Spending Review 2013

George Osborne has given his Spending Review in the House of Commons…

Cuts in the Spending Review 2013The Chancellor of the Exchequor, George Osborne, read out his Spending Review to a packed House of Commons this afternoon and set out his latest financial plans to "secure the recovery".

The thrust of the Chancellor’s review was that the coalition government continues to spend within its means in order to reduce the country’s deficit.

He repeated the mantra that his proposals were based on three principles of reform, growth and fairness, stating on ocassions that those with the broadest shoulders bear most of the weight, although he did not specifiy exact details.

Overall, George Osborne was looking to make savings of £11.5bn on government spending and to reduce government spending of some £745bn.

The Chancellor then outlined his plans to curb public sector pay, capping pay rises at 1% by arguing it was not fair that some in the public pay had received rises of 7%. In addition automatic progression pay is to be ceased under the tenet that pay increases have been made regardless of performance. The military was excluded from this.

Benefits also saw a cap with housing benefit, tax credits and disability allowances to be included. The winter fuel allowance would also be subject to further means testing.

Defence, education and health remained relatively untouched, as was widely anticipated, but all other areas of government expenditure saw a cut in their funding.

Resource budgets were cut for local government, energy, the environment, food & rural affairs, culture, media & sport, policing and transport. Business, skills and universities all had their funding cut to the tune of around 6% but the Chancellor did boost capital and infrastructure spending – potentially good news for business.

John Cridland, the CBI’s Director-General, said of the Spending Review that the Chancellor had walked a fine line between paying the national debt and trying to stimulate growth:

“Infrastructure is rightly singled out as the most effective engine for growth, as we urged. While the Government talks a good game on infrastructure we’ve seen too little delivery on the ground so far.”

“It is critical we see a real pipeline of projects announced tomorrow, so investors know what schemes are going ahead, where and when.”

“Other pro-growth areas including science, innovation, skills and exports have also been shielded from cuts. The £185 million boost for the Technology Strategy Board – a crucial anchor for innovation – is particularly welcome.”

The Forum of Private Business also seemed to tentatively welcome the Spending Review with Phil Orford MBE, the FPB’s Chief Exec, saying:

“Money allocated to capital growth spending represents vast sums, and on the face of it infrastructure around the UK is going to get long overdue investment. This will be music to the ears of small business only too familiar with sub-standard transport networks and digital infrastructure still lagging behind other countries, but let’s not forget this is some way off.”

Mirroring the CBI’s expectations of what might be in the "project pipeline" Orford added:

“As ever though, the devil will be in the detail, and we await with keen interest news around HS2 and other big ticket projects the Chancellor alluded to.”

“The allocation of £2bn to the single local growth fund is no doubt the biggest disappointment of the day. It doesn’t give the long term commitment businesses were looking for and needed to hear to really get behind the local growth agenda.”

“Given the disappointingly small amount going into the fund, the onus now is on the 39 LEPs to submit clear and convincing growth strategies focused on a small number of key local policies if they are going to make real change.”

The Chancellor is expected to make further announcements tomorrow (Thiursday).

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