Whitehall departments have been asked to start looking for further savings immediately, as George Osborne told business leaders he wanted to make an early start on planned spending cuts of £13bn.
The chancellor used a speech to the CBI last night to reveal that his new chief secretary Greg Hands had instructed departments to find fresh savings in their existing plans for 2015-16.
The government’s deficit reduction strategy envisages that the full £13bn of departmental spending cuts - alongside £12bn in welfare savings - will be met by 2017-18, but Osborne told the audience he wanted departments to go back and look again at their plans for this year.
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“This plan will be developed at the Budget I will present on 8 July – and completed at the Spending Review in the autumn,” Osborne said.
“To provide the best start our new chief secretary, Greg Hands, is… asking government departments to identify further savings that can be made in this financial year.
“We’ve achieved underspends in previous years; we can do so again this year. When it comes to saving money, we all know that the more you can do early, the smoother the ride.”
The chancellor also used his speech to spell out plans to merge the Shareholder Executive (ShEx) and UK Financial Investments (UKFI) into a new body aiming “to return government investments back to the private sector and deliver a good deal for the taxpayer”.
The ShEx, part of the Department for Business, Innovation and Skills, currently manages the government’s financial interest in state-owned or part-owned businesses, with its portfolio including Channel 4, Companies House and the Met Office.
UKFI, meanwhile, was set up at the height of the financial crisis to manage the public’s stake in bailed-out banks Lloyds, the Royal Bank of Scotland and Northern Rock. While Northern Rock was subsequently sold off to Virgin Money, the body still oversees an 80% stake in RBS and just under 20% of Lloyds.
The two entities will now be merged into a new government-owned company called UK Government Investments (UKGI). According to a Downing Street statement published late last night, the Treasury will now oversee the activities of both UKFI and the ShEx, taking responsibility for ShEx from the business department.
The statement added: “The Shareholder Executive will retain its current operating model whereby it acts directly for departmental secretaries of state and permanent secretaries in its governance and corporate finance activities.
"The change in overall reporting and governance regime will have no direct influence on this activity. This means that departments may continue to use Shareholder Executive staff exactly the same way that they use departmental staff and that there will continue to be direct access to ministers and senior officials.”
Mark Russell, currently chief executive of the ShEx, will step up to become CEO of the new UKGI entity. The two divisions will keep their existing names, but will be co-located and expected to share IT and back-office functions in a bid to save money. The Treasury said it aimed to have UKGI "fully up and running" by autumn of this year, and CSW understands that ShEx staff will continue to work from BIS during the transition.
Meanwhile, David Cameron has used a speech at the Home Office to announce the creation of a new government agency responsible for cracking down on labour market abuses. The labour market enforcement agency will feature in the latest Immigration Bill set for inclusion in next week's Queen's Speech.