“I have asked all departments to identify around five per cent of their resource budget that could be re-prioritised if new pressures emerge or new policies have to be funded, so there is a shared understanding of how it could be paid for,” he said.
“To be clear, no departmental budget is being changed as a result of this exercise,” he added. Cuts do not have to be made, but potential cuts must be identified.
The central reserve will continue to exist, but the Treasury does not want it to be the first resort for departments that require contingency funding. Previously, in the case of “policy problems or where difficulties have emerged, they felt they could simply turn to the contingency reserve to bail them out,” Alexander said.
He also announced that all departments must share spending data with the Treasury every month. Alexander will write to ministers and the head of the civil service if he thinks accounting officers aren’t ensuring value for money.