Osborne sets out another £3bn in Whitehall savings

4 Jun 15

George Osborne has announced that Whitehall departments will make an additional £3bn in spending cuts this year, but the local government finance settlement will not be reopened.

Speaking in the House of Commons today, the chancellor announced that departments had responded to calls for additional savings by putting forward plans for in-year cuts as part of the government’s deficit reduction plans. He also announced that the government would sell off its remaining stake in Royal Mail to raise around £1.5bn, meaning that a total of £4.5bn will be realised for the government's deficit reduction effort.

Among the funding reductions identified ahead of the Budget statement on July 8 was a £500m saving by the Ministry of Defence and £450m from the Department for Business, Innovation and Skills and £450m from the Department for Education’s non-school spending.

A spokesman for the Department for Communities and Local Government told Public Finance that the local government settlement ‘will not be reopened this year’.

However, it has been announced that the £200m of savings from the Department of Health, which is to be found from non-NHS spending, will come from public health budgets that are devolved to local authorities. A spokesman for the DoH said a consultation will now be held with them to decide the best way of delivering the savings that need to be made.

Announcing the savings, Osborne said the government was ‘making an early start’ on reducing the deficit, as part of Conservative plans to run a surplus by 2018/19 by identifying the underspends and efficiencies. Total borrowing is forecast to stand at £90.2bn in 2015/16 by the Office for Budget Responsibility.

Osborne said that the government was ‘getting on with what we promised’, and unprotected departments have found savings amounting to 3% of departmental spending this year.

He added: ‘Reducing the deficit – that is how you deliver lasting economic security for working people.

‘For as everyone knows, when it comes to living within your means, the sooner you start the smoother the ride.’

Responding to the announcement, Labour’s Shadow Chancellor Chris Leslie said that spending did need to fall in unprotected areas of public spending, but accused Osborne of ‘hiding the detail’.

He added: ‘George Osborne needs to  spell out urgently who is paying the price in this chaotic process. This is a shambolic approach to planning public services, ripping up his own ‘long-term plan’ set out just weeks ago in the March Budget. Savings need to be made through proper reform not short-term salami slicing.’

The Local Government Association said the fact the local government settlement had not been re-opened was good news.

However, he added that the £200m reduction to public health funding would gut councils’ ability to improve the public’s health and wellbeing and reduce demand for hospital, health and social care services.

‘Councils have finalised budgets and planned spending for the next 12 months. Local authorities can’t be handed further in-year reductions and be expected to be able to protect the services upon which people rely,’ he added.

‘Councils have worked hard over the past five years to shield residents from the spending reductions in government funding but the same efficiencies cannot be remade.’

The full list of savings indentified is:

DepartmentSavings (£m)
Education (non-schools)450
Department of Health non NHS200
Transport including King’s Cross property545
CLG Communities230
Business, Innovation and Skills450
Home Office30
Foreign and Commonwealth Office20
Energy and Climate Change70
Environment, Food and Rural Affairs83
Culture, Media and Sport30
Work and Pensions105
HM Revenue and Customs80
HM Treasury7
Cabinet Office17


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