Press release

Government toughens spending controls

Government toughens spending controls.

In a speech at the Institute of Fiscal Studies today, Chief Secretary to the Treasury, Danny Alexander, reaffirmed the government’s commitment to its fiscal consolidation and set out new, tougher spending rules to ensure delivery of its spending plans. Extracts of the speech are set out below.

Chief Secretary to the Treasury, Danny Alexander, said:

Fiscal discipline is not ideological. It is core to good government. And it necessary to deliver fairness too.

Be in no doubt, it is the poorest and most disadvantaged, not the wealthy, who are hit hardest when a country loses control of its public finances.

It is fair that we tackle our debts today so that we don’t burden our children tomorrow.

Ensuring that we can continue to provide high quality public services and support to those who need it the most.

And even as we take the tough decisions to tackle that debt, we are making sure that it’s not the poor and vulnerable who are forced to carry the burden, and that those who have the most contribute the most.

In an environment of economic uncertainty, with ongoing instability in the Eurozone, the UK’s large deficit remains a crucial economic vulnerability.

It remains a clear and present danger to stability.

Carrying on as we were means accepting that we spend even more on debt interest as a share of public spending.

Leaving things as they are for longer would mean higher debt, higher interest payments, and that means even bigger cuts in the long run.

Instead, we argue that we have to cut our cloth today to reflect our means, and show that we can be trusted to restore our public finances to health.

The significance of the creation of the Office for Budget Responsibility is often underestimated in the UK debate.

Historically in the UK, politicians had been tempted to adjust their economic forecasts to suit their policies.

So when last autumn the OBR chose to substantially change its assessment of the damage done by the crisis, and so of the spare capacity in our economy, the government could not sweep this uncomfortable judgement under the carpet.

Instead, as I explained earlier, policy had to respond.

This is a structural shift that will shape government for decades to come.

Never again will politicians be able to fiddle their forecasts in the face of the uncomfortable truth…

And never again will government’s be able to spend the financial mirages these forecasts create.

Today, I am setting some new and tougher rules around spending that the Treasury will be enforcing from this year on.

These are rules have been drawn up with finance directors from across Whitehall, and are designed to fundamentally change and improve financial management across all organisations spending public money.

Rules that demonstrate the collective determination of government to ensure that never again will our nation’s finances be allowed to get into such a mess.

Delegated responsibility for spending cannot be an excuse to hide information, close the books, or weaken financial management.

For too long financial management in government has been stifled by poor information sharing and poor incentives.

That has to change.

From now on, all departments must monitor and share spending information with the Treasury on a monthly basis.

And that data must be consistent.

In the spending review, we deliberately kept the reserve small in order to get the most money out to departments.

It means that departments have to be able to deal with problems that arise from within their own budgets.

Many departments already operate a small ‘unallocated provision’ in their annual budgets, to meet smaller pressures that arise.

And, under the new rules I have asked all departments to identify around 5% of their resource budget that could be re-prioritised if new pressures emerge or new policies have to be funded, so there is a shared understanding of how it could be paid for.

These new controls are not just a tweak to the Whitehall machine.

They are another signal of our unwavering determination to deliver the fiscal consolidation we promised.

It is this focus on delivery that is the cornerstone of our country’s credibility. Credibility, let us not forget, which is delivering the record low interest rates that are benefitting millions of families across the UK.

That’s why, when we look at the mess Britain’s finances were allowed to get into, we say ‘never again.’

Notes for Editors

  1. Improving Spending Control is available in the Improving Spending Control section of this website. It sits alongside, and is consistent with Managing Public Money and the Consolidated Budgeting Guidance.

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