The government will create a new system to track savings as departments come under increasing pressure to find efficiencies.
In today’s Spring Budget, the chancellor stuck to the overall 1% annual rise in public spending settlements from 2025 announced in November, but pledged an extra £11bn for defence over the next five years as well as a big increase in childcare support.
Paul Johnson, director of the IFS, warned this could mean a “very tough time for other spending areas”.
To reduce departments’ day-to-day running costs after soaring inflation weakened the value of their budgets, the government launched an Efficiency and Savings Review in the 2022 Autumn Statement, looking for ways to work more efficiently.
In this afternoon's Spring Budget, chancellor Jeremy Hunt revealed that the government will launch a Government Efficiency Framework (GEF) to "track efficiency savings and drive continuous improvement". The framework will aim to improve how departments report efficiency savings and ensure government has appropriate oversight and reporting processes in place.
The Treasury told CSW it will work with departments to track the delivery of efficiencies for the remainder of the Spending Review period, using the framework "to provide a common approach for accounting for efficiency savings".
According to the Spring Budget papers, departments have reprioritised and identified further efficiencies through the savings review, building on the 5% efficiency challenge set in the 2021 Spending Review.
The 2021 Spending Review asked departments to save 5% from departments’ day-to-day budgets by 2024-25 to be “reinvested into priority areas”, based on the findings of another cross-government efficiency and savings review.
These cuts mean "the government can protect the vital frontline services that matter most to the public despite the impacts of higher inflation", this year's Red Book says.
The budget boost for the Ministry of Defence – £5bn for defence and national security priorities in the next two years and £2bn for defence in the following three years – comes after defence secretary Ben Wallace called for “real money” rather than “fantasy efficiency savings” last month.
The government has also set out an “aspiration” to increase defence spending from 2% to 2.5% of GDP. Hunt told the House of Commons this would happen "as soon as fiscal and economic circumstances allow".
The defence budget increase follows similar help for the Department for Education and Department of Health and Social Care in November. But for other departments, this is likely to mean an extra squeeze on their spending or the 1% target simply not being achieved, Johnson warned.
The IFS director said Hunt had outlined a “very tough set of plans which are unlikely to be met"
The increase in defence and childcare spending “implies big cuts for councils, prisons and courts”, IFS economist Ben Zaranko added.
In the budget, the Treasury also revealed extra funding for testing and evaluation of innovative approaches to cross-government working. It will provide a further £30.4m from the Shared Outcomes Fund to 10 existing projects covering areas such as data and digital, education, and service provision for people experiencing multiple disadvantages.