News

Unprotected departmental budgets face average cuts of 25 per cent

Finance | Tania Mason | 22 Jun 2010

Whitehall departments that are not ringfenced from public spending cuts will have to swallow average real budget reductions of around 25 per cent over the next four years, Chancellor George Osborne announced last month.

In his Budget speech today, Osborne said the Lib-Con coalition had inherited from the previous government plans to cut departmental budgets by £44bn a year by 2014/15 – an average real reduction for unprotected departments of 20 per cent.

But the new government had now found that the structural deficit was worse than previously thought and would require a further £17bn of savings to be made by 2014/15.

Because the new government was committed to increasing the NHS budget throughout the parliamentary term and intended to honour its international aid pledges, the remaining departments will have to face average cuts of around 25 per cent over four years.

But some would have to swallow even deeper cuts, because some, such as education and defence, were already under particular pressure.

Osborne added that if any additional savings could be found in social security and welfare budgets beyond those already identified, then these would be applied to other departments.

“Final departmental settlements, and the final split between departmental expenditure and annually managed expenditure on welfare, will be set in the spending review,” he told the House of Commons.

The Comprehensive Spending Review will be presented on Wednesday 20 October.

Stephen Bubb, Acevo chief executive, said: “The scale of the challenge facing charities as a result of this Budget is enormous. The spending cuts outlined today will impact on frontline services. The vulnerable will likely receive less support, charities will be asked to do more, and will have to do so at a time that their cost base is rising due to the VAT rise.”

Public sector net debt as a share of GDP will be 62 per cent this year, before peaking at 70 per cent in 2013/14. According to the Chancellor, it will then begin to fall, to 69 per cent in 2014/15 and then 67 per cent in 2015/16.

Tweet

Directory: Association of Chief Executives of Voluntary Organisations (ACEVO)