Browns Budget to save public services

18 Apr 02
Public services are to receive an extra £4bn in 2003/04, with over half allocated to the health service, Chancellor Gordon Brown announced in this week's Budget.

19 April 2002

As was widely trailed, the NHS was the big winner, with an immediate allocation of £2.4bn and a pledge of an annual 7.4% real-terms increase up to 2007/08. The rise will be funded from a 1% increase in National Insurance Contributions from April next year.

Personal social services, often the poor relation to health, will receive £400m, plus a 6% real-terms increase over the next three years.

In the run-up to this summer's Spending Review, Brown outlined 'the envelope' for public spending until 2006. He proposed to increase funding by 2.5% from 2004 to 2006, excluding health. This will increase public spending from £390bn in 2002 to £471bn in 2005/06.

He also announced an increase in public sector investment - this includes the Private Finance Initiative - which will rise from £23bn in 1998 to £41bn by next year.

Schools were also beneficiaries, with an additional £100m from the Capital Modernisation Fund granted directly to head teachers. This gives an extra £2,500 to a primary school and £7,100 to a secondary.

After a sustained campaign by Home Secretary David Blunkett, the Home Office is to receive an extra £110m from reserves for anti-terrorism initiatives and street crime.

But as Brown outlined increases for the public services, he also set conditions: to match extra cash with improvements and to set 'responsible levels' of public sector pay. He also indicated that the government would switch its attention from health back to education come the summer. 'In the coming Spending Review, education will receive the priority it requires to deliver further substantial improvements, not just in our schools but also in our universities and colleges,' he told the Commons on April 17.

Brown's pledge was given a lukewarm response by teaching unions, who appeared to reserve judgement until the cash figures are announced. 'If the Spending Review does not come up trumps on matters such as workload and performance-related pay, then all hell will break loose,' warned David Hart, general secretary of the National Association of Head Teachers.

Doug McAvoy, general secretary of the National Union of Teachers, added: 'The question remains as to whether the additional expenditure will be sufficient to provide the support to ease teachers' workload.'

Predictably not all were happy with the National Insurance rise. The Conservatives on the Local Government Association warned that it could affect council services. 'Increasing employer contributions for National Insurance will have a serious impact on local authorities' budgets, especially given the ongoing wage negotiations with crucial public workers,' said Gordon Keymer, leader of the Conservative group.

'Coming at a time when councils are already financially stretched, this could have a profound impact on their ability to deliver key public services.'

Generally unions welcomed the pledge on extra spending and National Insurance, with Unison hailing it as the 'kiss of life' for the NHS. 'We are delighted that the government has recognised that you don't get world-class public services on the cheap,' said general secretary Dave Prentis.

The T&G said it was a Budget for 'health and home'. General secretary Bill Morris said: 'Much has been done by the Labour government, but much remains to be done. This Budget is another step forward.'

The Institute for Public Policy Research said it marked an 'important turning point in progressive politics'.

Matthew Taylor, Liberal Democrat Treasury spokesman, told Public Finance that the Budget went part of the way in meeting his party's demands on reinvigorating the health service.

But he said the new cash must be targeted at pay in the NHS, especially for those working in the Southeast who find it difficult to meet the local cost of living. 'This will need to be tackled and tackled very quickly or we will have severe staff shortages,' he said.


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