Treasury cuts £1.5 billion of spending promises

7 July 2010

7 July 2010 | Angeline Albert

Four Whitehall departments have agreed to cut £1.54 billion future spending commitments that were contingent on under-spent budgets.

Danny Alexander, the UK’s chief secretary to the Treasury, said the Department for Education has agreed to reducing spending by £1 billion, the Department for Business, Innovation and Skills by £265 million, the Department for Communities and Local Government by £220 million and the Home Office a cut of £55 million. It is not known what the departments had hoped to spend this money on.

The spending commitments relied on under-spending in government departments from the End Year Flexibility (EYF) system that allows them to carry forward unspent money from their Departmental Expenditure Limit (DEL) provision into later financial years.

A Treasury statement said it was not realistic to expect the amount of under-spending necessary to meet all of these commitments to have occurred. It said: “As this funding was never in departmental budgets, the DELs of these departments will remain the same. The departments will provide more detail on how they are managing these reductions in additional funding, by cancelling or re-prioritising spending plans that are not affordable within their existing budgets, and through better financial management.”

The government said it would meet the previous Labour government's EYF commitments to the devolved administrations, including those agreed with the Northern Ireland Executive.

Alexander said: “The decisions have not been easy, but the understanding and cooperation of my cabinet colleagues has enabled us to act swiftly to ensure the nation can live within its means. The reality is these unfunded spending promises should never have been made, because the money was never there to pay for them. We did not make this mess, but we are cleaning it up.”

The spending reductions are the latest in the government’s effort to reduce the public sector deficit. They follow £6 billion cuts already announced, which is set to come from this year’s budgets, and are separate from 25 per cent cuts to Whitehall spending by 2014-15, announced in June’s emergency Budget.

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