Spending Round 2013: Chancellor’s statement
Mr Speaker, this Coalition came into office with a commitment to address - with firmness and resolve – one of the biggest economic crises of the post-war era.
The action we have taken - together with the British people - has:
- Brought the deficit down by a third;
- Helped a record number of people into work; and
- Taken our economy back from the brink of bankruptcy.
And it allows us to say that, while recovery from such a deep recession can never be straightforward, Britain is moving out of intensive care - and from rescue to recovery.
Today, we announce the latest action to secure the recovery.
We act on behalf of every taxpayer and every future taxpayer who wants high quality public services at a price our country can afford.
We act on behalf of everyone who knows that Britain has got to live within its means.
We have applied three principles to the Spending Round I set out today.
Reform: to get more from every pound we spend.
Growth: to give Britain the education, enterprise and economic infrastructure it needs to win the global race.
And Fairness: making sure we are all in it together by ensuring those with the broadest shoulders bear the largest burden and making sure that the unfairness of the something for nothing culture in our welfare system is changed.
Mr Speaker, we have always understood that the greatest unfairness was loading debts onto our children that our generation didn’t have the courage to tackle ourselves.
We have always believed – against much opposition – that it is possible to get better public services at lower cost.
That you can cut bureaucracy.
And boost enterprise by taking burdens off the back of business.
In the face of all the evidence, the opposition to these ideas has collapsed into incoherence.
We’ve always believed that the deficit mattered; that we need to take tough decisions to deal with our debts – and the opposition to that has collapsed into incoherence too.
Today I announce the next stage of our economic plan – to turn Britain around.
Mr Speaker, let me start with the overall picture on spending.
Three years ago, we set out plans to make savings and reduce our borrowing.
Instead of the £157 billion the last government was borrowing, this year, we are set to borrow £108 billion pounds.
That’s £49 billion less in borrowing.
That’s virtually the entire education budget.
So we’ve made real progress, putting right what went so badly wrong.
But while we’ve been acting, the challenges from abroad have grown.
A eurozone in crisis.
Rising oil prices.
The damage from our banking crisis worse than anyone feared.
And the truth is Mr Speaker, we have to deal with the world as it is, not as we wish it to be.
So this country has to continue to make savings.
I can report that the biggest single saving we’ve made in government is the £6 billion pounds a year less we are paying to service our debts.
Bear that number in mind when you hear the opposition complaining about cuts.
Mr Speaker, the deficit has come down by a third.
Yet at over seven per cent, it remains far too high, so we must continue to take action.
Not just because it’s wrong to go on adding debts to our children’s shoulders.
But because we know from the global turbulence of the last few years that the economic risks are real.
That the recovery has to be sustained.
And if we abandon our deficit plan, Britain would be back in intensive care.
So the figures today show that until 2017-18, Total Managed Expenditure – in other words, the total amount of government spending - will continue to fall in real terms at the same average rate as it is falling today.
The task before us today is to spell out what that means for 2015-16.
Total Managed Expenditure will be £745 billion.
To put that huge sum into context, consider this: if government spending had been allowed to rise through this Parliament at the average rate of the last three decades, that total would have been £120 billion pounds higher.
This Government has taken unprecedented steps to achieve this expenditure control.
But now we need to find £11.5 billion of further savings.
And I want to pay a personal tribute to my Right Honourable Friend the Chief Secretary for the huge effort he has put into helping to deliver them.
Finding savings on this scale has not been easy.
These are difficult decisions that will affect people in our country.
But there never was an easy way to bring spending under control.
Mr Speaker, reform, growth and fairness are the principles.
Let me take each in turn – and start with reform, and the obligation we all have in this House to ensure that we get more for every pound we spend of taxpayers’ money.
With the help of my Right Honourable Friend the Minister for the Cabinet Office, we have been combing through Whitehall, driving out costs, renegotiating contracts and reducing the size of government.
Cutting money the previous government was spending on marketing and consultants, reforming government IT and negotiating harder on behalf of the taxpayer, has already saved almost £5 billion pounds.
In this Spending Round, we find a further £5 billion pounds of efficiency savings.
That’s nearly half of the total savings we need to achieve.
We’re reforming pay in the public sector.
We are holding down pay awards.
And public sector pay rises will be limited to an average of up to one per cent for 2015-16.
But the biggest reform we make on pay is to automatic progression pay.
This is the practice whereby many employees not only get a pay rise every year, but also automatically move up a pay grade every single year – regardless of performance.
Some public sector employees see annual pay rises of seven per cent.
Progression pay can at best be described as antiquated; at worst, it’s deeply unfair to other parts of the public sector who don’t get it and to the private sector who have to pay for it.
So we will end automatic progression pay in the Civil Service by 2015-16.
And we are working to remove automatic pay rises simply for time served in our schools, NHS, prisons and police.
The armed forces will be excluded from these reforms.
Keeping pay awards down and ending automatic progression pay means that, for every pound we have to save in central administration, we can better limit job losses.
I don’t want to disguise from the House that there will be further reductions in the number of people working in the public sector.
The OBR has forecast that the total number of people working for the Government will fall by a further 144,000 by 2015-16.
And I know that for those affected this is difficult.
That is the consequence of the country spending far beyond its means.
When I presented the Spending Round three years ago, I said then that around half a million posts in the public sector were forecast to have to go.
That is indeed what has happened – and we’re saving £2 billion pounds a year, with a civil service now smaller than at any time since the war.
But I also said three years ago that I was confident that job creation in the private sector would more than make up for the losses.
That prediction created more controversy than almost anything else at the time.
Instead, every job lost in the public sector has been offset by three new jobs in the private sector.
In the last year, five new jobs have been created for every job cut in the public sector.
A central argument of those who fought against our plan completely demolished by the ingenuity, enterprise and ambition of Britain’s businesses.
And I pay tribute to the hard-working people of this country who proved that pessimism wrong.
HM Treasury and Cabinet Office
Mr Speaker, in this Spending Round, the Treasury will, as you would expect, lead by example.
In 2015-16, our resource budget will be reduced by 10 per cent.
The Cabinet Office will also see its resource budget reduced by 10 per cent.
But within that we will continue to fund support for social action, including the National Citizen Service.
90,000 places will be available for young adults in the Citizen Service next year – rising to 150,000 by 2016.
It’s a fantastic programme that teaches young people about their responsibilities as well as their rights, and we are expanding it.
Local Government will have to make further savings too.
My Right Honourable Friend the Communities Secretary has set an example to all his colleagues in reducing the size of his department by 60 per cent and abolishing twelve Quangos.
He’s a model of lean government.
And he’s agreed to a further 10 per cent saving in his resource budget.
But we’re committing to over £3 billion capital investment in affordable housing and we will extend the Troubled Families Programme to reach 400,000 more vulnerable families who need extra support.
We are proving that you can save money and create more progressive government.
That is the right priority.
And here’s another of the Government’s priorities: helping families with the cost of living.
Because we know times are tough we have helped keep mortgage rates low, increased the personal allowance, cut fuel duty and frozen council tax.
That council tax freeze is due to come to an end next April.
I don’t want that to happen.
So I can tell you today, that because of the savings we’ve made, we can help families with their bills.
We will fund councils to freeze council tax for the next two years.
That’s nearly £100 pounds off the average council tax bill for families.
This bring savings for families to £600 pounds over this Parliament.
And it demonstrates our commitment to all those who want to work hard and get on.
And there’s one more thing that we can do to help with the cost of living in one part of the country.
For years, Members from the South West of England have fought on behalf of their constituents, who face exceptionally high water bills.
Nothing was done until we came to office.
Now we’ve cut those water bills by £50 a household every year until 2015.
My Honourable Friend the Member for Camborne and Redruth and others have campaigned to extend that rebate beyond 2015 – and I am happy to confirm today that we will.
Taking money out of the cost of government and putting it in the pockets of families – that’s what I mean by reform.
Local Government has already taken difficult decisions to reduce staff numbers, share services and make savings – and I want to pay tribute to Sir Merrick Cockell who has been instrumental in showing how they can do this.
We were told by the scaremongerers that savings in local government would decimate local services.
Instead, public satisfaction with local council services has gone up.
That’s because with our reforms, communities have more control over their own destiny.
That’s because we’ve devolved power and responsibility to manage budgets locally.
That’s because we’ve let councils benefit from the tax receipts that come when the local economy grows.
Today, we give more freedom – including greater flexibility over assets – and we will drive greater integration of local emergency services.
And I want to thank the Honourable Member for Bournemouth East for his fresh thinking in this area.
We’re also embarking on major reforms to the way we spend money locally through the creation of the Single Local Growth Fund that Lord Heseltine proposed.
This will be £2 billion pounds a year – that’s at least £10 billion over the next Parliament - that Local Enterprise Partnerships can bid for and the details will be set out tomorrow.
Our philosophy is simple: trust people to make their own decisions and they will usually make better ones.
But in return for these freedoms, we have to ask local government for the kind of sacrifices central government is making.
The local government resource budget will be reduced by 10 per cent in 2015-16, but when all the changes affecting local government I will set out are taken into account - including local income and other central government funding – local government spending reduces by around 2 per cent.
I set out today the block grants to the devolved administrations.
Because we have prioritised health and schools in England, this feeds through the Barnett formula to require resource savings of around just 2 per cent in Scotland, Wales and Northern Ireland.
The Scottish resource budget will be set at £25.7 billion.
And Scotland will benefit from new capital borrowing powers of almost £300 million pounds.
Being part of the UK means Scotland will see its capital spending power increase by almost 13 per cent in real terms in 2015-16.
And rightly it’s for the Scottish Parliament to decide how best to use it.
Devolution, within a United Kingdom, delivering for Scotland.
The Welsh resource budget will be £13.6 billion, and we will shortly publish our response to the Silk Commission on further devolution of taxation and borrowing.
When we do so, we will be able to say more about the impressive plans to improve the M4 in South Wales that my Honourable Friend for the Vale of Glamorgan and others have been campaigning for.
And the Northern Ireland resource budget will be £9.6 billion.
We have agreed to provide an additional £31 million in 2015-16 to help the Police Service of Northern Ireland tackle the threat posed by terrorism.
Those police officers do an incredibly brave job on our behalf.
Separately, we will make 10 per cent savings to the Scotland, Wales and Northern Ireland Offices.
Mr Speaker, I believe the culture heritage of our nations are not just an economic asset, but have great intrinsic value.
When times are tough, they too must make a contribution to the savings this country requires.
The Department for Culture Media and Sport will make savings of 7 per cent in its resource budget, elite sports will be protected while the funding of community sports, arts and museums will be reduced by just five per cent.
But because we recognise the value of our greatest museums, galleries and English Heritage, we are giving them the much greater freedom from state control which they have long called for.
Applying our reforming principles across the Board: empowering those on the frontline who know best – what the Director of the British Museum called: “good news in a tough economic climate”.
And while we’re at it, we’ll make sure the site of the Battle of Waterloo is restored in time for the 200th anniversary, to commemorate those who died there and to celebrate a great victory of coalition forces over a discredited former regime that had impoverished millions.
Ministry of Defence
Mr Speaker, we still have the finest armed forces in the world – and we intend to keep it that way.
The first line of national defence is sound public finances and a balanced defence budget.
My Right Honourable Friend the Defence Secretary is helping to deliver both.
He and his predecessor my Right Honourable Friend for North Somerset have filled the £38 billion black hole they inherited in the finances of the Ministry of Defence.
Now we continue to ensure we get maximum value for money from what will remain, at over two per cent of our GDP, one of the largest defence budgets in the world.
The defence resource budget will be maintained in cash terms at £24 billion pounds.
The equipment budget will be £14 billion pounds and will grow by one per cent in real terms thereafter.
- further reduce the civilian workforce and their allowances;
- renegotiate more of the hopeless PFI contracts signed in the last decade; and
- overhaul the way we buy equipment.
But my Right Honourable Friend the Prime Minister has rightly been clear throughout that he is not prepared to see a reduction in Britain’s military capabilities.
This Spending Round not only protects those capabilities, but enhances them with the latest technologies.
We will not cut the number of soldiers, sailors or airmen.
We need them to defend our country.
We will give them the best kit to do that job: the new aircraft carriers, submarines, stealth fighters, destroyers and state-of-the art armoured vehicles.
And we make a major commitment to invest in cyber.
This is the new frontier of defence – and a priority for this government.
We will look after the families who have lost their loved ones, and those who have been injured protecting us, long after the wars they fought in are over.
We previously committed to fund the Military Covenant for five years.
Today, I will commit to fund the military covenant permanently.
And we will do this from the money we have collected from the Libor fines.
Those who represented the very worst values will support those who represent the very best of British values.
Our veterans will not be forgotten.
The intelligence services are on the frontline too.
Silently, and often heroically, these fellow citizens protect us and our way of life.
And so we will protect them in return – with a 3.4 per cent increase in their combined resource budget.
The Foreign Office is the public face of our diplomacy.
My Right Honourable Friend the Member for Richmond is quite simply the best Foreign Secretary we’ve had in a generation.
He too has demonstrated how we can make our taxpayers’ pound go further.
While making savings in his budget, he has managed to expand our network of embassies in the emerging world, and focus his diplomats on British commercial interests.
There will be further savings in that budget of 8 per cent in 2015 but my Right Honourable Friend is still committing to strengthen our embassy network in high-growth markets,
from Shanghai to Abuja.
The Foreign Office projects our values abroad.
The Home Office protects our values here in Britain.
Police and criminal justice
Police reform is a model of what we can achieve across government.
Police forces are more accountable to the public, with modern working practices, the latest equipment, and democratic oversight.
And all on a smaller budget.
What was the prediction from the opposition three years ago?
Crime would rise.
And what has happened instead?
Crime has fallen by more than10 per cent.
Thanks to the hard work of the police officers up and down this country, crime is at its lowest level for 30 years.
Net migration down by more than a third.
The Home Secretary is demonstrating that responsible budgets and reform can deliver better services for the public.
In 2015, she will work with a resource budget of £9.9 billion – a saving of 6 per cent.
The police budget will be cut by less than that.
There will be further savings in the central department.
Police forces will be encouraged to share services.
And some visa fees will go up.
But protecting Britain from the terrorist threat remains a top priority, so I can confirm that the police counter terrorism budget will not be cut at all.
For the police to do their job, they need a criminal justice system that works a lot better.
A case of common assault can take 240 days to pass through the courts, involves five separate sets of case papers, generated on three different computer systems.
In some prisons, the cost of keeping a prisoner is £40,000 pounds a year.
In others, it’s one third of that.
And the cost of legal aid per head is double the European average.
My Right Honourable Friend the Lord Chancellor is reforming all of these things.
And by doing that he’ll make savings of 10 per cent in his departmental budget.
And he’ll do this while offering, for the first time, probation services for those who have served short sentences, to help to end the revolving door of crime and reoffending.
Mr Speaker, it’s an example of the reform we’re bringing across Government.
And every step of the way, every penny saved, every programme reformed, every entitlement reduced, every difficult choice taken, has been opposed by vested interests and those who got Britain into this mess in the first place.
We will not let up.
I will not let that happen.
The reform will continue.
Mr Speaker, government spending does not alone create sustainable growth.
And the job of the state is to provide the schools, science, transport links and reliable energy that enable business to grow.
Britain was once the place where the future was invented.
From the railway to jet engine to the world wide web.
We can be that country again.
And today we set out how we get there.
And a huge amount of innovation and discovery still goes on.
But successive governments of all colours have put short term pressures over the long term needs and refused to commit to capital spending plans that match the horizons of a modern economy.
Today we change that.
We commit now to £50 billion pounds of capital investment in 2015.
From roads to railways, bridges to broadband, science to schools.
It will amount to over £300 billion of capital spending guaranteed to the end of this decade.
Today we raise our national game.
This will mean that Britain will spend on average more as a percentage of its national income on capital investment in this decade – despite the fact money is tight – than in the previous decade, when government spending was being wasted in industrial quantities.
My Right Honourable Friend the Chief Secretary will tomorrow set out the next stage of our economic infrastructure plan, with specific plans for more than £100 billion of infrastructure projects.
But this is what it means for departments.
The Department for Transport will make a 9 per cent saving in its day to day resource spending, bearing down on the running costs of Transport for London and rail administration;
But its capital budget will rise to £9.5 billion – the largest rise of any part of Government.
And we will repeat that commitment for every year to 2020.
We’re already massively expanding investment on major road schemes; but we will do more.
So we’re announcing the largest programme of investment in our roads for half a century.
We’ve already expanded our investment in the railways.
But we will do more.
So we’re committing to the largest investment in our railways since the Victorian age, and with the legislation before this House today, we should give the green light to HS2 – a huge boost to the north of England and a transformation of the economic geography of this country.
Here in London we’re digging Crossrail, the largest urban infrastructure project in Europe.
But we will do more – looking at the case for Crossrail 2 linking London from North to South.
And we’re going to give the Mayor almost £9 billion pounds of capital spending and additional financing power to the end of this decade.
Energy and the Department for Environment, Food and Rural Affairs (DEFRA)
Mr Speaker, investing in our economic infrastructure also means investing in energy.
So we’ll provide the certainty investors are crying out for in western countries.
This country is already spending more on renewables than ever before.
Now we’ll provide future strike prices for low carbon.
We’re restarting our civil nuclear programme when other countries are unable to continue theirs.
Now we provide guarantees for new nuclear.
Already our exploitation of gas in the North Sea is second to none.
Now we make the tax and planning changes which will put Britain at the forefront of exploiting shale gas.
We will provide our country with the energy of the future at a price we can afford.
And taken together this should support over £100 billion of private sector investment in our energy.
The Department for Energy and Climate Change will do this while reducing its resource budget by 8 per cent.
The Department for Environment and Rural Affairs will see a 10 per cent reduction but we will set out plans for a major commitment to new flood defences for the rest of this decade.
Again, prioritising long term capital through day-to-day cost savings – exactly the tough choice Britain should be making.
Department for Business, Innovation and Skills (BIS)
Mr Speaker, it’s not enough to have roads, power stations and flood defences.
These are just the physical infrastructure you need to compete in the 21st century.
We need the intellectual capital too.
This country needs to invent, pioneer and export around the world.
That means backing the Department for Business that helps us to do this.
And it means taking tough decisions about what we should support.
My Right Honourable Friend the Business Secretary has agreed a reduction of six per cent in the cost of the department.
That means we’re making savings to student maintenance, keeping grants, but not increasing them.
And the cost of the central department will also be cut further.
But this means that within this reduced budget we can put more money into apprenticeships, and continue with the dramatic increase in support we’ve provided to exporters through UKTI.
And we’re not going to shift medical training and research out of this department, because they’re working well where they are.
And in this department too, we can shift from day to day spending to a huge 9 per cent increase in capital investment.
This includes a huge investment in science.
Scientific discovery is first and foremost an expression of the relentless human search to know more about the world but it is also an enormous strength for a modern economy.
From synthetic biology to graphene – Britain is very good at it.
And we’re going to keep it that way.
I am committing to:
- maintain the resource budget for science at £4.6 billion;
- increase the capital budget for science in real terms to £1.1 billion; and
- maintain that real increase to the end of the decade.
Investment in science is an investment in our future.
So yes, from the next generation of jet engines, to cutting edge super computers, we say: keep inventing, keep delivering, this country will back you all the way.
But when you’ve got infrastructure and you’ve got science you still need the educated workforce to make it happen.
Because of our ongoing reforms to our universities, they are now better funded than before.
We remember the scaremongering about fees.
The claims that this would destroy social mobility, and put off students from poorer communities applying.
And what has happened since?
The highest proportion of students from the most deprived neighbourhoods applying to universities ever.
We should all welcome that.
But Mr Speaker, there’s no greater long term investment a country can make than in the education and skills of its children.
Because of the tough decisions we have taken elsewhere we have been able to invest in education and accelerate school reform.
When we took office, our country’s education system was falling behind other parts of the world.
Now, thanks to the brilliant programme of reform by my Right Honourable Friend the Education Secretary and the Schools Minister, we are once again leading the way.
So we have applied our reform principles here too: freeing schools and teachers to concentrate on teaching and turning the majority of secondary schools into academies.
In this Spending Round this momentum of reform will grow.
So the Education Department’s overall budget will increase to £53 billion and schools spending will be protected in real terms - fulfilling the pledge we made at the beginning of this parliament, for all of this parliament.
And we will transfer power - and money - from town halls and central bureaucracy to schools - so that more of this money for education is spent on education.
So while grants to councils and spending on central agencies are reduced the cash going to schools will go up.
And I can announce today that schools spending will be allocated in a fairer way than ever before.
School funding across the country is not equally distributed, but distributed on a historical basis with no logical reason.
The result is that some schools get much more than others in the same circumstances.
It’s unfair and we’re going to put it right.
Many MPs from all sides have campaigned for it.
My Honourable Friend for Worcester has been a particular champion in this Parliament.
Now the lowest funded local authorities in this country will at last receive an increase in their per pupil funding as we introduce a national funding formula to ensure that no child in any part of our country is discriminated against.
And we will consult on all the details so that we get this historic reform right.
The pupil premium we’ve introduced also makes sure we are fair to children from low income backgrounds.
It will be protected in real terms - so every poor child will have more cash spent on their future than ever before.
The capital budget will be set at £4.6 billion in 2015-16 – with over £21 billion of investment over the next Parliament.
We’ll tackle the backlog of maintenance in existing schools and we will invest in new school places.
We’ll fund twenty new studio schools and twenty new University Technical Colleges – those outstanding new vocational institutions.
Free Schools are giving parents the opportunity to aspire to a better education for their children.
Instead we must accelerate the programme - and bring more hope to more children.
Which is why I can announce that we will fund an unprecedented increase in the number of Free Schools.
We will provide for 180 great new free schools in 2015-16.
The schools budget protected; fairer funding across the nation; the pupil premium extended to more students than ever before and a transformation in the free school programme.
We will not make our children pay for the mistakes of the past.
We will give them every chance for the future.
It is the single best investment we can make for Britain.
Our education settlement is also consistent with the third and final principle of this Spending Round.
It is not possible to reduce a deficit of this size without asking all sections of the population to play their parts - but those with the broadest shoulders should bear the greatest burden.
And the Treasury distributional analysis shows that the top fifth of the population lose the most after this Spending Round.
And the independent Institute for Fiscal Studies are unequivocal that the richest ten per cent have paid the most.
So when it comes to Her Majesty’s Revenue & Customs, despite the fact that this department will see a 5 per cent reduction in its resource budget, we are committed to extra resources to tackle tax evasion.
The result is that we expect to raise over £1 billion more in tax revenues from those who try and avoid paying their fair share.
Department for International Development (DfID)
Fairness also means refusing to balance the budget on the backs of the world’s poorest.
I know not everyone believes we should fulfil our commitment to spend 0.7 per cent of our national income on development.
But I do – and I’m proud to support a Government that is the first in our history to meet our pledge and meet it not only this year, but next year and the year after.
Of course, overseas development is about more than just the DFID budget, and we comply with internationally policed rules.
But the DFID budget is the lion’s share, and it will be set at £11.1 billion in 2015-16.
Even in tough times, the decisions we make mean we keep to our commitments.
And that includes our commitment to the National Health Service – an institution which is the very embodiment of fairness in our society.
The NHS is much more than the Government’s priority, it is the people’s priority.
When we came to office the health budget was £96 billion.
In 2015-16, it will be £110 billion.
And capital spending will rise to £4.7 billion.
New medical treatments and an ageing population means the demand for NHS services is rising.
So we have not spared in also demanding reform and value for money in this service.
This will not insulate the Health Service from tough choices.
There are already 7000 fewer managers.
And the NHS will continue to make efficiency savings.
But these savings will enable new investment in mental health, and funding for new treatments for cancers like prostate and breast cancer.
And let me respond directly to the Breast Cancer Research campaign so many have taken part in.
We will continue to back the Charity Research Support fund and look into making it easier for these organisations to benefit from gift aid.
Mr Speaker, many older people do not just use the NHS, they also use the social care system.
If we are honest they often fall between the cracks of the two systems, being pushed from pillar to post and not getting the care they should.
None of us here would want that for our parents or grandparents, and in a compassionate society no one should endure it.
It’s a failure that costs billions.
Britain can do better.
In the 2010 Spending Review, we said that the NHS would make available around £1 billion a year to support the health needs of people in social care.
It worked, and saved hundreds of millions in the process.
Last year, these improvements meant almost 50,000 fewer bed days were lost to the NHS.
So today, I can announce that I will be bringing together a significant chunk of the health and social care budgets.
I want to make sure everyone gets a properly joined up service where they won’t have to worry if that service is coming from the NHS or the local council.
Let’s stop the tragedy of people being dropped in A&E on a Friday night to spend the weekend in hospital because we can’t look after them properly in social care.
By 2015-16, over £3 billion will be spent on services that are commissioned jointly and seamlessly by the local NHS and local councils working together.
It’s a huge and historic commitment of resources to social care, tied to real reform on the ground, to help end the scandal of older people trapped in hospitals because they
cannot get a social care bed.
This will help relieve pressures on Accident & Emergency.
It will help local government deliver on its obligations.
And it will save the NHS at least a billion pounds.
Integrated health and social care: no longer a vague aspiration but concrete reality, transforming the way we look after people who need our care most.
So Mr Speaker, these are the three principles that guide the Spending Round: reform; growth and fairness.
Nowhere could these principles be clearer than in our approach to welfare.
Two groups of people need to be satisfied with our welfare system.
Those who need it – who are old, who are vulnerable, who are disabled, or have lost their job and who we as a compassionate society want to support.
And there’s a second group.
The people who pay for this welfare system: who go out to work, who pay their taxes and expect it to be fair on them too.
So we’ve taken huge steps to reform welfare.
- Changing working age benefits with Universal Credit, so work always pays;
- Removing child benefit from the better off;
- Capping benefits so no family out of work gets more than the average family gets in work.
And we’ve making sure benefit payments don’t rise faster than wages.
The steps we’ve taken will save £18 billion a year.
Now we propose to do three further welfare reforms.
First, as I said in the Budget, we are going to introduce a new Welfare Cap to control the overall costs of the benefits bill.
We’ve already capped the benefits of individuals – now we cap the system as a whole.
Under that system we inherited, welfare spending was put in a category called Annually Managed Expenditure.
But the problem was it wasn’t managed at all.
The cost of welfare went up by a staggering 50 per cent - even before the crash.
Our Welfare Cap will stop that happening again.
The Cap will be set each year at the Budget for four years.
It will apply from April 2015.
It will reflect forecast inflation, but it will be set in cash terms.
In future, when a government looks set to breach the Cap because it is failing to control welfare, the OBR will issue a public warning.
The government will then be forced to take action to cut welfare costs or publicly breach the Cap.
We’ll exclude a small number of the most cyclical benefits that directly rise and fall with the unemployment rate – to preserve the automatic stabilisers.
Housing benefit, tax credits, disability benefits, and pensioner benefits will all be included.
But the State Pension will not.
Mr Speaker, I have had representations that we should include the basic state pension in the Welfare Cap.
That would mean that a future government could offset a rise in working age benefits by cutting the pensions of older people.
That penalises those who’ve worked hard all their lives.
Cutting pensions to pay for working age benefits is a choice this government is certainly not prepared to make.
It is unfair.
We won’t do it.
And we reject those representations.
The new Welfare Cap is proof that Britain is serious about living within its means.
Protecting the taxpayer.
Today, we’re introducing a limit on the nation’s Credit Card.
The principles enshrined in the Cap apply to our second reform.
We will act to ensure that we will stop the cost of paying the Winter Fuel Payments made to those who live abroad rising in a way that no one ever intended.
EU law now says that people living in the European Economic Area can claim Winter Fuel Payments from us even if they didn’t get it before they left the UK.
Paying out even more money to people from all nationalities who may have worked in this country years ago but no longer live here is not a fair use of the nation’s cash.
So from the autumn of 2015, we will link the Winter Fuel Payment to a temperature test.
People in hot countries will no longer get it.
It is, after all, a payment for winter fuel.
The third welfare reform I announce today is about making sure we do everything to help people get into work.
My Right Honourable Friend the Work and Pensions Secretary changed the national debate about welfare and he has comprehensively won the argument.
He has committed to finding a further 9.5 per cent savings in his department’s running costs.
That will require a difficult drive for efficiency, and a hard-headed assessment of under-performing programmes.
But welfare reform is about much more than saving money – vital though that is.
It’s about reducing dependency and changing people’s lives for the better.
I am determined to go further to reduce worklessness with all its social consequences.
Where is the fairness in condemning people to a life on benefits because the system won’t help them get back into work?
Today we’re introducing Upfront Work Search.
We’re going to make sure people turn up with a CV, register for online job search, and start looking for work – and only then will they get their benefits.
Thanks to this government, lone parents out of work can now get free childcare for their three and four year olds.
So it is reasonable to ask that they start regularly attending jobcentres and preparing to return to work.
There are further changes we announce today.
Half of all jobseekers need more help looking for work, so we’ll require them to come to the jobcentre every week rather than once a fortnight.
We’re going to give people more time with jobcentre advisors and proper progress reviews every three months.
And we’re going to introduce a new seven day wait before people can claim benefits.
Those first few days should be spent looking for work, not looking to sign on.
We’re doing these things because we know they help people stay off benefits and help those on benefits get back into work faster.
And here’s a further change.
From now on, if claimants don’t speak English, they will have to attend language courses until they do.
This is a reasonable requirement in this country.
It will help people find work.
But if you’re not prepared to learn English, your benefits will be cut.
Taken together, this new contract with people on benefits will save over £350 million pounds a year, and all that money will enable us to afford extra support to help people get into work.
Help to work;
Incentives to work;
And an expectation that people should do everything they can to find work.
That’s fair for people out of work;
And fair for those in work who pay for them.
Together, these reforms bring the total additional welfare savings in 2015 up to £4 billion.
Mr Speaker, step by step, this reforming Government is making sure Britain lives within its means.
The decisions we take today are not easy – and these are difficult times.
But with this statement we make more progress towards:
- an economy that prospers,
- a state we can afford,
- a deficit coming down; and
- a Britain on the rise.
And I commend this economic plan to the House.