Latest Public Sector News

22.03.12

Budget outlines fall in spending for 2015

Chancellor George Osborne announced his Budget yesterday, setting out changes to taxation and public sector spending.

His new figures have set out a 0.9% fall in public sector spending in the two years after the current spending review period ends in 2014-15. In 2015-16 the total public sector expenditure will be £744bn, including £46.5bn in capital spend.

The Treasury stated that there will need to be “significant real reductions” in public sector spending in 2015-16 and 2016-17. There will be a small rise in departmental spending next year to £330bn, followed by a fall in 2014-15 to £327bn. The biggest cuts to individual departments will be to transport, communities and local government.

The Chancellor also announced a review to be held into whether regional pay should be introduced for public sector workers. This has been strongly opposed by unions, and especially workers inWales, who may be hit the hardest.

Other concerns about the Budget have also been raised, including the potential for economic growth. 

Ian Brinkley, director at The Work Foundation, said: “This was the Budget that could have done much more to set out a growth strategy.” He criticised cuts in corporation tax, and added: “This Budget does little to alter long-term prospects for theUKeconomy.”

John Philpott, chief economic adviser at the CIPD, said: “The Chancellor has redrawn the boundaries of taxation but, judging by the central forecast of the Office for Budget Responsibility (OBR), his budget has done nothing to change the big picture outlook for growth and jobs overall, while ironically shifting the balance of the economic recovery away from business investment and toward household consumption and public spending.

“The OBR is slightly more optimistic about economic growth in 2012 than it was last November but slightly more pessimistic about 2013. The OBR’s forecast for employment growth and headline unemployment is unchanged, with a lower forecast for claimant unemployment due in large part to a methodological change to the forecast rather than anything to do with the effects of policy.

“Most worryingly of all the OBR has significantly downgraded its forecast for growth in business investment between now and 2016 while raising its forecast for growth in household consumption and government spending and investment. If the OBR is proved right the economy doesn’t appear to be rebalancing in the way we were supposed to expect, which casts an element of doubt on the Chancellor’s claim that the budget will enable Britain to ‘earn its way’ to recovery.”

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