Budget sets out 2015-17 cuts

Departmental expenditure limits (DEL) will need to fall by 3.8 per cent per year in the first two years of the next Parliament – even more than the current annual cuts of 2.3 per cent – unless there are deeper cuts to annual managed expenditure (AME) budgets, chancellor George Osborne said in his Budget last week.

By Joshua.Chambers

28 Mar 2012

Osborne laid the groundwork for those AME cuts to fall on welfare, saying: “If nothing is done to curb welfare bills further, then the full weight of the spending restraint will fall on departmental budgets. The next Spending Review will have to confront this.”

The Budget sets out new figures for the necessary reductions in DEL in the first two years of the next Parliament without further AME cuts. In 2015-16, DEL would fall from £327bn to £321bn, and in 2016-17 to £317.7bn.

The Budget also set out plans to allow regional pay variation in the public sector. Osborne said that “some departments will have the option of moving to more local pay for those civil servants whose pay freezes end this year.”

While departments have been given permission to examine regional pay variation, none of them have yet confirmed that they will do so.
Meanwhile, the Budget contained measures to allow £150m of ‘tax increment financing’ for local authorities, enabling councils – under Treasury supervision – to borrow to invest in infrastructure on the basis that consequent economic growth will increase their tax take.

The chancellor also promised that HMRC will in future send taxpayers letters showing exactly how their money is spent.

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