The government has called a halt to plans to find £3.5bn in savings from across Whitehall in 2019-20 and announced a £3bn fund for departments to prepare for a possible no-deal Brexit.
The Budget Red Book announced that former chancellor George Osborne’s call in the 2016 Budget for departments to cut spending in the final year of the Spending Review has been dropped.
In order to drive efficiency savings, the government had commissioned Sir Michael Barber, who led Labour prime minister Tony Blair’s delivery unit from 2001-5, to conduct a review on how to drive improvements. Today’s statement confirmed that the Treasury had accepted his recommendations to create a new “public value framework” that government departments would use to benchmark the effectiveness of their spending, but revealed that the savings target had been dropped.
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The Red Book setting out the details of the Budget announcements stated that a £1.4bn reduction has been delivered by a number of savings in low value spend in addition to lower than forecast overseas development spending, as downgraded growth forecasts meant less money was needed to meet the target to spend 0.7% of UK gross domestic product on aid.
In the face of what the Treasury called “new spending and administrative pressures faced by departments in 2019‑20”, it has decided not to proceed with the remaining £1.1bn reduction in spending in that year.
“Taking these changes together, departmental spending in 2019-20 will therefore be higher than envisaged at Budget 2016 by £2.1bn,” it stated.
It was also announced that £3bn would be spent over the next two years to help Whitehall departments prepare for Brexit.
Chancellor Philip Hammond said that negotiations with the EU over a Brexit settlement and future relationship were “in a critical phase”, and it was vital to make early progress where possible in preparing to implement any deal.
“While we work to achieve this deep and special partnership we are determined to ensure that the country is prepared for every possible outcome,” he said. “We have already invested almost £700m in Brexit preparations. And today I am setting aside over the next two years another £3bn. And I stand ready to allocate further sums if and when needed.”
The Red Book revealed that this funding will be split into £1.5bn in both 2018-19 and 2019-20, with the UK set to leave the bloc in March 2019.
Departmental allocations will be agreed “in early 2018”, according to the document. “Ahead of these allocations, government departments will continue to refine their 2018-19 plans with the support of HM Treasury and the Department for Exiting the European Union. Departmental allocations for 2019-20 will be agreed later in 2018-19, when there is more certainty on the status of our future relationship with the EU.”