20 October 2010
Chancellor George Osborne today announced funding cuts of 7.1% for councils over the four years of the Comprehensive Spending Review period.
He said that overall there would be cuts of 19% to government spending, below the 25% expected and, he claimed, below the Labour Party’s suggested scale of cuts.
The reduction in councils’ budgets would be offset by removing ring-fencing from all revenue grants bar education and public health. The Department for Communities and Local Government will also have its social housing budget cut by £1.1bn by 2014/15. To raise revenues, new social housing tenants will be offered intermediate rents at 80% of market rates – double the 40% usually charged. This will allow the building of 150,000 new homes, Osborne claimed.
The chancellor spelt out the public sector job losses, putting the figure at 490,000. He said much of this would be through natural wastage, but added that it would be up to individual employers which jobs will be cut. A further £1.8bn savings would be made through former Labour minister John Hutton’s public sector pension review, which will be published in the spring.
The welfare budget will be the hardest hit. Osborne spelt out £7bn savings, mainly made through further benefit cuts. A new Universal Credit system, which has been championed by Work and Pensions Secretary Ian Duncan Smith to simplify the system, will be brought in over the next two Parliaments, he confirmed. The cuts to child benefits, which will limit the benefits given to high earning families, would save £2.5bn a year but there would be no further changes.
Osborne also detailed savings of £5bn a year to be made from raising the state pension age for both men and women to 66 by 2020 – four years earlier than had been previously announced. The increase in the female retirement age would be speeded up, he said.
Schools spending would not only be protected but would be increased in real-terms from £35bn a year to £39bn a year by 2014/15, the chancellor announced. He also pledged that cash funding per pupil would not fall, while Sure Start would be protected in cash terms. Ring-fenced funding for schools would be removed, he said.
University funding, however, will be cut by 7.1% a year, in line with savings expected from the Department for Business, Skills and Innovation.
Furthermore, the Train to Gain programme will be abolished but extra funding will create 75,000 more apprenticeships by 2014/15.
Health spending in England would increase to £114bn by 2014/15, Osborne said. Social care would be given funding increases of £2bn, he said, £1bn of which is to aid co-operation between the Department of Health and local authorities.
The Treasury will be required to make 33% cuts by 2014/15, and parts of the Cabinet Office will be moved to the Treasury building.
