The Chancellor, George Osborne, has today announced Government spending plans for 2015-16 (including cuts to individual Departmental budgets).
When setting out his first Budget in 2010, Mr Osborne had hoped to eliminate the structural deficit (the portion of borrowing which is not affected by changes in the economic cycle) entirely by 2014-15. However, the timeframe for addressing deficit issues has slipped to 2017-18 and the revised spending plans reflect the need to borrow an additional £275bn above and beyond the requirement envisaged in 2010.
The vast majority of Government Departments are being asked to tighten their belts further. Local authorities, many of whom are still trying to deal with the impact of the 2010 Budget, will not welcome a further 10% cut in the DCLG budget, coupled with a continuing freeze on Council Tax. However, local authorities will welcome plans to pool certain health and social care budget and should benefit from money being made available to help troubled families, build new homes and invest further in infrastructure.
- Government spending for the year is planned at £745bn, taking into account savings to be made during the period of £11.5bn;
- the Government will deliver over £5bn further efficiency savings in 2015-16 by transforming transactional services, reducing the running costs of Government and tackling fraud, error and debt;
- there will be a 1% cap on public sector pay rises;
- automatic pay increases will be brought to an end in the Civil Service, schools, hospitals, prisons and the police (but not the armed forces);
- DCLG will suffer a further 10% cut in budget (as had previously been thought), while Council Tax bills in England will be frozen for both 2014-15 and 2015-16;
- a reduction in overall local government spending of 2.3%;
- better cooperation between services at local level is a key objective for this Spending Round, with £3.8bn funding for a single pooled budget for health and social care services to work more closely together in local areas;
- a £100m collaboration and efficiency fund to enable the re-engineering of local service delivery and the realisation of efficiencies;
- £3bn capital will be made available for building new homes;
- DCMS will suffer a 5% reduction in its budget for community museums and arts;
- major MoD contracts, and in particular its Private Finance Initiative (PFI) contracts, will be renegotiated;
- the Government will invest £9.5bn in the UK’s transport network in 2015-16;
- spending on health, schools and overseas aid will continue to be protected;
- it is expected that public sector employment will fall by a further 144,000 by 2015.
The Spending Round 2013 sets out a series of investment announcements on growth, transforming public service delivery, and driving out efficiency savings in the Government's plans for spending in 2015-16. For local authorities, the key measures are:
The Government has announced that it will:
- set out a long-term plan for capital investment to 2020 and beyond (including capital spending allocations for all Departments for 2015-16). Details of over £100bn of infrastructure investment will be announced tomorrow, along with details of Single Local Growth Fund (SLGF) funding in 2015-16;
- maintain resource funding for science in cash terms at £4.6bn in 2015-16, increase capital funding in real terms from £0.6bn in 2012-13 to £1.1bn in 2015-16, and set a long-term capital budget for science in the next Parliament growing in line with inflation to 2020-21;
- provide funding for up to 180 new Free Schools, 20 Studio Schools and 20 University Technical Colleges a year, supporting the next stage of schools reform to increase choice for parents and equip young people with the skills they need to succeed.
Transforming public service delivery
The Government remains committed to public service reform and has announced that it will:
- put £3.8bn into a pooled budget for health and social care services to support and reward integrated working in 2015-16, following the example of the Whole Place Community Budget pilots;
- transfer £200m to local authorities from the NHS in 2014-15 to ensure change in relation to pooled health and social care budgets may start immediately through investment in new systems and ways of working;
- £330m to support the transformation of local services including a £200m extension of the Troubled Families programme and a £100m collaboration and efficiency fund to enable the re-engineering of service delivery and the realisation of efficiencies;
- create an innovation fund of up to £50m for police forces to work jointly with each other and with local authorities on new ways of collaborative working;
- launch an action plan to make the criminal justice system work together more effectively, creating a fully integrated system based around a common digital platform from police station to courtroom, ensuring that victims and witnesses get the efficient and user-friendly systems they deserve;
- make £335m available to local authorities in 2015-16 so that they may prepare for reforms to the system of social care funding, including the introduction of a cap on care costs from April 2016 (and a universal offer of deferred payment agreements from April 2015);
- consult on how best to introduce a fair national funding formula for schools in 2015-16; in future, the amount of funding a school receives will be based on a fair and rational assessment of the needs of its pupils (taking into account how many pupils are deprived);
- pilot new operational freedoms to help the museums sector to become more financially independent. National museums will have greater autonomy to take independent decisions on issues such as pay and procurement, and to access finance to unlock new projects, commercial revenues and philanthropic donations;
- establish a £30m fund to help meet the upfront costs of transforming the fire service and to act on the opportunities identified by the Knight Review, such as creating more emergency centres to accommodate the three blue light services, sharing back office functions and running joint response systems.
The Government will deliver over £5bn further efficiency savings in 2015-16 through stopping wasteful expenditure, transforming transactional services, and reducing the running costs of Government. These reductions include:
- £1.9bn from departmental administration budgets in 2015-16, an overall reduction of around 40% since 2010 in the cost of running Whitehall departments;
- funding to support local authorities that choose to freeze their council tax in 2014-15 and 2015-16, and a council tax referendum threshold in each of those years that gives local people a say if their council tax rises by more than 2%;
- the Cabinet Office will have continued funding of £56m to support Government programmes which help Voluntary, Community and Social Enterprise organisations play a bigger role in communities and public services;
- over £1.5bn from the Government’s projects portfolio through scaling back or stopping non-priority projects, and better project management and around £1bn from ensuring that the Government acts effectively as a single customer when purchasing goods and services;
- public sector pay awards will be limited to an average of up to 1% in 2015-16, saving at least £1.3bn;
- there will be substantial reforms limiting automatic progression in pay for teachers, the health service, prisons and the police.
Bevan Brittan continues to be the country's leading adviser to local authorities on the legal issues and opportunities for efficiency savings and service transformation.
If you would like to discuss any of the legal issues arising from your Council's objectives to find further efficiency savings, please contact any member of our leading Local Government team.