Spending review: Winners and losers
Whitehall departments are furiously trying to work out how hard they’ve been hit as the implications of the comprehensive spending review sink in.
Average departmental cuts of 19% have been announced after the ringfencing of health and aid spending.
But with minsters inevitably prioritising some areas, others have paid the price by bearing an even greater burden of the cuts.
Here’s our department-by-department list of the final settlements they have reached with the Treasury – revealing the big winners and losers from this historic comprehensive spending review.
***Update*** – An earlier version of this article was based on the resource departmental expenditure limits, what the Treasury call the “headline figure”. They have subsequently released a new version, withheld from the original document, which combines resource allocations with capital spending for each department. This throws up a few interesting changes – see below. Thanks to the FT for persuading the Treasury to release the final total departmental expenditure limits, on which this is based.
All stats are cumulative real-terms growth figures over the four-year period of the comprehensive spending review.
1: Department for Communities and Local Government (communities) – CUT by 68%
Eric Pickles, “public chum number one” as David Cameron called him in his speech to the Tory party conference, has been approaching the spending cuts exercise with zeal. The Audit Commission, which scrutinises local government finance, is among the arms-length bodies which have been cut to achieve a cut of 33%. Actually, because of the shift in power from the DCLG budget to local authorities, the real-terms cut in the central department’s budget will be a whopping 51%. The communities section is even worse. Ouch.
2: Treasury – CUT by 32%
The department holding the purse-strings is making an example of itself. Central government economists are going to be given the boot, for lowering headcount will help make most of the savings. Its main building in central London will be sublet, too.
3: Department for Environment, Food and Rural Affairs – CUT by 30%
The bonfire of the quangos is proving especially effective for cutting Defra’s bill. It is cutting its number of arms-length bodies from 92 to 39. The rural development programme is being cut by £66 million, in a big blow to farmers.
4: Department for Business, Innovation and Skills – CUT by 28%, comprising 40% cuts from higher education and 16% from other areas
This big department is packing in a lot of big changes. The decision to save the science budget, the result of much campaigning from our lab-coated friends, will cost money. So will a big boost for adult apprenticeships. These have been paid for, in part, by the abolition of the Regional Development Agencies, saving £1.5 billion a year. Labour’s Train to Gain programme is being scrapped completely – and overall university cuts are much higher than the departmental 25% average.
=5: Department for Communities and Local Government (local government) – CUT by 27%
The government is hoping to sweeten the pill for councils by devolving “significant financial control” to them. But, the spending review admits, they have no choice but make “significant savings over the spending review period”.
=5: Small and independent bodies – CUT by 27%
The survivors will be counting themselves lucky they still exist at all.
=7: Department for Culture, Media and Sport – CUT by 25%, but by 15% for core cultural programmes
This could have been even worse. Core funding for museums and arts is only being cut by 15%. The bodies organising much of this money are the real victims, though – quangos like the UK Film Council, whose demise has kicked up a stink in the cinema world.
=7: Foreign Office – CUT by 25%
The Foreign Office has turned into little more than a lobbying body for British business. It hopes to get by with its diplomatic functions, while refocusing on “championing British companies to win exports and secure jobs at home”. This is the price it must pay for having greater influence across Whitehall.
=7: Law Officers’ Departments – CUT by 25%
The Crown Prosecution Service is hoping to save lots of cash by reducing the cost of its headquarters. Local prosecutors will be “empowered” instead.
=7:Ministry of Justice – CUT by 25%
This is going to be tough. There’s not as much fat to cut out as in the Home Office, so much of the burden will be borne by legal aid – being slashed by as much as a third. Prison places will only fall at a slow pace, so even cutting numbers by around 3,000 will be a big ask. “Reforming sentencing” by sending less people to jail is unlikely to be easy as ministers think.
=7: Home Office – CUT by 25%. Police budget cut by 14%
Savings of 14% to police funding mean there will have to be cuts to the overall number of police officers. These are not likely to be as bad as feared, however – but they rely on chief constables being able to quickly cut administrative costs to the level predicted by the Conservatives in opposition.
12: HM Revenue and Customs – CUT by 17%
The HMRC is placing its faith in IT savings – investing in new technology and the like. This seems a little optimistic. Sentences like “savings will be maximised from IT” haven’t always worked out as planned in the past.
13: Department for Transport – CUT by 15%
George Osborne’s long list of road infrastructure spending raised some cheers in yesterday’s speech. This is supposed to be one of the departments whose capital spending will offer a way out of recession, after all, but it still faces major cutbacks. Paying for the ongoing investment will cost the department and its quangos, which will cut its admin bill by 33%. Local government grants are also being cut by an enormous 28%.
=14: Devolved administrations – cumulative resource budgets to Scotland, Wales and Northern Ireland CUT by 11%
Yes, these are London-imposed cuts from the centre. Yes, the Scottish government in particular doesn’t like it one bit. But it could be much worse. There’s an extra £250 million being poured in through the green investment bank for Scotland. Northern Ireland gets a £175 million loan to cope with the Presbyterian Mutual Society collapse. And, in the long-term, things are looking up – reform of the way Scotland, Wales and Northern Ireland get funding is being reformed.
=14: Department of Education – CUT by 11% but real terms increases of 0.1% in each year of spending review
Michael Gove won’t be complaining. After the Building Schools for the Future wind-up there will still be £15.8 billion of capital spending available. The Liberal Democrats have their £2.5 billion pupil premium. Early years nursery care is being expanded. Spending on education has been all but ringfenced in an unexpected boost for the country’s schools. But this isn’t enough to replace BSF, leaving an overall reduction in double figures in the next four years.
16: Ministry of Defence – CUT by 7.5%
George Osborne had been angling for overall cuts to defence spending of between ten and 20%, but sustained campaigning from defence secretary Liam Fox restricted the overall cuts after he won the support of the prime minister. The defence review stated the headline figure was eight per cent; in fact it’s even less than that. But the reshaping of Britain’s military has resulted in what can only be described as a major downscaling. Still, at least we have those two new shiny aircraft carriers. Shame about the planes to go on them.
17: Single intelligence account – CUT by 6.6%
The national security strategy published on Monday prioritised counter-terrorism. Keeping Britain safe means the intelligence agencies have escaped damning cuts – but the combined capital and resource figures reveal they are still suffering an overall budget decline.
18: Department of Health – INCREASED by 0.4% to £114 billion by end of four years
We knew about this one, of course. Extra funding of £1 billion a year for social care is an unexpected bonus, making the NHS the biggest beneficiary of all from the spending review. Efficiency savings of £20 billion are still being sought, of course, even as pressures increase.
19: Department for Work and Pensions INCREASED by 2.1%
The spending review lops off another £7 billion to the overall welfare bill, adding to the £11 billion removed in the emergency Budget. This is huge by itself, but Iain Duncan Smith’s department will go further by cutting its corporate overheads by 40% in real terms. Don’t let the headline figure fool you here. For many people, this is the department whose cuts will have the biggest direct impact on their lives.
20: Department for Energy and Climate Change– INCREASED by 17%
There hasn’t been much coverage of a £1 billion tax on energy firms, the main surprise from the Decc settlement. The cost of EU carbon permits for around 5,000 businesses was to have been recycled back to companies under previous plans – now the Treasury is going to keep them. Most of the unexpected boost for Chris Huhne’s department comes from extra spending on dealing with nuclear waste.
21: Cabinet Office – INCREASED by 20%
Capital spending has a big impact here, which is perhaps a little deceptive. The central government department is actually suffering a real-terms cut of 35%. Perhaps it’s appropriate that the Department of Paperclips is among those getting both the biggest chop and, somehow, a big overall increase too… The Whitehall pen-pushers will be scrapping consultants here, selling off bits of its estate there and renegotiating supplier contracts. The cuts also include a 25% reduction in No 10’s bill.
22: Department for International Development – INCREASE by 34%
This figure is simply staggering – but that’s what it costs to meet Britain’s commitment to raise its overseas development aid spending to 0.7% of GDP by 2013.
