Spending Review – Looking ahead to 25 November

On 25 November the Government will publish its 2015 Spending Review. With that date approaching, we look ahead to what we can expect to see through an assessment of governmental priorities, while looking at a number of key bodies and some of the things they’d like to see in the Review.

During the last parliament the Government took significant steps to reducing the deficit so that by 2014/15 the deficit as a percentage of GDP had dropped to 4.9% from 10.2% in 2010. Now the Government aims to continue reducing debt at the same rate – on average around 1.1% of GDP a year – so that by 2019/20 an overall surplus will be achieved.

In his Summer Budget 2015 Chancellor George Osborne announced a fiscal plan which laid out £17 billion of cost-saving solutions to further continue reducing the deficit. The solutions included £12 billion from welfare reform and £5 billion from tackling tax avoidance and tax planning, evasion and non-compliance, and imbalances in the tax system.

With the Government still borrowing £1 for every £10 spent, departments have been asked to model two cost-saving scenarios – one adding up to 25% and one adding up to 40% – to help make up the £20 billion of savings necessary to eliminate the deficit by 2019/20. In July 2015, HM Treasury published ‘A country that lives within its means’ – a document setting out the Government’s priorities ahead of the 2015 Spending Review. This month’s Review will lay out the Government’s chosen cost-saving measures to reach its 2019/20 surplus target. The solutions it sets out will also prioritise the Government’s investment in the NHS and national security.

The Government has given interest groups, individuals and representative bodies the opportunity to voice their suggestions for new policy ideas or reforms to be included in the Spending Review in the form of a ‘Spending Review representation’. In order for representations to be accepted and make an integral contribution to the Review they have to contain spending and policy suggestions and be backed up with a rationale, costs and benefits and an explanation of how the solutions would be delivered.

With the Spending Review being published on 25 November organisations have now submitted their representations. Below are key areas of government spending and an examination of what organisations in those areas would like to see in the forthcoming Review.

Local Government

‘A country that lives within its means’ stated that ‘radical devolution’ is a firm governmental priority and that England has only taken the first steps to moving away from the ‘imbalanced and overly-centralised’ system in which the country currently operates.

South East England Councils (SEEC) is a voluntary membership body which brings together local authorities in the South East of England to represent their interests and vocalise their views. Collectively the SEEC represents 74 local authorities – 55 district councils, 12 unitary councils and seven county councils.

The SEEC’s Spending Review representation highlights how ‘radical devolution of powers to South East authorities can deliver HMT aims of economic growth, better productivity and more efficient, value-for-money public services’. The representation lists a number of primary requests which the SEEC believes would allow for the effective application of devolution to the South East of England.

Firstly, increased devolution of powers will allow councils to integrate services, facilitating economic development through greater cost-effectiveness. Secondly, gaining more powers will allow the SEEC to fund and target investment into local infrastructure projects, further releasing economic potential. The SEEC also plans to deliver more efficient and cost-effective public services through back-office integration and reducing duplication.

Health

With the Government making the NHS a priority in the Spending Review, health sector organisations have come forward to set out what they want to see published on 25 November.

The NHS Confederation is the only body which speaks on behalf of all organisations providing NHS services. It has nearly 500 members spanning every part of the health and care system. The NHS Confederation has three primary roles: ‘to be an influential system leader; to represent our members with politicians, national bodies, the unions and in Europe; and to support our members to continually improve care for patients and the public’.

The NHS Confederation’s representation states that the most efficient plan for delivering effective health care services can be found in the NHS Five Year Forward View (5YFV), a plan which the Confederation says sets out a ‘compelling vision’ for new techniques of providing health care, resulting in an improved NHS by 2020/21.

Education

The University and College Union (UCU) represents more than 120,000 individuals ranging from lecturers to researchers and librarians, within organisations ranging from universities to colleges and prisons. It is the largest post-school education union in the world.

The UCU’s representation discusses ‘widening participation’, by which it means addressing the under-representation of certain social groups in higher education. It wishes to increase the number of individuals applying to enter higher education, with a particular focus on those from ‘under-represented backgrounds’. It further plans to increase the level of fair access, including to ‘selective universities’.

The UCU believes its plans will benefit the wider economy, stating that ‘students aged 19 and over in further education generate an additional £75 billion for the economy over their lifetimes’. It is the view of the UCU that allowing more individuals access to higher education will create a pool of qualified and trained graduates whose participation in society will ultimately boost the economy.

Housing

The National Housing Federation is an industry body which represents over 1000 housing associations throughout England. The federation’s ‘mission’ is to ‘support and promote the work of housing associations and campaign for better housing and neighbourhoods.’

Its ‘representation’ is build around the aim of ‘creating an environment that supports housing associations to deliver what is needed to end the housing crisis in every area and drive growth in all parts of the country.’ The Federation in its submission details a number of things it wants to see in the Spending Review, four of which have been included here.

Firstly, the Federation wants to see continued upfront investment of capital to drive the increase in house building. Secondly, it wants to see a more effective sector through improved local market research leading to investment being targeted more efficiently. Thirdly, it wants to see a more flexible approach for those looking to become owners of affordable housing, making it easier for the British public to enter the housing ladder. Finally, it wants to see an extension of the Affordable Homes Guarantee Programme.

Scotland

According to the think tank Fiscal Affairs Scotland, the Scottish Government has estimated that out of the £20 billion required to eliminate the deficit, £1 billion is likely to be contributed by the Scottish budget. The Spending Review’s consequences for Scotland’s Parliamentary budget will not, however, become clear until 25 November. What we do know is that the UK Government prioritising NHS England and continued support for schools will benefit Scotland as the emphasis on health and education will directly affect the Scottish Government’s budget.

On 10 November 2015 Deputy First Minister and Financial Secretary John Swinney announced that Scotland’s draft budget for the next financial year will be published on 16 December 2015. With this the Scottish Government will have sufficient time following the Spending Review to prepare its proposals for the budget.

It will set out the Scottish Government’s financial plans for the country, which will come into effect at the start of the next financial year. The future budget, which Mr Swinney said will be a ‘bold, ambitious budget for the future’, will adhere to the Scottish Government’s plans to ‘tackle inequality through economic growth.’

Central Government

On 9 November George Osborne announced that four Government departments have provisionally agreed to reduce their budgets by 30%. The departments to have agreed provisional cuts are the Department for Transport, the Department for Communities and Local Government, the Department for Environment, Food and Rural Affairs and the Treasury.

The savings will come from the resource spending of these central departments – that is, the day-to-day spending – and not the departments’ capital budgets. The spending for each department will be reduced on average by 8% a year for the next four years, amassing 30% for each department in total.

The Chancellor went on to say that reductions will be achieved through ‘a combination of further efficiencies in departments, closing low value programmes, and focusing on our priorities as a country.’ It should be noted that these are 4 of the smaller Government departments. Those with more extensive budgets, such as the Home Office and the Department for Work and Pensions, have yet to reach provisional spending agreements.