First thoughts on CSR...

I am pleased with the outcome of today’s CSR and think that the ‘quad’ did a good job in very difficult circumstances. In the opening paragraph CSR it states that, “The Coalition Government  inherited one of the most challenging fiscal positions in the world,” which I think we all have to remember.

It continues: “Last year, Britain’s deficit was the largest in its peacetime history – the state borrowed one pound for every four it spent. The UK currently spends £43 billion on debt interest, which is more than it spends on schools in England. As international bodies such as the IMF and OECD have noted, reducing the deficit is a necessary precondition for sustained economic growth. Failure to take action now would put the recovery at risk and place an unfair burden on future generations.”

I am pleased that the NHS is protected and that £2bn is being out in for social care. I am also happy that a pupil premium is being introduced to support the poorest school children.

Main announcements of CSR today:

• 490,000 public sector jobs likely to be lost
• Structural deficit to be eliminated by 2015
• £7bn in additional welfare budget cuts & £2bn in universal credit.
• Police funding cut by 4% a year
• Retirement age to rise from 65 to 66 by 2020
• Additional £2bn in capital spending
• NHS budget protected; £2bn extra for social care
• Permanent bank levy
• Winter fuel allowance, free bus passes and TV licences for over-75 kept
• 24 quangos axed
• Ring-fencing of local authority grants to end
• Social housing reform with the aim to build 150,00 new affordable homes
• BBC licence fee frozen for 6 years (equivalent to a 16% cut for them)
• RAF & Navy to lose 5,000 jobs; Army to lose 7,00 and MoD to lose 25,000 civilian staff
• Schools to get a real term increase in funding
• Police cut by 4%
• Overseas aid budget to be protected and to rise to £11.5bn to meet UN commitment.
• Aid to China and Russia to stop.
• New 1,500 capacity prison scrapped but £1.3bn capital investment in prisons
• Introduction of a fairness premium worth £7.2bn to support the poorest children

Upcoming CSR

Over the weekend I have received a few emails from CF members about the upcoming Spending Review on Wednesday asking what it’s all about and what I think about it so here goes.....

This year the UK will be borrowing £109 billion which amounts to £4,000 for every home across the country. Over the course of the current parliament, the total cost of overspending will be £292 billion. Remember that this is a result of Labour’s mismanagement of the economy that has nothing to do with the recession as Alan Johnson (Shadow Chancellor) detailed in his speech this morning.

In Labour’s last year in office the Government spent £600 billion which equates to around £10,000 for every man, woman and child in the UK. In 2014-15 the Coalition Government plans to spend £692.7 billion which equates to £11,500 per head. This shows that increased spending can occur against a background of cuts.

When the Coalition Government came to power they planned to cut government departmental budgets by 25% by 2014-15. The six key departments are: Education; Business, Innovation & Skills; Communities & Local Government; Justice; Home Office and Energy and Climate Change.

The budgets that have been ringfenced are for the frontline of the NHS, overseas aid and some education spending. On Saturday it was leaked that the Defence budget would only suffer a 7% cut which is a large reduction from the Treasury’s original forecast of a 20% cut.

Last weekend the think tank Policy Exchange wrote a report entitled ‘Controlling Public Spending- How to cut 25%’ which makes interesting reading 

The major conclusion that I took from this report was that the cuts could be a lot higher than 25% “To maintain the ringfences to health, international development along with the lower targets of cuts to defence and education it will mean that some departments may need a cut of at least 33%”

To read more on the Spending Review click here  and look on ConHome for opinion and commentary on this.