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Spending Review: Osborne Wields Axe
BBC NEWS
October 20, 2010, Chancellor George Osborne has announced the government's four-year Spending Review to Parliament, revealing some of the deepest cuts in public spending in decades.
The key announcements:
About 490,000 public sector jobs likely to be lost
Average 19% four-year cut in departmental budgets
Structural deficit to be eliminated by 2015
£7bn in additional welfare budget cuts
Police funding cut by 4% a year
Retirement age to rise from 65 to 66 by 2020
English schools budget protected; £2bn extra for social care
NHS budget in England to rise every year until 2015
Regulated rail fares to rise 3% above inflation
Bank levy to be made permanent
Here, department by department are more details.
Business, Innovation and Skills
Annual budget: £21.2bn
What's being cut: Annual cut of 7.1% or 25% over the period. Administration costs to be cut by £400m with 24 quangos axed. The Train to Gain program to be axed. University funding to be cut and reform of student tuition fees building on Browne review. The science budget is to be frozen - in cash terms - rather than cut as had been feared. Funding for 75,000 adult apprenticeships a year.
Cabinet Office
Annual budget: £2.6bn
What's being cut: £55m cut in budget. Support for citizenship and "big society" projects. Cabinet Office officials to move into Treasury. Civil List cash funding for Royal Household to be frozen next year. New system of funding for Royal Household from 2013.
Communities and Local Government
Annual budget: £33.6bn
What's being cut: Councils will see a 7.1% annual fall in their budgets. But ring-fencing of local authority revenue grants will end. Funding for Redefinition of social housing, changed terms for new rental agreements. Aim to build 150,000 new affordable homes over next four years.
Spending Review: Fears for Devon firms in spending cuts
Tim Jones, chairman of Devon & Cornwall Business Council, said that would hit firms relying on the public sector. "Estimates suggest a turnover rate of over 8% in the public sector. "But yes, there will be some redundancies. That is unavoidable when the country has run out of money."
Nearly 50,000 people are employed by local authorities in Devon, about one in five of the working population, according to latest figures in a report by the South West Observatory (SWO).
Percentage of public sector workers in Devon
Ivybridge: 36.4%
Torquay: 30.9%
Exeter: 29.7%
Plymouth: 26.3%
The SWO report said the South West saw the largest change in public sector employment across the UK between 2000 and 2010, with a rise of 100,000 jobs. But Mr Jones warned that firms which relied on local authority deals would be hit. He said: "The general business stock in Devon is very vulnerable to cuts in the public sector. "For every one of those jobs there is a knock-on effect to private sector businesses. That's the pain we are going to have to suffer. "Maybe the 100,000 jobs that we gained, we are going to lose again."
Chancellor George Osborne has unveiled the biggest UK spending cuts since World War II, with welfare, councils and police budgets all hit.
The pension age will rise sooner than expected, some incapacity benefits will be time limited and other money clawed back through changes to tax credits and housing benefit.
A new bank levy will also be brought in - with full details due on Thursday.
Mr Osborne said the four-year cuts were guided by fairness, reform and growth.
But shadow chancellor Alan Johnson, for Labor, called the review a "reckless gamble with people's livelihoods" which risked "stifling the fragile recovery" - a message echoed by the SNP, despite smaller than expected cuts in Scotland.
Mr Osborne ended his hour-long Commons statement by claiming the 19% average cuts to departmental budgets were less severe than expected - thanks to an extra £7bn in savings from the welfare budget. He claimed this meant his savings were less than the 20% cuts Labor had planned ahead of the general election.
Outlining his Spending Review in the Commons, which includes £81bn in spending cuts over four years, he told MPs: "Today is the day when Britain steps back from the brink, when we confront the bills from a decade of debt."
He claimed the program would restore "sanity to our public finances and stability to our economy", telling MPs: "It is a hard road, but it leads to a better future."
The government will slash the amount of money it gives to local councils by 7.1% from April, but will give local authorities more control over how council tax money is spent.
Universal benefits for pensioners will be retained as budgeted for by the previous government and the temporary increase in the cold weather payment will be made permanent.
But a planned rise in the state pension age for men and women to 66 will start in 2020, six years earlier than planned.
The main new welfare savings come from abolishing Employment and Support Allowance for some categories of claimant after one year, raising £2bn, and higher contributions to public sector pensions.
Bank levy
Mr Osborne also said axing child benefit from top rate taxpayers would raise £2.5bn - more than predicted when the policy was announced earlier this month.
Up to 500,000 public sector jobs could go by 2014-15 as a result of the cuts program, according to the Office for Budgetary Responsibility.
Mr Osborne has not set out in detail where the jobs will go but he admitted there will be some redundancies in the public sector, which he said were unavoidable when the country had run out of money.
He has set out extensive cuts to the budgets of individual government departments including:
Home Office - 6% cuts, with police spending down by 4% each year of the spending settlement
Foreign Office - 24% cut through reduction in the number of Whitehall-based diplomats and back office costs
HM Revenue and Customs - 15% through the better use of new technology and greater efficiency
Justice - 6%, with plans for a new 1,500 place prison dropped and local courts closed
The Department for International Development's budget will rise to £11.5bn over the next four years, reaching 0.7% of national income in 2013.
The chancellor's big surprise announcement is that the state pension age will rise for both men and women to 66 ”
The science budget will be ring fenced and the increase for the NHS over the whole spending period has been confirmed as 0.4%, or 0.1% a year.
The schools budget will rise from £35bn to £39bn and, overall, the Department for Education will be required to find resource savings of just 1% a year.
Each government department will next month publish a business plan setting out reform plans for the next four years.
The government will also deliver £6bn of Whitehall savings - double the £3bn promised earlier, said the chancellor.
The Spending Review is the culmination of months of heated negotiations with ministers over their departmental budgets and comes a day after the Ministry of Defense and the BBC learned their financial fate.
The MoD is facing cuts of 8% - less than most other departments but enough to mean 42,000 service personnel and civil servants will lose their jobs over the next five years and high-profile equipment such as Harrier jump jets, the Ark Royal aircraft carrier and Nimrod spy planes will be scrapped.
The BBC has been told it must freeze the license fee for six years and take over the cost of the World Service, currently funded by the Foreign Office, and the Welsh language TV channel S4C. This adds up to an estimated 16% cut in the BBC's budget in real terms.
The chancellor insists tough action on spending is needed to stave off a debt crisis - and that the private sector will create new jobs to fill the void.
A special BBC News season examining the approaching cuts to public sector spending
The Spending Review: Making It Clear
Labor would also have had to make major cuts if they had won the general election, but the party insists Mr Osborne's plans were too aggressive and risked tipping the country into a "double dip" recession.
During raucous Commons exchanges, Shadow chancellor Alan Johnson accused Tory backbenchers of cheering "the deepest cuts to public spending in living memory".
He claimed that for some on the government benches cuts were an "ideological objective" and "what they had come into politics for".
The Queen has agreed to make spending cuts
The Queen is to play her part in the cuts being made throughout the UK, Chancellor George Osborne has announced in his Spending Review.
He said that, having already accepted a one-year freeze in Civil List pay next year, the Queen had also agreed spending cuts of 14% by the Royal household in 2012-13.
But the Royal family will get a special payment of £1m to cover the costs of Diamond Jubilee celebrations in 2012 which, Mr. Osborne said, the whole country was looking forward to.
After 2013, the current grants and Civil List payments, which fund the Royals, would be rolled into a single new Sovereign Support Grant, linked to Crown Estate revenue.
Mr Osborne said this was so that "my successors do not have to return to this issue as often as I have had to".
The chancellor in his June budget first announced the cash freeze to this year’s Civil List.
The Civil List has remained unchanged for the past 20 years at £7.9m.
