Osborne details £6.2bn spending cuts
By James Tapsfield and Joe Churcher, PA
Monday, 24 May 2010
The Chancellor, standing alongside his Lib Dem deputy at the Treasury, David Laws, said the reductions would be made while maintaining "frontline" services in key areas such as the NHS. He also announced that schools spending would be protected.
Some £500 million will be "recycled" to boost employment and skills, and the rest will be used to cut the Government's debt.
"In the space of just one week we have found and agreed to cut £6.25 billion of wasteful spending across the public sector," Mr Osborne said.
Previously only health. defence and international development budgets had been promised protection from in-year cuts.
But Mr Osborne said: "Because we have found these savings, I am able to make a new commitment which we didn't think possible before.
"I have already agreed that savings for health, defence and international development will be reinvested in their front lines.
"Today I am also able to protect schools funding, funding for Sure Start spending and 16-19 education spending from these in-year cuts.
"Schools will have to become more efficient, like everyone else, but their savings will be reinvested in the classroom this year."
Mr Osborne said the savings would include:
:: More than £1 billion of "discretionary" spending such as consultancy and travel;
:: Nearly £2 billion from IT programmes, suppliers and property;
:: Over £700 million from "restraining recruitment" and cutting quangos.
:: More than £500 million from cutting "low-value spending".
The savings were based on "strong economic advice" from the Bank of England and the Treasury in favour of "early action to deal with our debt", the Chancellor said.
It reflected a "decisive shift" around the world towards deficit reduction as a priority.
Referring to a note left by outgoing Labour chief secretary Liam Byrne for Mr Laws, Mr Osborne said: "It's all very well writing a letter telling us the money has run out; the real challenge is having an answer to that letter."
He said his theme of "we're all in this together" meant "cutting wasteful spending while protecting the quality of key frontline public services we all depend on".
Mr Laws said the savings identified for 2010-11 totalled £6.243 billion.
He listed the cuts by department as:
:: Department of Transport - £683 million
:: Communities and Local Government - £780 million
:: Local Government DEL - £405 million
:: Business - £836 million
:: Home Office - £367 million
:: Department for Education - £670 million
:: Ministry of Justice £325 million
:: Law Officers Department - £18 million
:: Foreign Office - £55 million
:: Energy and Climate Change - £85 million
:: Environment, Food and Rural Affairs - £162 million
:: Culture, Media and Sport - £88 million
:: Department for Work and Pensions - £535 million
:: Chancellor's Departments - £451 million
:: Cabinet Office - £79 million
:: Devolved administrations - £704 million
Mr Laws admitted there would be "disappointment to some parents" over slashed child trust fund payments.
But he also said public servants would be stopped from taking first class travel under the cuts.
He said: "Figures for central government departments suggest that £45 million was spent on first class travel in 2007 and 2009. We believe that huge savings can be made in this area.
"All first class fares are extremely expensive and should be avoided by all public servants wherever possible."
He said the Government had been forced to work on "scaling back lower priority spending".
He added: "As the Chancellor indicated, we will pass legislation to end child trust fund payments and this will save £320 million in 2010 and 2011, rising to £520 million in 2011-12.
"From this August we will reduce contributions at birth and stop all contributions at age seven. And from January 2011 we will stop all contributions at birth.
"I know that this will be a disappointment to some parents but we need to be honest about what we are doing."
He said it was a "deception" to suggest young people were being made richer by the scheme.
"By ending payments into this scheme we will also save the £5 million annual cost of administering it."
Mr Laws said the devolved administrations would have the option of making their savings this year, or deferring them to the next financial year.
He added that the Government was "recognising" the fact that local authorities were delivering £1.16 billion of savings.
"We will help local government to deliver their savings by removing ring-fences around £1.7 billion of grants to local authorities in 2010-11," he said.
However, ring-fencing of schools and Sure Start funding will not be removed.
Mr Laws insisted the Government's "first priority is to cut out waste".
"We expect departments to make savings which will include £1.15 billion on cutting discretionary areas such as consultancy, advertising and travel costs," he added.
Some £1.7 billion will be achieved by "delaying and stopping contracts and projects", and "immediate" negotiations will take place with the Government's 70 biggest suppliers to reduce costs.
Around £600 million will be saved by cutting quangos, £170 million from "property costs", £95 million from IT, and at least £120 million from freezing Civil Service recruitment.
Savings from the Child Trust Fund would be spent on extra "respite breaks" for disabled children, Mr Laws added.
He said: "Last week I said that the Chancellor and I aspired to be more than competent accountants. We are also determined to cut with care as far as is possible.
"We want to protect the key frontline services that people depend on and protect those on the lowest incomes from the actions that we are now having to take.
"This is a key commitment to the coalition agreement and we have jointly rejected proposals which we believe would threaten that commitment."
There will be "many more tough decisions but we believe that the British people understand", he added.
"The years of public sector plenty are over - but the more decisive we react, the more quickly and strongly we can come through these tough times."
The cuts will not be an "easy task" but the Government was willing to be judged, he added.
Mr Laws said: "This is only the first step on what will be a long road to restoring good management of our public finances.
"Even tougher decisions undoubtedly await us in the Budget this year and in the autumn spending review if we are to restore responsibility after the years of Labour extravagance and mismanagement of our public finances."
Mr Osborne insisted: "We have conducted the fastest and most collegiate spending review in recent history.
"That is what this new Government is all about.
"Rolling up our sleeves, getting on with the job, working together in the national interest, delivering on our promises, getting a grip."
Mr Laws said he intended to send a "shockwave" through Whitehall over the need for "draconian" restrictions on the money being spent on consultancy, IT and other areas.
He is to chair an "efficiency and reform group" including with Cabinet Office Minister Francis Maude to help push through the savings quickly and hold bodies to account.
"It will provide a central unit in the Government that can negotiate on behalf of all Government departments to renegotiate contracts to give our Government as much clout as possible to go out there to the private sector and negotiate savings," he said.
"But it is also imposing, with the agreement of the Treasury, some quite draconian controls over the next year on expenditure on consultancy, on advertising on IT, which will require approval down to a very low level of spending.
"There were some people who said 'Is this too draconian, are we being too inflexible?'. Actually, my view is that, unless we send out this sort of shockwave through Government departments to say 'You can't spend on all these areas', that they are not actually priorities, we won't get the step change in behaviour we expect.
"So we are being very draconian and very inflexible, deliberately, over the next year to drive out these types of costs."
The group will look at areas such as IT spending - with a freeze on £1 million-plus projects, procurement, advertising and marketing - with only "essential" items allowed, Civil Service expenses - such as cars and first-class travel - and recruitment and property.
There will also be an "immediate review to create a more simplified approach to Civil Service pay structures and terms and conditions", the Cabinet Office said.
Mr Laws said his Liberal Democrat Cabinet colleague, Business Secretary Vince Cable, had been "very pleased" to play his part in cutting costs despite his department bearing big cuts.
"As you know, Vince is the deficit hawks' pin-up for being willing to take tough decisions on public spending. He has led this debate in the country and certainly in our party over the last year or so and therefore he has been very pleased indeed to play his part."
The Department was losing less as a proportion of its overall budget than some others, he said, and would be greater in real terms than in 2008/9.
Becta, the Government's technology agency for schools, has been abolished.
In a statement today, the agency's chairman, Graham Badman, and chief executive, Stephen Crowne, said: "Naturally we are very disappointed at the Government's decision. Becta is a very effective organisation with an international reputation, delivering valuable services to schools, colleges and children.
"Our procurement arrangements save the schools and colleges many times more than Becta costs to run. Our Home Access programme will give laptops and broadband to over 200,000 of the poorest children.
"Our top priorities now are to make sure we have an orderly and fair process for staff, and that as far as possible schools, colleges and children continue to benefit from the savings and support that Becta has provided.
"We will be talking to Government departments and our other stakeholders including the industry about this."
Shadow Chancellor Alistair Darling called for the coalition to "come clean on the detail of what these cuts mean".
"Today they dodged the House of Commons, because they didn't want to have to explain the real impact on firms and families," he said.
"Today George Osborne wouldn't say how many jobs this package would cost.
"But it is already clear that these cuts will seriously affect support for business, mean less jobs for young people, and hit student places for this September."
Mr Laws said a previously announced review of hundreds of projects signed off by Labour since the start of the year would be completed by the end of this week.
The coalition has accused the previous administration of agreeing a series of unaffordable projects in the months before the General Election.
He insisted that "sensitive" projects such as equipment for the front line in Afghanistan would not be held up.
The £500 million of spending being reallocated was broken down by the Treasury as:
:: £50 million to provide capital investment for Further Education colleges;
:: £150 million to fund 50,000 new apprenticeship places, focused on small and medium enterprises;
:: £170 million to safeguard delivery of around 4,000 social rented homes;
:: £50 million for action to tackle backdated business rates bills, including a freeze on payments for 2010-11.
The remainder will go to the devolved administrations.
Osborne details £6.2bn spending cuts - UK Politics, UK - The Independent
Osborne details £6.2bn spending cuts
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