Osborne announces 25% real-terms cuts to Whitehall departments

22 Jun 10
Whitehall departments are set to have their budgets slashed by an average of 25% in real terms over the current Parliament, the chancellor has announced
By David Williams

22 June 2010

Whitehall departments are set to have their budgets slashed by an average of 25% in real terms over the current Parliament, the chancellor has announced.

Presenting what he termed ‘the unavoidable Budget’ to the Commons this afternoon, George Osborne set out plans to eradicate the structural deficit.

Departmental spending, already set to fall by £44bn a year – or 20% – by 2014/15 under plans established by the previous Labour government, will now be reduced by an additional £17bn, or an average of 25%.

Osborne repeated his commitment to real-terms increases in the NHS budget, and to ring-fence spending on international development, and added that some departments would be hit less than others.

‘I recognise, for example, the particular pressures on our education system and on defence,’ he said.

Final settlements will be set out in the coming Comprehensive Spending Review, which Osborne confirmed would be published on October 20.

On top of drastic departmental spending cuts, Osborne also promised to reduce the UK’s welfare bill, which he said had risen by 45% in real terms over the past decade and was ‘one reason why there is no money left’.

With the exception of the state pension and pension credit, benefits will now rise in line with the consumer price index – 3.4% in April – rather than the retail price index, which was calculated at 5.1%.

Child tax credits will be more tightly focused on the poorest families, with less for those earning over £40,000. Child benefit is to be frozen for three years, but will remain universal and not be means-tested.

There will also be a new medical assessment for those claiming Disability Living Allowance, and maximum limits for housing benefit claims, from £280 a week for one-bedroom properties to £400 a week for a four-bedroom or larger home.

The chancellor announced a two-year public sector salary freeze, and revealed that no public sector boss would be paid more than 20 times the salary of the lowest-paid worker. Osborne also promised a flat-rate pay increase for the 1.7 million workers on less than £21,000 a year, which he said would benefit 28% of the least well-off workers.

However, there were no announcements on public sector pensions, which will be subject to a review to be carried out by former Labour work and pensions secretary John Hutton.

Capital spending will not be cut, the chancellor said. He added, however, that projects that contribute significantly to economic growth would be prioritised.

Osborne called the Budget ‘progressive’ and said: ‘This emergency Budget deals decisively with our country’s record debts. It pays for the past and plans for the future. Yes it’s tough, but it’s also fair.’

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