The devolved governments of Scotland, Wales, along with Northern Ireland’s executive, will enjoy a real terms increase in their capital spend.
■ Overall budgets face real-term cuts. The Scottish administration’s resources goes from £28.4bn to £28.6bn (from 2014-15 to 2015-16), while the Welsh administration’s stays static at £13.6bn – representing a fall, given inflation. Northern Ireland’s administration’s resources, in cash terms, stay at £9.6bn.
■ Britain’s tax collectors will have to chip in too, with HMRC’s total budget edging down from £3.4bn in 2014-15 to £3.3bn in 2015-16.
■ And HMRC will be tasked with helping deficit deduction by raking in more money, too – especially by tackling avoidance and evasion.
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- The cabinet’s winners and losers
- Our panel of experts delivers its verdict on Osborne’s spending plan
- Cuts will have to keep on coming
- Osborne only moved us a fraction of an inch towards real budget restraint
- An incomplete cap on welfare spending risks long-term fiscal ruin
- Railways and shale gas to get Treasury boost
- Transport for London secures investment despite budget cut
- Council tax to be frozen for two more years
- Government pledges national funding formula for schools
- Tax collectors told to find £1bn more in revenue despite cuts
- No dole for first seven days of unemployment
- Heseltine’s local growth funding initiative gets fraction of budget
- Defence budget cut modestly as Libor fines pledged for covenant
- Stubborn deficit threatens tax hikes from 2016
- NHS budget raided to pay for new social care services fund