Policy paper

2010 to 2015 government policy: government spending

Updated 8 May 2015

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

This is a copy of a document that stated a policy of the 2010 to 2015 Conservative and Liberal Democrat coalition government. The previous URL of this page was https://www.gov.uk/government/policies/spending-taxpayers-money-responsibly. Current policies can be found at the GOV.UK policies list.

Issue

Controlling spending is what any well-run organisation should be doing as a matter of course and with an annual budget of over £700 billion, the government should have the most effective spending control possible.

We must also make sure we are spending people’s money responsibly and providing value for money.

Actions

In the 2013 Spending Round we announced the following actions:

• £11.5 billion of savings from departmental resource budgets in 2015 to 2016, enabling an additional £3 billion to be invested in capital projects
• a long-term plan for capital investment to 2020 and beyond, including how £100 billion of infrastructure investment will be allocated over the next Parliament
• the introduction of a cap on welfare spending to ensure that welfare remains affordable
• at least £5 billion further efficiency savings in 2015 to 2016

At Budget 2013 we announced a cap on total welfare spending for 2015 to 2016 onwards. This means that if spending is forecast to exceed the limit, savings will have to be found. It will apply to welfare spending with some exceptions, including the state pension, bringing in over £100 billion of spending under new controls.

This builds on the following actions:

• the deficit reduction plan is firmly on track, with the deficit reduced by a third in the three years since 2009 to 2010
• departmental spending plans for 2016 to 2017 and 2017 to 2018 will continue to fall at the same rate as those years covered by the Spending Review 2010 and Spending Round 2013
• departments, devolved administrations, and their arms-length bodies are now required to monitor and manage information about spending more effectively and improve the skills needed to deliver their spending plans
• we are providing incentives to departments that manage public money well - those with good financial management will be given more freedom while those with bad management will be subject to more Treasury control
• a wide number of reforms have been put in place to help deliver the necessary savings in a way that protects the quality of public services, including in the NHS
• ongoing pay restraint for public sector workers

Background

With the largest budget deficit in the UK’s peacetime history, reducing the deficit is one of the government’s most urgent priorities. Find out more about the government’s plans to reduce the deficit.

Chancellor of the Exchequer George Osborne made a series of announcements on spending taxpayers’ money responsibly in the Spending Review 2010, Autumn Statement 2012, Budget 2012 and Spending Round 2013.

Appendix 1: reforming public service pensions

This was a supporting detail page of the main policy document.

£35.8 billion was spent by the government on public service pensions in 2013 to 2014, according to the Office for Budget Responsibility. That’s 5% of government spending.

The government believes that reforming public service pensions is important to make sure that it’s not spending more money than it has, whilst keeping the pensions offered to public sector workers fair and among the very best available.

Recent reforms are forecast to save £430 billion over the next fifty years. These changes will help to put the long term public finances back on a sustainable footing.

What we are doing

To reform public service pensions, we have:

• changed the way pensions are calculated, by bringing them in line with inflation calculated by what is known as the consumer prices index (CPI), instead of the retail prices index (RPI)
• changed the pension we offer to public sector employees from a final salary pension scheme to a career average pension scheme
• asked public sector employees (with the exception of the armed forces, police officers and firefighters) to work longer to receive a full pension, in line with the normal state pension age
• set caps on the costs of the pension schemes, to protect future taxpayers

The pension schemes being reformed are those for:

• staff in the NHS
• teachers
• civil servants (and other central government workers)
• staff in local government
• police
• firefighters
• the armed forces
• judges

Background

The Chancellor invited Lord Hutton to undertake a review of public service pension provision in June 2010.

The review set out a clear case for reform, publishing a final report at Budget 2011, which were accepted by the government.

This report then formed the basis for consultation with public servants, trades unions and other member representatives on the detail of the new pension schemes.

The changes will be implemented by 1 April 2015.