The Chancellor of the Exchequer George Osborne and Chief Secretary to the Treasury Danny Alexander today announced details of how the next Spending Review (SR) will be conducted. The SR, due to conclude in the Autumn, will set spending limits for every Government department for the period 2011-12 to 2014-15.
The timetable for the review, the process and guiding principles that will underpin the Government’s approach to setting spending limits are set out in the Spending Review Framework presented to Parliament today.
The Spending Review Framework sets out how the SR will:
- require departments to submit their initial plans to deliver their priorities before the Summer Recess and demonstrate that they meet a tough new set of criteria to deliver value for money. The criteria cover questions such as: is the activity being funded essential to the Government’s priorities, does the Government need to fund the activity, and can it be provided more efficiently?
- start a period of external engagement between the Government and all parts of society including; the private sector, the general public, voluntary/charitable organisations and experts, in order to obtain the best ideas from those most involved in and affected by public services
- establish a new Star Chamber chaired by the Chancellor and Chief Secretary and drawing on the expertise of other senior Cabinet Ministers to ensure that the Government challenges every department’s spending plans to ensure that they deliver more for less. Other Cabinet Ministers will be considered to join the group, once they have settled their department’s budget.
- seek input from the brightest and best individuals in this SR by establishing a Spending Review Challenge Group of experts - both from within Government and outside - to act as independent challengers and champions for departments throughout the process. Their remit will be to think innovatively about the options for reducing public expenditure while balancing priorities.
- require each Secretary of State to appoint a Minister with specific responsibility for driving value for money across their department, identifying savings opportunities and playing an important role in challenging spending in all areas, including on contracts and programmes.
- comprehensively examine areas such as: social security, tax credits and public service pensions as part of the process
- end the previous administration’s complex system of Public Service Agreements that relied too heavily on rigid targets and instead ask departments to publish business plans that show the resources they need to put in place in order to protect key frontline services and deliver on their objectives.
Tough decisions need to be taken in order to reduce the unprecedented deficit. The Government is committed to achieving the bulk of this through reductions in Government spending, rather than tax increases, while protecting the quality of key frontline services.
This SR is not just about cutting spending and setting budgets. It will be a complete re-evaluation of the Government’s role in providing public services. The SR will look at what services the Government should be providing and how to get more for less.
Chancellor of the Exchequer George Osborne:
This is the great national challenge of our generation: after years of waste, debt and irresponsibility, to get Britain to live within its means. It is a time to rethink how government spends our money.
We didn’t choose the terrible economic situation we inherited. But we can work to put it right, to deal with our debts, to set our country on a brighter economic course, and show that we are all in this together.
Notes for editors
The Spending Review Framework can be found on the Spending Review section of the HM Treasury website.
Last year, Public Sector Net Borrowing was the largest in Britain’s peacetime history. The March Budget forecast the UK deficit to be 11 percent of GDP this year. According to the IMF, the UK has the highest deficit in the G7 and G20.
The Government has made clear that the bulk of the reductions in the current structural deficit will be achieved through reductions in spending.
On 24 May the Chancellor set out how the Government will reduce spending this year by £6¼ billion by cutting waste. This was the first step on the road towards restoring good management of Britain’s public finances.
Even tougher decisions will be required at the Spending Review. The Spending Review will set out the Government’s spending plans for the next Parliament, setting departmental budgets for the years 2011-12 to 2014-15.
In the Budget, the Government will set out the overall path it will pursue for the public finances, against which the OBR will judge its fiscal policy. This will include setting the path for expenditure in the next SR period, which will give a clear sense of the scale of the challenge.
To ensure that the SR looks comprehensively across the whole of Government expenditure, it will also cover significant elements of Annually Managed Expenditure, where the risk is taken by the Exchequer as a whole, including social security, tax credits and public service pensions, setting out plans for savings and reform in these areas.
To ensure that resources are prioritised within tighter budgets, departments will be asked to prioritise their main programmes against a tough set of criteria to ensure value for money in public spending.
- Is the activity essential to meet Government priorities?
- Does the Government need to fund this activity?
- Does the activity provide substantial economic value?
- Can the activity be targeted to those most in need?
- How can the activity be provided at lower cost?
- How can the activity be provided more effectively?
- Can the activity be provided by a non-state provider or by citizens, wholly, or in partnership?
- Can non-state providers be paid to carry out the activity according to the results they achieve?
- Can local bodies, as opposed to central Government, provide the activity?
The Government is determined to take decisions in a way that is in line with its values of freedom, fairness and responsibility.
- Therefore the Government will:
- Deliver its guarantee that health spending will increase in real terms in each year of the Parliament, and that 0.7 per cent of GNI with be spent on overseas aid by 2013;
- Limit, as far as possible, the impact of reductions in spending on the poorest and most vulnerable in society, and on those regions heavily dependent on the public sector
- Protect, as far as possible, the spending that generates high economic returns
- Make further savings to fund the priorities set out in its programme
To lead collective decision-making in Government on spending, the Prime Minister has appointed a Committee of senior Cabinet Ministers - the Public Expenditure Committee (PEX/Star Chamber). Chaired by the Chancellor of the Exchequer and supported by the Chief Secretary, the PEX Committee will advise the Cabinet on the high-level decisions that will need to be taken in the Spending Review.
- The membership of the Committee will be:
- Chancellor of the Exchequer (Chair) - The Rt Hon George Osborne MP
- Chief Secretary to the Treasury (Deputy Chair) - The Rt Hon Danny Alexander MP
- Foreign Secretary - The Rt Hon William Hague MP
- Minister for the Cabinet Office and Paymaster General - The Rt Hon Francis Maude MP
- Minister of State at the Cabinet Office - The Rt Hon Oliver Letwin MP
The Government will require the input of the brightest and best individuals to achieve the optimal outcome in this Spending Review. Therefore, it will form a Spending Review Challenge Group of experts - both from within Government and outside - to act as independent challengers and champions for departments throughout the process. Their remit will be to think innovatively about the options for reducing public expenditure and balancing priorities to minimise the impact on public services.
The Government is determined that this Spending Review process will be open, responsible and fair and conducted in a way that protects the poorest and most vulnerable in our society. Over the next few weeks, the Government will begin a process to engage and involve the whole country in the difficult decisions that will have to be taken.
The Government is committed to greater transparency to enable the public to hold politicians and public bodies to account, and will build on the actions it has already taken to publish raw public spending data from the Combined Online Information System (COINS). It will publish more user-friendly subsets of COINS data by August 2010, and has committed to publishing online all new items of central Government spending over £25,000 from November 2010.
- The Government will also organise a series of events over the summer to discuss and debate various aspects of public spending. The line-up of events will incorporate many of the key areas that need to be considered as part of the overall SR process. A range of people will be invited to these events, to make sure that they represent a wide spectrum of expertise and viewpoints. Invitees will include members of think tanks and interested groups, academics, representatives of local government, business and trade unions, and public sector experts and watchdogs such as the Audit Commission.
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