George Osborne has reached a provisional deal with four departments on the level of cuts they are to set to make at the government-wide Spending Review.
In a speech on Monday, the chancellor confirmed that the Department for Transport, the Department for Environment, Food and Rural Affairs, and the Department for Communities and Local Government have agreed to reduce their spending by 8% a year for the next four years, as the government seeks £20bn in annual savings by 2019-20. The Treasury has also agreed a plan to cut its own running costs.
“These savings will be achieved by a combination of further efficiencies in departments, closing low value programmes, and focusing on our priorities as a country,” Osborne said.
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Chief secretary to the Treasury Greg Hands will hold talks with ministers yet to settle this week, ahead of the final Spending Review announcement on November 25. Home secretary Theresa May, work and pensions secretary Iain Duncan Smith and foreign secretary Philip Hammond are reported to be continuing to push back against the Treasury’s demands.
Departments were ordered to model cuts to their resource budgets of both 25% and 40% by 2019-20. Spending on health, schools, defence and overseas aid has been protected by the Treasury, but that ring fence puts additional pressure on unprotected areas of government spending.
Paul Johnson, director of the Institute for Fiscal Studies think tank, told the Today progamme on Monday that the scale of spending cuts already achieved by the Ministry of Justice and the Home Office meant fresh settlements with those departments would likely be the most difficult to achieve.
"If they are to get something like 25% cuts on top, over the next four years, that's going to be a halving of their budgets between 2010 and 2020," he said. "That's going to be very tough on prisons and police, and other bits of the Home Office and Ministry of Justice budgets."
"Unacceptable"
Meanwhile, Osborne has hinted that the Spending Review will include further tough measures on public sector pay and terms.
The chancellor confirmed in July that staff across the public sector – including civil servants – would continue to have any payrises they do receive capped at 1% until at least the end of the current parliament. The Treasury has also announced measures to end exit payouts of more than £95,000 – a move which unions have warned could hit long-serving staff on relatively modest incomes.
Responding to a Daily Mail investigation on the number of public sector staff currently earning six-figure salaries, the chancellor said: “I intend to issue new guidance sending a clear signal to public sector employers on pay and terms – setting out what I, and I suspect most taxpayers, see as unacceptable.
“What this shows is the scope that remains for savings at a time when budgets need to be trimmed. We’re determined to do all we can to rein in excess where we find it.”
At the latest Budget, the Treasury said ministers would use the Spending Review process to “examine pay reforms and modernise the terms and conditions of public sector workers”.
That would, the Budget document promised, involve “a renewed focus on reforming progression pay, and considering legislation where necessary to achieve the government’s objectives”.
It was reported by The Telegraph this weekend that Osborne is also seeking to curb automatic progression payrises – which have already been scrapped across much of central government – in the Armed Forces.