“That’s over £11bn from greater efficiencies, £5bn from scaling back or cutting lower priorities, and over £4bn from reducing the cost of public sector pay and pensions. In total, over £20bn worth of savings to reduce borrowing and protect front-line services – even before the spending review.”
Alistair Darling MP, chancellor of the exchequer, budget speech, 25 March 2010
Cathy Newman checks it out
Paying off a mere £20bn of that massive £167bn deficit sounds like peanuts. But it’s a start. Just how much of a start is it though?
Government departments announced yesterday how they’d make £11bn of those £20bn savings from next year. But within hours of the budget statement, FactCheck had begun to wonder just how real these “savings” were.
Today, we’ve got a fuller picture. And what started out as peanuts now looks even smaller (more like pine nuts perhaps). Here’s what we’ve found out:
Over to the team for the analysis
Of the £11bn, it looks like less than half will actually go towards reducing the deficit.
That’s because more than half the savings are made in protected areas – like schools and hospitals. Savings in these areas will be ploughed back into the department.
Typical of the smoke and mirrors is the Department for Children, Schools and Families.
There, the entire £1.1bn of cuts is being ploughed back into the department, so it’s not a cut at all, and none of that money will help pay off the deficit.
A DCSF official told FactCheck: “It’s a saving on what would have had to be spent.”
The Institute for Fiscal Studies reckons £5.5bn – half of the £11bn – comes from protected areas.
The Liberal Democrats say it’s £6bn. The Tories say as much as £7bn,
Why so much higher than the IFS’s £5.5bn? We queried it with the Tories, who pointed to extra money from DFID. The IFS erred on the side of caution, and ignored the fact that overseas aid – which makes up the bulk of DFID’s budget – is protected.
But DFID’s only pencilled in for £150mn of efficiency savings – could the Conservatives have got the decimal point in the wrong place? FactCheck reckons the true figure they’re looking for is more like £5.7bn.
Add to all this the fact that the government’s track record on delivering efficiency savings is not good.
The government claimed the Gershon review had resulted in £26.5bn of savings.
But parliament’s spending watchdog, the National Audit Office, cast serious doubt on the figures halfway through the process. In 2007, it found three quarters of the savings were questionable. A quarter of the savings either did not “yet demonstrate efficiency or the reported gains may be substantially incorrect”.
A spokesman for the Treasury told FactCheck that “the spending review establishes, precisely, allocations for reinvestment and for deficit reductions”. So that means not all of the money goes to paying off the deficit.
We won’t know until the next spending review how much money the government has actually saved from the new measures.
Cathy Newman’s verdict
Alistair Darling tried to give the impression yesterday he had a plan to tackle the deficit. But if he has a plan, we haven’t seen it yet.
£5.5bn cuts out of £167bn is pretty puny. The reality is that whoever wins the election is going to have to make real cuts not just to Whitehall waste, but public services too. No political party is going to be honest about that until after polling day, though.
So what we’re left with is the kind of sleight of hand that the chancellor treated us to yesterday. His promise on using savings to pay off the deficit wasn’t quite a work of fiction, because he acknowledged some of it would be ploughed back into “frontline services”.
But he did his best to conceal from the electorate the harsh facts about the full extent of the spending cuts.