Osborne’s impossible balancing act?
Today’s Spending Review saw the Chancellor George Osborne set out plans for more than £4,000 billion of public spending over the next five years. As he did, we saw an attempt to not simply shape the short term political narrative, but the entire political weather for the rest of this Parliament. We also saw a seemingly impossible and contradictory combination of austerity and largesse.
For example, state spending will fall to 36.5% of national income by the end of the decade. The debt and deficit will both fall, leaving a £10bn budget surplus. The £12bn of welfare cuts announced earlier this year will also be delivered in full.
Yet, in almost the same breath, Osborne announced that the Government’s controversial tax credit cuts would be scrapped. The police budget will also now be protected in the wake of the Paris attacks, instead of being cut by 10%. A range of other areas from the NHS to transport, housing, childcare, and even the BBC World Service, will all get more money.
Osborne said he was able to do this thanks to a £27bn improvement in the public finances. New data and statistical measures meant debt would be lower and the economy would grow by a predicted 2.5% a year for the rest of the decade.
Public sector reform
In spite of this, Departments will still have to cut £12bn while continuing to transform.
A total of £1.8bn will be invested in digital transformation. The Government Digital Service will receive an extra £450m to deliver the next phase of reforms, and there will be increased emphasis on using common technology services and platforms across the public sector. HMRC will get 18% less money while delivering digital tax accounts for every individual and small business in the country.
Criminal justice will also see significant change. Underused courts and old prisons in prime locations will be sold off. The money raised will fund £700m of new technology in the courts and more than £1bn to build new, modern prisons. Borders will be strengthened through a £250m online system for managing passport and visa applications, while a £1bn 4G network for the emergency services will also enable more remote working and data sharing to free up officers’ time.
In health, the NHS will receive £6bn to fully find its five year plan. An additional £1bn will support new technology in the NHS, including integrated care records and innovative treatments. More money will also help integrate the health and social care system, and local authorities will be able to raise taxes to pay for adult social care.
Businesses to help train 3 million apprentices
The Chancellor set out an ambition to increase the number of apprentices from 2m to 3m. Businesses will have more say over how apprenticeships are run, but will also have to pay more. From April 2017 the new Apprenticeship Levy will see every business with a payroll of more than £3m pay a 0.5% charge. This will raise £3bn a year to pay for new apprenticeship places. Employers who pay into the system and are committed to training will get out more than they put in.
A bold Spending Review from an ambitious Chancellor
Today’s Spending Review saw the Chancellor ranging widely over the Government and its work. Clearly, he felt confident enough to make huge u-turns over tax credits and police funding without the risk of serious damage from the Opposition. But as with any budget, the true test will be whether the sums bear scrutiny over the coming days.