Government departments are set to have their budgets cut by £1 billion, the chancellor announced during the Autumn statement today.
George Osborne told the House of Commons government departments are set to under-spend by £7 billion this year due to “tight discipline”.
“We can therefore be confident in reducing the contingency reserve by £1 billion this year and reducing departmental budgets by a similar amount in the next two years,” he said. “This will save a further £3 billion in total.
“The protections for the NHS and schools will apply. The security and intelligence agencies and HM Revenue & Customs (HMRC) will be exempt.”
On exports, Osborne said business taxes are too high and exports are too low. Even though exports are growing, he said it was not as “fast as we would like”. He put this down to Britain being too dependent on European and North American markets.
He said: “Today I am doubling to £50 billion the export finance capacity available to support British businesses, expanding the help available to firms in these emerging markets and ensuring our excellent new trade minister, Lord Livingston, will have all the firepower he needs.”
A proposed rise in fuel duty will be cancelled next year, and the chancellor claimed this will mean petrol will be 20 pence cheaper than if the increase had gone ahead. He said cancelling fuel duty “has been a major priority”.
The government also announced an additional 20,000 apprenticeships will be made available.
“We’ve doubled the number of apprenticeships. And now we will transform the way they are provided by funding employers directly through HMRC,” said Osborne. “There will now be an additional 20,000 higher apprenticeships over the next two years.”
Osborne rejected suggestions to increase corporation tax from 20 per cent. “Putting up corporation tax hits investment, cuts productivity and raises much less,” he said. “It would be economic madness to pursue it.”
Small businesses will see business rate relief for a further year until March 2015. This will include a 2 per cent cap on inflation from April next year.
CIPS economist John Glen said departmental cuts will mean public sector procurement professionals will be looking to squeeze their supply chains.
"As the economy recovers supply chains have become very lean and there is a danger there is a lack of supply capability in those supply chains as demand increases. The real problem there could be lack of availability in supply chains. Supply chains will catch up, it's just that lag."
He warned those with poor supplier relationships could be hit hard. "If you've been very transactional with your suppliers, so in the recession you squeezed them, then some chickens are going to come home to roost. People are going to say, 'Well, in the bad times you treated us aggressively, now you want supply, we're going to give it to other people.'."