Unprotected Whitehall departments will be asked to set out plans for cuts to their resource spending of between 25% and 40% as part of the spending review process, the Treasury has announced.
Chancellor George Osborne confirmed this afternoon that the results of the spending review - which will seek £20bn of departmental savings in a bid to put the UK’s budget into surplus by 2019/20 - are to be published on November 25.
His announcement came as the Treasury published guidance to departments on the review process, saying that the next few months would provide an “opportunity to review the role of government”.
“Spending review 2015 is central to the government’s commitment to control spending, eliminate the deficit and start to run a surplus,” the document says.
“This means taking a step back and thinking about the shape of the state, exploring innovation and reform in public services, ensuring spending on core public services is prioritised and delivering value for money for the taxpayer.”
Last month’s Budget saw the chancellor commit to increases in health and defence spending; ring-fence schools funding on a per-pupil basis; and renew the pledge to spend 0.7% of GNI on overseas aid.
But those commitments will increase the pressure on unprotected government departments to make significant savings by the end of the parliament.
The guidance published by the Treasury today confirms that “all areas“ of public spending will come under the scope of the review, and says resource spending - the day-to-day spending by departments on areas including staffing and administration costs - will face a renewed squeeze.
“HM Treasury is inviting government departments to set out plans for reductions to their resource budgets,” the document states. “In line with the approach taken in 2010, HM Treasury is asking departments to model two scenarios, of 25% and 40% savings in real terms, by 2019-20.”
Under the spending review process, the Treasury will set new Departmental Expenditure Limits (DELs) for every department, and conduct a “full review” of capital spending in line with the Budget’s commitment to invest £100bn in infrastructure by the end of the parliament.
Departments will also be asked “to examine their assets and consider how they can be managed more effectively”.
The document says that process will involve further consideration of “the role of privatisation and contracting out where assets do not need to be held in the public sector”; promises “further action to ensure departments and agencies work more closely together”; and says departments will be asked to look at disposing of public land to try and encourage housebuilding.
It adds: “In the last parliament, the government met its target to sell surplus land with capacity for 100,000 homes. But taxpayers still own over £300 billion worth of land and buildings, with the Ministry of Defence (MoD) alone owning approximately 1% of all UK land.
“Operating from such a diversified estate also drives other costs, including the £115 million a year the MoD spends on vehicle hire, including to travel between different sites. The government has committed to dispose of public sector land for at least 150,000 homes by 2020. As part of the Spending Review, departments will set out how they will meet their share of contributions to this target.”
Departments will now be asked to work with the Treasury on the savings plans during the summer. That will include what the Treasury calls an “external engagement programme” with “expertise from within the public sector and beyond” called upon to consider ways to reduce government spending.
“The government will organise a series of events over the summer to discuss and debate various aspects of public spending,” the Treasury promises. “These will involve a wide range of experts, including those working on the front line of public services.”
Ministerial discussions on departmental settlements will get underway in September, and will be signed off by the Cabinet in November before the final outcome of the spending review is published on the 25th of that month.
During the last parliament, overall departmental spending was cut by 9.5%, according to analysis by the independent Institute for Fiscal Studies. But the cuts faced by unprotected departments were much higher, averaging at 20.6%.