Chancellor George Osbourne makes further budget cuts: part 1

So what does this mean for Public Services? The week ahead is a critical one for Chancellor George Osborne and public services finances. Departments are facing another round of budget cuts in Mr Osborne’s spending review due out next week. Several departments have already agreed the extent of cuts but others are still to settle.

This two part blog covers the current state of affairs, and which will be the likely winners and losers.

Part 1 – departments still negotiating
Part 2 – departments where decisions have been made

PART 1
The Big Picture

Mr Osborne has reached a deal with 11 departments so far, which will see cuts in real terms funding of an average of 24% over the next four years, adding up to £4bn of savings by 2019/20.
But he is still in talks with Home Secretary Theresa May and several other big spending departments, including defence and justice. He has asked unprotected departments to find a total of £20bn in savings as part of plans to balance the government’s books.

Note that the past spending cut figures are taken from the IFS analysis of the latest Treasury figures for changes to departmental expenditure limits between 2010/11 and 2015/16, taking into account the impact of inflation.

Home Office – still negotiating
Annual budget £10.6bn
Cuts since 2010: 24.9%

Where the axe fell 2010-2015: The police budget has been cut by 4% a year. About 17,000 frontline police jobs have been lost over the past five years, according to the Police Federation.

What’s next: In line for further sizeable cuts, with police chiefs warning that a cut of 25%, at the bottom end of the expected range, could threaten the future of some forces. At least 22,000 jobs will be lost, according to unofficial estimates seen by The Guardian. Home Secretary Theresa May has suggested some forces could share resources. Could there be a return to the idea of force mergers?

Defence – still negotiating
Annual budget: £35bn
Cuts since 2010: 12.8%

Where the axe fell 2010-2015: Reductions in the size of the army and Royal Navy, delays to fighter jet upgrades, scrapping the Nimrod spy plane and halving the number of jets to be deployed on two new aircraft carriers.

What’s next: The chancellor pledged in his summer Budget to meet NATO’s target of spending 2% of national income on defence every year, up to 2020. That means spending on defence will rise in real terms – 0.5% above inflation – every year during the Parliament. The £40bn predicted cost of four new Trident nuclear submarines is not included in these figures. Chancellor George Osborne is reportedly bidding to take control of that contract from the Ministry of Defence. The MoD could also be forced to sell off land it owns.

Business, Innovation and Skills – still negotiating
Annual budget: £16.9bn
Cuts since 2010: 18.4%

Where the axe fell 2010-2015: BiS was ordered to find 25% savings in George Osborne’s first spending review in 2010, although in practice the cuts did not turn out to be as severe as that. The university teaching budget took a big hit and dozens of quangos were abolished.

What’s next: A likely target for further significant cuts. Business Secretary Sajid Javid has drawn up plans to close down some of its 80 offices and cut its remaining quangos by half to as few as 20, closing seven separate research councils, according to the Financial Times, some 200 civil servants are taking voluntary redundancy, the paper says.

Justice – still negotiating
Annual budget £6.6bn
Cuts since 2010: 34.1%

Where the axe fell 2010-2015: Spending was slashed by 23% in 2010 and then by a further 10% in 2013, making an overall cut of £2.1bn. This was largely achieved by cutting the number and cost of prison places. There are also plans to cut legal aid and close 91 courts and tribunals in England and Wales, and integrate or merge another 31.

What’s next: Justice Secretary Michael Gove has announced plans for nine new prisons, to be funded by selling off old prisons for housing. He will be expected to find significant further savings, which he has said he would like to achieve by locking fewer people up. The Chief Inspector of Prisons has warned about the dangers of overcrowding if the budget is cut further.

Foreign and Commonwealth Office – still negotiating
Annual budget: £1.9bn
Cuts since 2010: 21.6%

Where the axe fell 2010-2015: More than half of the savings came from transferring the cost of the World Service to the BBC. There was also a reduction in the number of Whitehall based diplomats and a cut in capital spending.

What’s next: The Foreign Office has submitted proposals for budget cuts of between 25% and 40%, according to the Financial Times. Foreign Secretary Philip Hammond is said to be concerned about possible embassy closures. There have also been warnings about redundancies at Foreign Office HQ.

Culture, Media and Sport – still negotiating
Annual budget: £1.5bn
Cuts since 2010: 30.7%

Where the axe fell 2010-2015: There were big cuts in administration costs and a 30% cut in the budget of Arts Council (England).

What’s next: Likely to be further cuts to arts funding with the National Lottery expected to make up shortfalls. Free museum entry likely to remain protected.

Education – still negotiating
Annual budget: £58.2bn
Cuts since 2010: 6.4%

Where the axe fell 2010-2015: Schools budgets are protected but the rest of the department’s spending is not – capital spending, on new buildings and equipment, has been cut, as has post-16 education and early years. Spending on the four-to-16-year-olds schools budget went up by 3% while cash spending per pupil rose by 6%.

What’s next: The government has again vowed to protect cash spending per pupil although no details have been revealed. But experts say upward pressure on school budgets from growing pupil numbers and pay demands will mean a growing strain on resources. There had been questions about the free school meals for all infants policy, but David Cameron has ruled out that being axed.

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