Spending Review: Bonus cannot hide large scale spending cuts

SPENDING will be slashed across Government departments despite the Chancellor’s insistence savings over the next four years will be smaller than those he has already made.
Picture: PAPicture: PA
Picture: PA

Analysis of the cuts to day-to-day spending announced in the Autumn Statement and Spending Review showed the Department for Communities and Local Government will be hardest hit.

Local Government spending will fall by 60 per cent by 2020 compared to the final year of the last Parliament while in the communities section of its work there will be a 43 per cent cut.

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The Foreign Office will spend 41 per cent less while day-to-day spending at the Department of Energy and Climate Change will fall by 36 per cent.

Speaking in the Commons, the Chancellor said lower debt interest payments and higher than expected tax receipts had improved the state of the public finances to the tune of £27 billion.

But he made clear his priority was to reduce borrowing and invest in capital projects rather than reducing the impact on day to day spending.

The Chancellor said the UK would be a country that “lives within its means”.

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So while he announced the Department of Transport would be embarking on the biggest road building programme in decades, it was also revealed its revenue spending would fall by 31 per cent.

Critics warned long term investment was not a substitute for proper funding of services.

Campaign for Better Transport chief executive Stephen Joseph said: “While Mr Osborne dons his hi-vis jacket and hard hat at big construction projects, bus services continue to be lost and high impact investment in walking and cycling is scaled back.

“The Chancellor’s claim that ‘We are the builders’ will be meaningless for people finding it harder to get to work, school and town centres because their cash-strapped local authority can’t support a bus service.”

But the focus on capital spending was backed by business.

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CBI director-general Carolyn Fairbairn said: “It’s good that the Government has increased capital spending and remains committed to road and rail investments, including the Trans-Pennine railway. Businesses will want to see promised projects breaking ground as early as possible in this Parliament to maintain momentum.”

Mr Osborne told MPs that day–to-day spending of all government departments would be cut by an average of 0.8 per year compared to an average fall of two per cent over the previous five years.

He said: “Since 2010, no economy in the G7 has grown faster than Britain.

“We are growing three times faster than Japan, twice as fast as France, faster than Germany and the same as the United States.”

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He added: “We are borrowing £8 billion less than we expected overall and we will reach a bigger surplus while at the same time helping working families.”

The Chancellor said the better than-expected state of the public finances meant the Government could “smooth the path” to its goal of having public spending in surplus by 2020.

He said Government borrowing was on track to fall every year until 2019-20 where it will be in a £10.1 billion surplus and forecast that would rise to £14.7 billion the following year.

Forecasts also put the UK economy on track to grow by 2.4 per cent this year and next and 2.5 per cent in 2017.

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However, analsyts pointed out that Mr Osborne’s £27 billion bonus highlighted how the delivery of his spending plans was closely linked to the performance of the economy over the next four years.

Critics also highlighted the failure of the Chancellor to meet previous targets he has set to bring the Government’s spending under control.

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