AUTUMN STATEMENT: UK chancellor demands further efficiency savings from departments

5 December 2012

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5 December 2012 | Adam Leach

Wasteful government departments must bring their spending in line with their more efficient counterparts and cut their administration costs over the next two years, the chancellor announced today.

Giving his Autumn Statement, Chancellor of the Exchequer George Osborne commended Francis Maude and the Cabinet Office for delivering £12 billion of efficiency savings since the beginning of the current parliament. However, he said the Treasury believed more savings could be delivered and asked for all departments to cut costs by a further 1 per cent next year and 2 per cent the year after.

He told the House of Commons that by raising performance to the level of the best performing departments and making greater use of digital services, billions more could be saved. “We believe there is room to do even more. If all departments reduce their spending on administration in line with the best performing departments like the Department for Education and Department for Communities and Local Government, another £1 billion can be saved. If all departments made greater provision of digital services and rationalised their property estates, as some have done, then a further £1 billion could be saved.”

While the cost reduction demands will apply to all central government departments, the savings delivered in the Department of Education and the NHS will be recycled and invested into schools and health provision. Osborne also explained that the Ministry of Defence will be given flexibility over delivering the savings and that due to the freeze on council tax, local governments will be exempt from next year’s reduction, but must deliver a 2 per cent reduction the year after.

In total, the chancellor aims to cut government spending by a further £6.6 billion by 2017, reducing it to 39.5 per cent of GDP. Reductions in foreign welfare will, along with reduced departmental spending, deliver the savings. The majority of the funds, £5.5 billion, will be used to provide extra investment in infrastructure projects, such as upgrading the M25 motorway.

Other measures announced included scrapping the planned 3.02ppl rise in fuel duty, an extra £120 million of funding for the Advanced Manufacturing Supply Chain initiative and a reformed version of the Private Finance Initiative (PFI). Despite the lobbying efforts of the travel and air industries, the rise in Air Passenger Duty will go ahead.

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