Chancellor unveils £6.25bn in spending cuts

Today the Chancellor of the Exchequer George Osborne and Chief Secretary to the Treasury, David Laws announced The details of £6.2 billion of savings from Government spending in 2010-11 to tackle the unprecedented £156 billion deficit, while protecting the quality of key frontline services

Schools, Sure Start and spending on education for 16-19 year-olds will be protected from these in-year cuts.£500 million out of the £6.2 billion will be used to improve Britain’s growth potential and create a fairer society, by reinvesting in further education, apprenticeships and social housing.The foundation of an Efficiency and Reform group chaired by the Chief Secretary David Laws and Cabinet Office Minister Francis Maude to oversee the implementation of many of the savings announced today.

The details were agreed in discussion with Secretaries of State over the last week, following advice from Treasury and the Bank of England that savings on this scale are feasible and advisable.

Savings will be taken out of budgets, without affecting the quality of key frontline services, as set out in the coalition agreement. In addition to £6.2bn of savings in non-protected departments, savings in health, defence and international aid will be reinvested in front line services in those departments.

The savings will come from the areas set out a week ago:

Outside of Local Government and the Devolved Administrations, the savings are allocated across different areas as follows:

- £1.15bn in discretionary areas like consultancy and travel costs

- £95m through savings in IT spending

- £1.7bn from delaying and stopping contracts and projects, including immediate negotiations to achieve cost reductions from the major suppliers to government

- £170m from reductions in property costs

- at least £120m from a recruitment freeze across the civil service for the rest of
2010-11

- £600m from cutting the cost of quangos

- £520m by reducing other lower value spend.

In addition, £1.165 bn of savings will be made in Local Government by reducing grants to Local Authorites to reflect their contribution to the £6.2bn. The Government will also remove the ringfences around over £1.7bn of grants to local authorities in 2010-11, to give them greater flexibility to re-shape their budgets and find savings in the areas set out above, while maintaining the quality of services to their customers

As announced a week ago, the Devolved Administrations will have the option of making savings this year or deferring their share of the savings, which totals £704m, until the next financial year.
As well as savings from waste and efficiency, including £10m from cracking down on first class travel and £5m from restricting ministerial entitlement to a dedicated car and driver, specific low value programs included in the above list include:

- £320m from reducing and then stopping government contributions to the Child Trust Fund. The Government intends to introduce legislation to scale back payments from August this year and then stop payments from 1 Jan 2011. Payments to disabled children due this year will be made, and the Government will ensure that the funding allocated for these payments in future years will be redirected to other forms of support for disabled children.

- £150m from savings in the last Government’s housing pledge, while seeking to protect social housing.

- £320m from ending ineffective elements of employment programmes, including ending further rollout of temporary jobs through the Young Person’s Guarantee (the ‘Future Jobs Fund’) and removing recruitment subsidies from the ‘Six-Month Offer’

- £270m from ending lower value RDA spending

- £80m from closing the British Educational Communications and Technology Agency (BECTA) and other savings in Department for Education quangos.

In addition to these savings, and as announced last Monday, the Chief Secretary to the Treasury and Secretaries of State across Whitehall are currently undertaking a re-examination of all spending approvals made since the 1st January 2010, to ensure that they are consistent with the Government’s priorities of good value for money

1 - Protecting schools, Sure Start and 16-19 year olds from in year savings

The Government is also announcing today that schools, Sure Start and spending on16-19 year-olds will be protected from any in-year spending cuts.

Efficiency savings made within schools, Sure Start and 16-19 education will be recycled within their respective budgets. The Department for Education will still make savings of £670m from reducing waste and quango costs elsewhere in its budget.

2- Investing in Britain’s growth potential

As set out in the coalition agreement, the great majority of £6.2billion savings will be used to reduce the deficit. A total of £500m out of the £6.2bn of savings will be used to invest in improving Britain’s growth potential and building a fairer society:

- £50m of Government investment in Further Education colleges, which they will be able to leverage up to create a £150m fund to provide capital investment to those colleges most in need.

- £150m to fund 50,000 new apprenticeship places, focused on small and medium enterprises

- £170m to safeguard delivery of around 4,000 otherwise unfunded social rented homes to start on site this year, protecting 3,500 jobs and prioritising provision for the most vulnerable.

- £50 million for action to tackle backdated business rates bills, including a freeze on payments for 2010-11

In addition, Barnett consequentials will be paid at the same time as Devolved Administrations make their contribution to the £6.2bn, making a total of £500m.

3- Efficiency and Reform Group - delivering the savings

The savings will be driven by the new Efficiency and Reform Group, whose board will be chaired jointly by the Chief Secretary to the Treasury, David Laws, and the Minister for the Cabinet Office and Paymaster General, Francis Maude. The Group will be formed by pulling together existing capabilities, drawing on expertise of officials from across Whitehall. As well as helping departments to deliver savings, the group will oversee an immediate freeze on non-critical spending on consultancy, advertising, and recruitment of non-frontline civil service staff.

The Efficiency and Reform Group will be comprised of existing civil servants from across Whitehall, and will be located within existing premises, with no additional cost to departmental budgets.