As I was finishing writing How to Survive Austerity (which is now available to buy on Amazon), the Chancellor of the Exchequer, George Osborne, had just delivered the conclusions of the 2015 Spending Review.
So as local authorities up and down the country prepare to deliver budgets for the next financial year, it seemed timely to take a moment and look back at the Spending Review and the real implications.
Aside from unexpected changes to things like working tax credits, his speech on 25 November 2015 set out public sector budget cuts for some ‘non-ring-fenced’ departments of between 15% and 37%. Overall day-to-day depart- mental spending was cut by £20 billion – equivalent to 0.8% of total expenditure each year by 2020.
Those reductions were the culmination of many months of wrangling between the Treasury and spending departments. The ramifications for managers of services affected by those reductions will be severe and will be felt for years to come.
Key points of the 2015 Spending Review:
- State spending, as a share of total national output, will to fall to 36.5% in 2020, down from 45% in 2010.
- While the budgets of policing, health, education, international aid and defence remain protected, departments such as transport, energy, business and the environment are among the biggest losers, with their respective resource budgets falling by 37%, 22%, 17% and 15%.
- Even within frozen budgets efficiency savings will be expected: police forces will be obliged to share resources, the NHS in England must find £22 billion in efficiency savings, and the Department of Health resource budget will fall by 25%.
- The 2015 Spending Review introduced a new social care ‘precept’ in council tax of up to 2% that will allow local councils to raise £2 billion for social care.
The pressure mounts on public services
As the announcement on the 2015 Spending Review demonstrates, the pressure on public service finances is severe, some would say unprecedented. Those pressures and the drive towards austerity challenge your claim to a future in public service. Austerity challenges the claims of your staff to a future in public service. And most importantly, austerity challenges the very future of the service you hold dear and the delivery of services to people who really need them.
The Office for Budget Responsibility (OBR) (www.budgetresponsibility.org.uk) is responsible for assessing how public finances are likely to evolve, based on existing government policies on tax and spending. Independent of government, the OBR estimates how much money the public sector will raise from taxes and other sources of revenue, and how much it will spend on things like public services, state pensions and debt interest.
In July 2015, following the Chancellor’s budget, the OBR report A Brief Guide to the UK Public Finances said it expected UK PLC to raise £673 billion of income and spend £742 billion in 2015–16. That is a whopping deficit of almost £70 billion. And that is just an annual amount, in case you were wondering.
That is the deficit the Chancellor keeps talking about and the one he is keen to tackle. The key point for you is that closing that gap will affect the funding of most public services. Even services that are currently ‘ring-fenced’ and therefore, relatively insulated from the worst of the spending cuts, are not immune to efficiency plans. The impact on those services that are not ring-fenced will be severe, both for those receiving the services and for those who work in them.
It is certainly worth reading the OBR’s independent report http://budgetresponsibility.org.uk/efo/economic-and-fiscal-outlook-november-2015/ so you understand the implications of the 2015 Spending Review. It provides a no-nonsense update of the July 2015 report and leaves public sector managers in no doubt about the extent of the challenge ahead.