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2013 Comprehensive Spending Review

Chancellor George Osborne has today delivered his Comprehensive Spending Review (CSR) for the 2015-16 financial year. The CSR determines how much money each government department will have available to spend in the upcoming period. These decisions used to be an annual occurrence, but under Gordon Brown, a three year system was introduced to allow for greater long-term planning.

This year’s CSR, however, will revert to the old annual system, as, with an upcoming general election, plans laid out by the Conservatives are likely to be disbanded should the Labour Party win in 2015. The 2015-16 financial year commences just before the election will take place, so the responsibility for that year will fall on Osborne and the Conservatives.
 
Political Context
The Conservative government could have waited until next year to announce the CSR, but, with cuts central to the plans, it makes political sense to announce as far away from the next General Election as possible, to allow time for the political and economic dust to settle.
They are looking to send a message to the Labour Party, who, so far, has not said clearly whether it would support the coalition spending strategy or reverse it should they win in 2015.
Some of the key CSR highlights were:
-          Total cuts of £11.5bn during the 2015/16 fiscal year
-          £3bn has been made available for affordable housing contributions
-          Funding is provided for 180 new free schools
-          The government announced the ‘biggest investment in rail since the Victorian times’, including a further commitment to HS2 and a feasibility study on Crossrail 2
-          The Mayor of London will be given almost £9bn of capital spending and financing powers for new projects
 
A Summary of the CSR
 
The 2015-16 CSR was built on three key themes: ‘reform, growth and fairness’, as a mechanism for building a solid economy and ensuring Britain as a nation lives within its means.  The government pledged to continue cutting the deficit and reducing overall spending.
The total expenditure for the 2015-16 fiscal year will be £745bn. Total borrowing is set to be £108bn (down £49bn from the last government) and the total savings will be £11.5bn. Of this figure, £5bn will be found through government wide efficiency savings, further cuts to public sector staff and an ending to automatic progression pay throughout the civil service.
The majority of government departments saw their budgets cut to some extent. Among those worst affected were the Cabinet Office and Foreign Office, who saw their total budgets cut by 10% and 8% respectively. The Department for Culture, Media and Sport was cut by 7% and the resource budgets for the Treasury, the Home Office, Business, Innovation and Skills, DEFRA and Justice were also cut. The Department for Work and Pensions will find a 9.5% saving in its running costs, and local government saw its budget cut by 2%, although £3bn was made available for affordable housing investment.
The Defence Department saw its resource budget frozen and a 1% increase in its equipment budget. There will be no reduction in the number of serving military personnel and the intelligence budget will be increased by 3.4%. The Government commitment to International Aid was reinforced by the decision to retain existing expenditure at DfID.
Those sectors of government that can boast increases to their budgets are transport, healthcare and education. The Chancellor announced a large-scale investment in transport infrastructure, including a commitment to High Speed Rail and to consider Crossrail 2, described as the ‘biggest investment in the rail network since Victorian times’. Investment in the roads was also promised and, predictably, there was no mention of airport policy. Transport will have to make 9% savings on day-to-day expenditure.
The Government pledged to make money available for 180 new free schools and increase the school funding budget. The Department for Health was the big winner, with the NHS budget rising to £110bn in 2015/16. A further £4.7bn of capital investment will be spent on improvements to the health service.
Three new welfare reforms were announced as part of the ongoing reform of the welfare system in the UK. A welfare cap will be introduced in 2015, to be set annually in the budget, although state pensions will not be included. Jobseekers will face new requirements for benefit receipt and non-English speakers will be required to take language courses. Payment of winter fuel allowance will be withheld for people living abroad in warmer climates.
 


Sector Highlights

Sector

Initiative

Detail
Energy

Departmental Savings

The Energy and Climate Change Department will need to find a 8% saving in the resource budget.

Renewable energy

Spending on renewable energy will increase.
Planning, Property and Local Government

Departmental Savings

Local government spending to be cut by 2%.

Council Tax

Council tax will be frozen for a further two years through council funding.

Housing

£3bn will be made available for affordable housing contributions.
Transport

Overall budget

Transport will make 9% savings on day-to-day spending, but will receive the largest increase of any department to the capital expenditure budget - £9.5bn.

Road

The Chancellor announced the ‘largest investment in the roads for half a century’, although he did not specify further. Further details are to be announced by the Chief Secretary to the Treasury.

Rail

The Government announced the ‘biggest investment in the rail network since Victorian times’ and committed further to the HS2 program, and will look at the case for Crossrail 2.

Airports

No mention of airports or infrastructure investment around the air industry was announced.
Finance

HMRC

Resource budget cut by 5% but extra powers will be granted to tackle tax evasion.

Employment

144,000 public sectors jobs will be cut, but for every job in the public sector that is cut, three private sector positions are created.

Enterprise investment

£10bn will be made available for local enterprise partnerships to bid for.
Further investment will be made in both the apprenticeships programme and UKTI.
London

Fundraising power

The Mayor of London will be given almost £9bn of capital spending and additional financing power by 2020.
A £500m borrowing guarantee has been introduced to support housing and transport infrastructure in Tottenham.

Transport

London will benefit from the investment in transport infrastructure and the case for Crossrail 2 will be examined through a £2m feasibility study.



 

 

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