Spending cuts: where the £6bn axe will fall
Updated on 24 May 2010
They're calling it "wasteful spending", but will the £6.2bn axed from budgets really all fit under that heading?
The first thing to say is that not all of the £6,243,000,000 will be used to pay down Britain's £156bn deficit. Around £500m of the savings are being re-allocated towards further education, training, housing, jobs and small businesses.
Certain areas are being protected. The government had already announced that any savings in health, defence and international development would be ploughed back into their front-line services. Today the Chancellor added schools, Sure Start centres and education for 16-19-year-olds to the protected species.
And not all of the savings will be delivered in the current financial year - the devolved administrations in Scotland, Wales and Northern Ireland will have the option of delaying some or all of their £704m share of the cuts until the next financial year.
At a glance: main spending cuts
- £1.15bn to go in "discretionary" spending areas across Whitehall
- £1.7bn saved by stopping projects undertaken by the last government
- £836m to be cut from the government's business department
- £120m savings from a recruitment freeze in the civil service
- £600m cut from quangos
- £320m cut from the Child Trust Fund
But the Treasury is clearly pleased with the fact that - within a fortnight of the coalition being formed - it's managed to come up with such a significant set of figures.
So where will the axe fall?
Child funds
The most high-profile of the cuts was the axing of Child Trust Funds. From 1 August this year payments at birth for the children of lower-income families will be reduced from £500 to £100. The better-off, who currently receive £250 at birth, will have this cut to £50. And £250 payments for everyone at the age of seven will be stopped. And the scheme will disappear entirely from 1 January 2011.
The sole exception will be the additional payments for disabled children, which will be paid as normal under the scheme this year, with an equivalent amount of cash being redirected to provide respite care from 2011-12.
Two of the other largest single areas of cuts will affect local government and the civil service.
How easy is it to make efficiency savings?
Gary Gibbon blogs on the death the of the Child Trust Fund. What else could have been cut instead?
Civil service
Councils face a cut of £1,165,000,000 in government grants.
The Chancellor says he'll help protect frontline services by removing the ring-fencing from £1.7bn of grants, giving the councils greater freedom in deciding how and where to make the cuts. But, given that past governments have ring-fenced the grants to ensure that potentially-unpopular services - such as catering for asylum-seekers - continue to be provided, the removal of that ring-fencing could make the impact of the cuts greater in some areas.
There are a range of cuts facing Whitehall - both Ministers and officials.
At least £120m will be saved by a freeze on civil service recruitment for the remainder of the financial year - with exceptions only for key frontline posts (authorised by relevant chief executives), business-critical appointments (approved by the department's secretary of state) and graduate fast-stream arrangements already underway. Civil service pay settlements will now need the approval of the Chief Secretary to the Treasury, David Laws, who is unlikely to be generous.
Faisal Islam reports from Sheffield
At the Treasury this morning, it had the faint air of a Richard Curtis film: Four Funerals and a Wedding, you might say. The reality as the Chief Secretary to the Treasury suggested in an answer to me is that this is just a start even to the week’s cuts.
To get a feel for what these cuts actually smell like, I jumped on a train to Sheffield. Deputy PM Nick Clegg is an MP here.
"Kind cuts" look different on the ground to how they look on a Treasury spreadsheet. In Sheffield there are very real worries about a raft of central government, council and regional development authority spending.
A £200m schools building projects, a massive £650m public-private roads refurbishment (in a city which saw its roads budget raided to pay for the student games) and then there’s Sheffield Forgemasters.
This giant facility scored an £80m loan from the Labour government. The plan – to become a world leader in forging giant steel reactor cores only currently manufactured in Japan. It is high tech, world beating engineering, four-fifths of which will be exported.
That loan is now under review, but Peter Birtles, a director of the company is confident that the value-for-money of this state support is self-evident.
All around Sheffield you see the very real difference public sector regeneration cash has made. With regeneration funding slashed, transport funding cut, and the DCMS quite a loser too, that model of growth is now gone for good.
Travel perks
Ministers, who've already had to agree to a five per cent pay cut, will now lose their right to a dedicated car or driver from the government car service.
"Ministers will be expected to walk or take public transport where possible, or use a pooled car," said Mr Laws. "The pooling of cars will allow big savings to be made."
Similarly, the Treasury is expecting big savings to be made from a restriction on the use of first class travel by all public servants - with a potential cut in grants to any public body using its scarce resources in such a way.
Travel cost savings will contribute to a total £1,150,000,00 cut from "discretionary" areas, which also includes consultancies.
Another £1.7bn will come from delaying and stopping contracts and projects. There will be "immediate negotiations" to achieve cost reductions from the government's major suppliers and there will be a re-examination of all spending approvals made by the previous government since the beginning of 2010 to ensure they meet the new administration's definition of "good value for money".
Quango savings
Among the other savings: £95m on IT projects, £170m on property costs, £600m on quangos and £520m on "other low-value spend", including ending the further rollout of temporary jobs through the Labour government's Young Person's Guarantee, and removing recruitment subsidies from Labour's "six-month offer".
There will be a £270m cut in "lower-value" spending via the Regional Development Agencies, £80mn from closing BECTA - the British Educational Communications and Technology Agency - and £27m will be cut from the budget of the Olympic Delivery Agency.
In terms of the government departments, Vince Cable's Department for Business takes the biggest single hit - £836m. But his Liberal Democrat colleague David Laws was quick to point out that £200m of that will be ploughed back into the department, with £150m set aside to fund 50,000 new apprenticeships in small and medium enterprises and £50m extra to be spent on improvements to further education colleges.
Another £170m has been found to ensure the delivery of 4,000 more social rented houses, protecting 3,500 jobs.
