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PREVIEW: Autumn Statement and Spending Review 2015

PREVIEW: Autumn Statement and Spending Review 2015

🕔23.Nov 2015

The Chancellor’s Autumn Statement has evolved in recent years from a rather dull but worthy assessment of future Government spending plans to high political theatre second in importance only to the Budget, writes Paul Dale.

When George Osborne stands up in the House of Commons to address MPs, the man regarded as the most political Chancellor of the Exchequer in a generation is unlikely to disappoint his fan club, and will certainly infuriate his opponents as he continues with his theme of austerity in order to repair the public finances.

On the Chancellor’s packed agenda this year is: the Government’s latest proposals for reforming tax credits after the House of Lords rejected his original plan; the future of the National Living Wage; the latest on the roll out of English devolution deals; a radical plan to convert empty prisons into new homes; defence spending in an increasingly dangerous world, and of course the old favourites of fuel duty, pension tax relief and tax avoidance.

The Spending Review, which will coincide with the Autumn Statement, is expected to set out the inevitable tidal wave of cuts across all unprotected departments.

All cabinet ministers have finally reached agreement with the Chancellor about a cuts package worth between six and eight per cent a year including Home Secretary Theresa May and Work and Pensions Secretary Iain Duncan Smith. Both were thought to be holding out for a better deal.

Even Mr Osborne may struggle to convince Conservative MPs that police forces in England and Wales should not have special protection against cuts, but the Chancellor appears determined to press ahead and will say he has to make tough and unpopular decisions in order to reduce the national debt.

Trumpeting investment will be Mr Osborne’s main distraction technique. He will emphasise recent devolution deals like the West Midlands metro mayor agreement, which will trigger a £1.2 billion Government investment in transport and economic development.

But opponents will focus on the continued impact of the cuts, and probably David Cameron’s naivety in this area, which opponents say was displayed in a recent letter to a councillor in his constituency in which the prime minister complained about the impact council cuts were having on local services.

Shrewd political operator that he is, the Chancellor will certainly endeavour to manipulate the coverage, but with critics lining up to continue the tax credits row and departments creaking under cuts, even he may struggle to keep the Government’s message on track.

Featured below are a few of the spending areas and what we anticipate, but if you would like a full version of the RJF Public Affairs Briefing Paper on the Autumn Statement and Spending Review, please email kevin.johnson@rjfpa.com before 10.00am tomorrow (Tuesday 24th) and a free copy will be emailed to you.

Transport

The DfT have reached a provisional agreement with the Treasury of cuts of around 30 percent over the next four years. Capital spending is protected however, so large investments on roads and rail will likely go ahead as planned. However, with the rail industry awaiting reports on the future of Network Rail, some uncertainty still remains over future infrastructure spending.

Arts and Culture

The budget for culture, media and sport is often seen as an easy target for cuts, with rumours of the abolition of DCMS rearing their heads from time to time. Despite this, Secretary of State John Whittingdale recently confirmed that the Spending Review would not lead to the abolition of his department. Cuts to grants for the arts are likely, with lottery money potentially making up the shortfall.

Communities and Local Government

Communities Secretary Greg Clark was one of the first to reach an agreement with Osborne on departmental cuts, which will see a 30 per cent reduction in the departmental spending. Clark recently stood by the agreement reached stating “it is right to lead from the front and to make significant savings in the running costs of my department before I invite local councils to do the same.”

Local Government Minister Marcus Jones has confirmed the Government is taking into account business rates on empty properties as part of their wider review “which will be updated at the Spending Review and the Autumn Statement.”

In the Budget, Osborne set local authorities a deadline to submit proposals to both the Department for Communities and Local Government and HM Treasury on what powers they sought, and how they would use them, with the aim of announcing the agreed deals in the Spending Review. Since the Budget there have been a number of devolution deals announced, including an agreement with the West Midlands Combined Authority. It is expected that multi-year settlements is to be agreed at the Spending Review.

Health

The latest round of cuts will see £200 million disappear from this year’s public health budget, which is 6.2 per cent of current spending. Over the next four years, this would equate to a cut of £800 million with impact across services including obesity, smoking, drug and alcohol misuse, and sexual health, among others.

While NHS funding has been ring-fenced and an additional £8 billion of funding secured, it has been widely commented that cuts across public health will lead to increased demand for NHS services as public health services aim to be preventative, so save the NHS money over time. The Faculty of Public Health estimated that this year’s cut alone will cost the NHS an extra £1 billion.

While ministers pledged to invest £8 billion to meet growing demand by 2020, a survey has reported that 100 per cent of finance directors polled at hospitals expect to end the year in deficit, up from 77 per cent four months ago.

Any comment on investment in the NHS alongside funding to address rising bills in social care will be keenly watched. As with much in health, the devil will be in the detail. No promise of funding or reform for the social care system has been made yet though the majority of NHS leaders have recently said they want a five-year financial commitment from the Government on both health and social care in the review.

Education and Skills

The Government has pledged that the schools budget and spending per pupil would be protected, however this leaves early years and post-16 funding vulnerable to the substantial cuts that are expected to be made to the Department for Education. It was deduced from announcements in June that the department would have to find £450 million of cuts to the non-schools budget.

Despite existing opposition to the VAT status of sixth form colleges, it appears that DfE cuts are likely to disproportionately affect sixth-form colleges. It is thought cuts announced in the Spending Review could result in the closure of as many as four in ten sixth-form and further education. It is widely expected that further education colleges will be hit hard.

Further details on the apprenticeship levy are expected to be announced in the Spending Review. There has been widespread interest in the details of the levy across a wide variety of industries. However the construction sector has been particularly vocal in warning against a ‘one size fits all’ approach given that levy payments from construction firms could end up subsidising other sectors.

The permanent secretary at the Department for Business, Innovation and Skills vowed that progress on gender diversity at BIS would not go into reverse as the department prepares for the next round of spending cuts. Martin Donnelly told Civil Service World that “scrapping the department would be a step backwards” but did confirm more cuts to BIS would be likely.

It is understood the Government has drawn up plans to replace up to £600 million of annual research grants to industry with loans, a move condemned by many business leaders. In one of his first speeches as science minister Jo Johnson said that while he remained committed to the principle of the dual-funding support system he wanted to see a “simpler system” for allocating resources.

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