Osborne’s Budget targets pay progression and plans to control AME more tightly

The civil service pay cap will continue for an extra year, limiting pay increases to an average of one per cent per year until 2015-16, and the government will also seek to end automatic pay rises for all civil servants, chancellor George Osborne announced in his Budget last week.

By Suzannah.Brecknell

27 Mar 2013

Osborne also announced that most central government departments will have to cut spending by two per cent over the next two years, though certain areas will be protected.

The table below shows the cuts announced in 2013-14 and ‘14-15 departmental Resource DEL budgets in both the 2012 Autumn Statement and the Budget, focusing on those departments allowed by the Treasury to carry underspends over as a ‘Budget Exchange’ – off-setting the cuts.

The health, schools and international development budgets remain ringfenced, though DfID’s budget will drop in real terms to track the decline in gross national income.

The savings created by reducing departmental resource spending will fund £3bn extra infrastructure investment each year from 2015-16.

The chancellor also set out £11.5bn of further cuts to be included within the next spending round, and announced plans to introduce tighter controls on departments’ Annual Managed Expenditure (AME) budgets. At a briefing after the chancellor’s speech, a Treasury source told the Guardian that government would set an overall cap on AME spending. “If AME spending is running ahead of forecasts, tough decisions on things like welfare [will have to be made] in order to stay within that cap,” he said.

Paul Johnson, director of the Institute for Fiscal Studies, warned that severe cuts could be in the pipeline for the next spending review, since the overall spending envelope has not been increased but “nearly £5bn of additional spending on capital, childcare and social care has been committed to. That leaves even less for everything else.”


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