Chancellor cuts Whitehall budgets by 1 per cent

20 March 2013

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20 March 2013 | Adam Leach

The chancellor is to cut central government department budgets by 1 per cent in each of the next two years to bring them in line with what is spent.

Announcing today’s budget, George Osborne told a packed House of Commons “tough financial control” of public sector spending had produced an under-spend of £11 billion this year. To build on this, he committed to reducing budgets in most departments by 1 per cent in each of the next two years. Health service and schools budgets will be exempt, while the plans already laid out for local government and police are unaffected.

Standing at the dispatch box, Osborne said: “If you want to bring borrowing down, then you have to control spending, and that is what we have done. Now we want to ensure departments have budgets that are more closely aligned to what they actually spend. So both next year and the year after, we will reduce resource departmental expenditure limits by the equivalent of a 1 per cent reduction for most departments.”

The chancellor also announced that when final departmental budgets are set in June, he will be asking for £11.5 billion savings, increasing the £10 billion target set out in his Autumn Statement. To support this revision he disclosed that chief secretary to the Treasury, Danny Alexander and Cabinet Office minister Francis Maude had identified a further £5 billion of efficiency savings that can be delivered. The savings generated will be used to fund a £3 billion boost in infrastructure spending.

Among the many measures outlined in the budget, the government cancelled the planned increase in fuel duty, pledged to limit pay increases within the civil service and public sector workforces with Pay Review Bodies to an average of up to 1 per cent in 2015-16, and to introduce tax breaks for investing in shale gas and ultra-low-emission vehicles. Tax incentives will also be offered to incentivise private investment in social enterprises.

The government also committed to expand the Small Business Research Initiative, where businesses compete to develop new solutions to public sector challenges, to cover more than £100 million of contracts in 2013-14 and more than £200 million in 2014-15, up from the current value of £40 million.

And from Sunday night, a pint of beer will be one penny cheaper, after the planned three pence rise was scrapped.

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