Yesterday (26 June 2013) Chancellor George Osborne presented the coalition Government’s Spending Review for 2015-16, which will cover the year immediately after the scheduled date of the next general election. This was followed today by the Chief Secretary to the Treasury, Danny Alexander’s announcement on capital infrastructure investment.
The Chancellor confirmed the announcement made in the 2013 Budget that the total allocation for 2015-16 is to be £744.7bn. The intention of the Spending Review is to reduce Government expenditure to below this level allowing savings to go towards servicing the country’s deficit, which stood at £120bn for the year 2012-13. In contrast Mr Alexander detailed where the already-announced capital spend of £50bn for 2015-16 would be allocated.
The ‘theme’ of the announcements was “reform, growth, fairness”. Reform to ensure money is well spent, growth in the economy by investing in infrastructure, education and enterprise, and fairness through ending the “something-for-nothing culture” in social security.
Overall, the Spending Review contained few surprises. In Mr Osborne’s speech the budgets that many expected to be protected – Health, Schools, International Development, Defence and Security – were. Those that most commentators expected would bear brunt – DWP, Energy and Climate Change, DEFRA and Culture – did.
Mr Alexander outlined significant infrastructure spending including £3bn for investment in road and rail schemes, including HS2, further money for the Green Investment Bank and setting a strike price for renewables. However, the Single Growth Fund promoted by Michael Heseltine as needing £49bn, will only receive £10bn to spend on transport, housing and skills.
On the wider theme of “reform, growth, fairness” it is as yet unclear whether the principles will be fulfilled.
The savings outlined above do not total a great deal of money so and there remains a great deal of waste in Government procurement so it seems the desired reform to get more from each pound spent should be reached. However, at the same time, with some departments having already cut by over 40%, there must be question marks over how this can be achieved while maintaining service provision.
In terms of ‘growth’, Danny Alexander’s announcement today will be followed by more announcements from particular departments over the coming months and years. It appears that the £50bn for the year 2015-16 should go some way to mitigating the cuts however as critics will point out, investment takes years to have an effect while the cuts will be immediate.
The third theme, ‘fairness’ is the most debatable, not least because it depends on political points of view. Mr Osborne considers it will be achieved through further restructuring of social security but there are many in the country who think the opposite.