Today’s Spending Review laid out “efficiency savings” totalling £5bn over the year – a sum equivalent to all the savings claimed to date from the Cabinet Office’s spending controls and supplier renegotiations. And with most departments seeing cuts in ‘resource DEL’ budgets of up to 10%, some administration budgets are set to fall by much more.
Between 2014-15 and 2015-16, the Cabinet Office will lose 29%; the DWP’s admin budget will fall by £218m, or 20%; and the Home Office drops £96m, or 19%.
In his ministerial statement on the Spending Review, chancellor George Osborne also confirmed the abolition of ‘progression pay’ inside government: the review states that “departments will be putting in place plans to end automatic time-served progression pay in the civil service by 2015-16,” adding that progression pay will also see “substantial reforms” for teachers, health workers, prison officers and the police. The armed forces, though, will be spared this new pay constraint.
In defence of this move, the Treasury points out that average public sector pay growth still exceeds that in the private sector, and that not all public sector employees currently receive progression pay.
The efficiency savings planned for 2015-16 include shaving £1.9bn from departmental administration budgets – making the total cut since 2010 about 40% - plus £1.5bn from major projects “through scaling back or stopping non-priority projects, and better project management”, and a further billion via procurement. This latter saving will rest largely on centralising departmental purchasing through the Government Procurement Service, greater use of crown representatives to centralise the management of government’s relationship with individual suppliers.
Combining these savings with those resulting from lower than expected spending on debt interest payments, the Treasury has tried to give departments greater confidence on their future capital budgets – an investment plan will be published tomorrow setting out the government’s biggest capital projects and detailing its funding for the new Single Local Growth Fund championed by Lord Heseltine .
Other bright spots include protected funding for science investment; new funding flexibilities for bodies including museums, the Scottish government and social care; and a £1bn Conflict, Security and Stability Fund, controlled by the National Security Council, to replace the Conflict Pool.
The review notes that departments have over-achieved against the spending cuts they were handed, saving £11.5bn in 2012-13 compared to the OBR’s December 2012 forecast. Two thirds of the £80bn of spending reductions planned for the Parliament have already been delivered, though in 2010 the Treasury thought at this point we’d only be halfway there.
Nonetheless, it believes that the civil service’s financial management and capabilities need improving, and the government will soon launch a review to consider how the Treasury and departments can “further improve financial standards, the quality of management information and wider financial capability.”
See also: CSW has also set out the Spending Review’s main implications for each department, covering the changes in their resource and capital DEL and their administration budgets, and explaining the main policy and operational challenges facing civil servants.
Clarification: An earlier version of this story said that the DH will lose almost £1bn in administrative spending, representing a 27% cut. These figures were taken from the Treasury's Green Book. The Department of Health say that these Treasury figures do not compare like-for-like, and that their administration cuts will represent £300m - a 10% reduction - in 2015-16.