Departments told to find new efficiencies AND work up growth proposals

Chief Treasury secretary insists spending review allocations will not be revised despite financial crisis
Photo: fancycrave1 via Pixabay

By Jim Dunton

29 Sep 2022

Departments are today being asked to find new “efficiencies” and set out how they will contribute to the growth drive at the heart of chancellor Kwasi Kwarteng’s mini-budget, which has plunged the UK’s global financial standing into turmoil.

Chief Treasury secretary Chris Philp has confirmed he is asking secretaries of state and their perm secs to come up with additional savings plans that will allow them to deliver services on existing budgets. The budgets were set when inflation was expected to peak at 3% rather than the current level of 10%, and well before last week’s £45bn package of tax cuts – and the hike in the cost of government borrowing it prompted.

Speaking on ITV’s Peston show last night, Philp insisted that extra savings would have to be found. He also said departments would still be asked to set out how they proposed to assist with the realisation of a 2.5% annual growth target for GDP set in Kwarteng’s Growth Plan.

“We’re going to stick to CSR21 – that’s the Comprehensive Spending Review 2021, which set out three-year spending plans – for the financial year we’re currently in, and the next two,” Philp said.

“We are going to stick to those targets; we’re going to look for efficiencies wherever we can find them.”

The minister refused to be drawn on where he thought savings could be made, and whether more civil service headcount reductions would be required. Departments have already been tasked with modelling cuts adding up to 91,000 civil service roles over the next three years. However, progress with that mission has been impacted by Boris Johnson’s removal from office over the summer.

Philp said new efficiency plans would be set out at an unspecified future date and that sticking to CSR21 settlements would be at their heart, along with targeting spending on “things that stimulate growth”.

“Growth is one side of the equation. The other side of the equation is making sure spending is handled responsibly,” he said.

Philp also refused to rule out changes to the mechanism that increases Universal Credit and the state pension in line with inflation each year. Under current rules, both would rise from April next year by inflation as measured by this month’s Consumer Prices Index.

CPI for August rose by 9.9% over the preceding 12 months. September’s CPI figure is due to be published on 19 October.

Garry Graham, deputy general secretary of the Prospect union, said talk of “efficiency savings” within departments was a euphemism for job cuts.

“Staff and the public paying the price for the deeply damaging announcement made last week,” he wrote on Twitter.

“The cost of borrowing hasn’t increased because of the size of the civil service, it’s increased because of the disastrous announcement on Friday.”

Yesterday, the Bank of England made an emergency market intervention, confirming it will buy up UK government bonds “in order to restore orderly market conditions” following what it described as “significant volatility” in global financial markets since Kwarteng’s mini-budget.

“The Bank has identified a risk from recent dysfunction in gilt markets, so the Bank will temporarily carry out purchases of long-dated UK government bonds,” it said.

“These purchases will be strictly time limited, and completed in the next two weeks. To enable the Bank to conduct this financial stability intervention, this operation has been fully indemnified by HM Treasury.”

The move followed concerns that some pension schemes were at risk from rapid reductions in the value of UK government bonds – known as gilts – caused by uncertainty over the impact of Kwarteng’s budget measures.

Those economic plans were not accompanied by forecasts from the Office for Budget Responsibility.

Kwarteng has committed to set out a medium-term fiscal strategy backed by OBR analysis on 23 November.

In the wake of last week’s mini-budget, Institute for Fiscal Studies director Paul Johnson said it was “hard to see how day-to-day public spending will do anything other than overshoot” if last year's funding settlements were not revised upwards to reflect current pressures.

He said the only alternative was for the government to “allow a further deterioration in the range and quality of public services”.

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