24 March 2006
Gordon Brown gave an unambiguous signal that the days of plenty are over for the public sector as he used his Budget statement to announce that four Whitehall departments would have their expenditure cut in the next spending round.
The chancellor, addressing a packed House of Commons on March 22, set the tone for next year's Comprehensive Spending Review when he declared that the affected ministries' budgets would be cut by 5% per year in real terms in 2008/09, 2009/10 and 2010/11, using 2007/08 budgets as the baseline.
The Department for Work and Pensions, Revenue & Customs, the Cabinet Office and the Treasury will have their funding reduced in cash terms by 2.25% a year, which Brown said would release £1.8bn over that period.
The yearly budgets for the departments were not available as Public Finance went to press.
Brown told MPs that the departments had agreed to undertake 'necessary modernisation', which would be paid for from a fund worth more than £800m.
The chancellor also told MPs that Home Secretary Charles Clarke had agreed to a funding freeze. 'The home secretary has agreed that he can invest more in priorities like policing and security, while making savings in other areas within a three-year budget at its 2007/08 real terms level.'
Brown's announcement provoked immediate fears that the fund would be used to pay for more redundancies among civil servants.
Mark Serwotka, general secretary of Whitehall's Public and Commercial Services union, told PF that the cuts would damage services and hamper the drive to implement policies the chancellor lauded elsewhere in his speech.
'It's bad news for key areas of public service delivery. Getting people back into work, delivering tax credits, these are going to be affected,' he said. 'The government is giving the message that they are going to save money, regardless of the consequences. The axe has just got blunter.'
Jonathan Baume, general secretary of mandarins' union the FDA, said Brown's announcement 'made a mockery' of the 2007 CSR process. He said he was seeking urgent talks with the departments to establish what it would mean for staff.
He also attacked Brown's declaration that public sector pay settlements would average no more than 2.25%. 'Restricting public sector pay will do nothing to ensure that organisations can recruit and retain the best managers, without whom the government's reform programme could be undermined.'
Brown used his Budget statement to crow about the government's progress against the Gershon agenda, saying that £6.4bn of the £21.5bn annual savings target had been achieved, and 40,000 civil service posts had been scrapped.
He also published proposals, as pledged in his Pre-Budget Report last December, to make the Office for National Statistics independent.
Professor David Rhind, chair of ONS watchdog the Statistics Commission, reserved judgement on the plans. 'The responsibilities, accountability and constitution of the proposed governing board will be crucial,' he said.
PFmar2006
