Spending Review 2010
November 2010
Spending Review 2010
The spending cuts outlined by George Osborne recently won international backing and some leading economists have said the plans were tough, necessary and courageous. Nevertheless the Treasury-led spending review revealed some of the deepest cuts in public spending for decades, with Mr Osborne counting on a strong corporate recovery to boost the economy.
The key points coming out of George Osborne's Spending Review are outlined below. If you have any specific questions about how this may affect you then do not hesitate to contact us.
Public Sector Reform
“The public sector needs to change to support the aspirations and expectations of today's population, rather than the aspirations and expectations of the 1950s,” Mr Osborne, October 2010 Spending Review.
• Quangos will be abolished and services will be integrated
• The administrative budgets of every main governmental department cut by a third
• 490,000 public sector jobs likely to be lost over four years
• Police funding cut by 40% each year
Welfare Reform
“Welfare spending now accounts for one third of all public spending and Benefit bills have soared by 45%”, Mr Osborne, October 2010 Spending Review.
• £2 billion of resource allocation to reform the welfare state
• A 12 month time limit to be put on those people on Employment and Support allowance looking to find a job
• Maximum savings award in pension credit to be frozen for four years
• Families that don't work will never receive more in benefits than the average family that does go out to work, with the exception of those on Disability Living Allowance, Working Tax Credit or the War Widows Pension
• Increased working hours threshold for working tax credits for couples with children
• An increase to the child element of the Child Tax Credit by £180 per annum
• Cuts to child benefit for higher rate taxpayers to generate 2.5bn
• Free eye tests, free prescription charges, winter fuel allowance, free bus passes and TV Licenses for pensioners all remain
• NHS protected and an increase in health spending every year
• A new cancer drug fund to be provided
• Spending on health research protected and work on the treatment for dementia prioritised
• The aim to fund new hospital schemes
Housing
“We will also reform our social housing system because it is failing to address the needs of society,” Mr Osborne, October 2010 Spending Review.
• Redefinition of social housing
• Changed terms for new social housing rental agreements – new tenants will be offered immediate rents at around 80% of the market rent
• Aim to build 150,000 affordable new homes over the next four years
Retirement
“One of the first acts of this coalition government was to re-link the basic state pension to earnings, and to guarantee a rise each year by earnings, inflation or 2.5% - whichever was higher,” Mr Osborne, October 2010 Spending Review.
• The state pension age for men and women will reach 66 by the year 2020
• The desire for public service pensions to become 'Gold Standard' and with this an inevitable increase in employee contributions. These will most likely be staggered
and progressive (full commission report to be published next Spring on the exact nature of the defined benefit and progressive contributions rise)
Business Growth
“Even when money is short we should prioritise those areas of public spending which are most likely to support economic growth,” Mr Osborne, October 2010 Spending Review.
• Lower priority programmes like 'Train to Gain' will be abolished
• Adult learners and employers will have to contribute more to further education
• Investment in adult apprenticeships with the aim of helping 75,000 new apprentices by the end of the spending review period
• Better off graduates will have to pay more for University
• The science budget for scientific research is protected
• £200 million invested in the development of off-shore wind technology and manufacturing at port sites
• The idea for a green investment bank has been given the go-ahead
Transport
“After our defence requirements are met, the Department for Transport will receive the largest capital settlement,” Mr Osborne, October 2010 Spending Review.
• Over the next four years, £30 billion will be invested in transport projects including extending the Midland Metro, the upgrade of the A11 to Norwich and improvements to major motorways across the country
• Direct bus subsidies will be reduced, but statutory concessionary fares will remain
• Regulated rail fares to rise 3% above inflation
Education
“The most important ingredient a twenty-first century economy needs is well educated children, who believe in themselves and aspire to a better life whatever their background or disadvantages,” Mr Osborne, October 2010 Spending Review.
• The schools budget will rise from £35 billion to £39 billion and will rise every year for the next four years
• Sure Start budget to be protected
• 15 free hours of early education and care for all disadvantaged two year olds
• Phasing out the Building Schools for the Future programme but £15.8 billion will be spent to maintain school estates and rebuild and refurbish 600 schools
