Brown reveals surprise increase in public spending

18 Mar 04
Gordon Brown threw down the gauntlet to the Conservatives this week when he used his Budget statement to promise substantial extra investment in key public services well into the next Parliament.

19 March 2004

Gordon Brown threw down the gauntlet to the Conservatives this week when he used his Budget statement to promise substantial extra investment in key public services well into the next Parliament.

The chancellor, addressing a packed House of Commons on March 17, pledged to boost total government spending from £520bn in 2005/06, the final year of the current Spending Review period, to £579bn by 2007/08.

The increases, which are more modest than those seen in previous spending rounds, are nevertheless higher than many expected and drew immediate plaudits from the public sector unions.

These spending plans take the government through to the other side of the next general election and mark out the battle lines over which the campaign will be fought. They are a clear challenge to the Tories' pledge, made by shadow chancellor Oliver Letwin in February, to cut significantly the proportion of national income that goes on public spending.

In addition to confirming a 7.2% real-terms increase in health spending each year until 2008, Brown also pledged an average 4.4% real-terms rise in education funding for England.

And, in a pointed reference to the Conservatives' plans to freeze spending across many public services, he pledged real-terms increases for transport and defence.

Brown also promised not to freeze spending on the Home Office, housing, local government or services for children and the elderly.

The precise allocations to each department will be unveiled in July's Spending Review and ministers will lobby intensely until then. But, in exchange for his largesse, Brown made clear that he would push through substantial efficiency savings.

All ministries will have to find efficiency savings of 2.5% a year from their budgets between 2005 and 2008, delivering an estimated extra £20bn per year for frontline services by the end of that period. The Department for Education and Skills will slash 31% of its administrative posts by 2008, allowing it to divert more resources to schools.

'The growth rate of both overall spending and departmental spending will be lower in this Spending Review than in the last,' Brown told MPs. 'But, with administrative costs cut and with wider efficiency improvements, we will be able to deliver further substantial increases in resources direct to the front line, to patients, pupils and users.'

Unison general secretary Dave Prentis said it was a 'win-win' Budget for people and the public services. 'It will pay dividends in years to come. Staff morale on the wards and in the classrooms will be lifted by the chancellor's determination to continue that investment,' he added.

GMB general secretary Kevin Curran endorsed Brown's strategy of seeking job cuts and efficiency savings within government. 'He has bravely negotiated cuts in Whitehall departments that will ensure that public service investment reaches communities where it can most help.'

Digby Jones, director general of the CBI, hailed a Budget designed to 'protect economic stability and curb public sector waste'. He added: 'Our message to the government is, “you will need sustained political courage to achieve genuine reform”. Failure is not an option.'

But the Institute for Fiscal Studies sounded a note of caution. Its director, Robert Chote, said: 'Labour will go into the next election offering voters a rising tax burden and slower growth in public spending than we have seen in recent years. Not necessarily what the spin-doctor ordered.'

PFmar2004

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