Whitehall prepares for a squeeze on running costs

30 Nov 06
Chancellor Gordon Brown is poised to announce cuts to the administrative budgets for all Whitehall departments in his Pre-Budget Report on December 6, Public Finance has been told.

01 December 2006

Chancellor Gordon Brown is poised to announce cuts to the administrative budgets for all Whitehall departments in his Pre-Budget Report on December 6, Public Finance has been told.

Stephen Timms, chief secretary to the Treasury, revealed in an interview with PF that every ministry will have to slash running costs over the 2008–2011 spending period.

He said the move was essential to protect the programme of investment in key public services in the 'tightly constrained fiscal environment' of the next few years. It heralds the start of a concerted funding squeeze that will be entrenched in next year's Comprehensive Spending Review.

'There will be value for money targets as part of the Spending Review. There will be targets for reduced spending on administration, for example, which we will be expecting departments to deliver,' he said.

'I think the chancellor will want to say more about that at the Pre-Budget Report.'

The Treasury has pencilled in real-terms public spending growth of just 1.9% per year, compared with growth currently running at 3.4% annually for 2005/2008.

Brown presaged that slowdown in his April Budget, when he announced that four Whitehall departments would have their running budgets cut by 5% in real terms each year between 2008 and 2011.

The ministries in the firing line were the Cabinet Office, the Department for Work and Pensions, Revenue and Customs, and the Treasury.

Timms would not be drawn on the size of the cuts other departments would have to make, but it is likely they will be under similar constraints.

Looking ahead to next year's CSR, the chief secretary said ministries will have to co-operate more closely through revamped Public Service Agreements.

PSAs are agreed between departments and the Treasury at the time of each Spending Review, and stipulate the outcomes they are to achieve in return for their allocations.

'There will be fewer PSAs, and a much greater proportion of them will be cross-departmental than in the past. I think that's a recognition that achieving the improvements we need in outcomes, in a more tightly constrained fiscal environment, is going to require better co-operation,' Timms told PF.

Meanwhile, the chancellor will use next week's PBR to laud the government's progress against its Gershon efficiency programme targets, which demand £21.5bn in annual savings by 2008 and the cutting of 84,000 civil service posts. The latest figures will reveal the state of play as of September this year – the Gershon programme's halfway milestone <

PFdec2006

Did you enjoy this article?

AddToAny

Top