Latest Public Sector News

25.11.15

Osborne faces ‘£30bn black hole’ by next Parliament

Ahead of today’s Spending Review, which is likely to see big cuts in spending for the police, social care, local government, further education, renewable energy and welfare, CEBR said “the prospects – which the chancellor may well know – are unappetising”. 

According to the economics consultancy, weaker than predicted growth will mean that the UK remains in the red by £20.8bn in 2020, instead of the OBR’s July forecast for a £10bn surplus. 

During his speech in the Commons this afternoon, George Osborne will detail £20bn of cuts to Whitehall budgets and £12bn to welfare. 

However, the chancellor is expected to release nearly £7bn to make housebuilding a priority. More than £2bn is expected to be paid directly to developers to build so-called "starter homes", aimed at first-time buyers, who will get a 20% discount on prices up to £450,000 in London and £250,000 elsewhere. 

And the government will provide £4bn for housing associations, local authorities and private-sector developers to build shared-ownership dwellings. 

But social care is expected is expected to be a victim this afternoon, despite a pledge to allow councils to raise council tax by up to 2% to increase social care funding by around £2bn

Additionally, police chiefs are expecting to see their budgets cut even further. But the chancellor will be keen stress the cuts will “not impact on the fight against terrorism” and has said the anti-terror budget will rise 30% to£15.1bn. 

It is also thought that local authorities, who have already made significant savings and efficiencies, will again be a target for cuts of around 25% over four years as part of the Spending Review.  

Lord Porter, the Conservative chair of the Local Government Association, has told the Guardian that some councils could effectively go bust if the cuts in the Spending Review are as deep as expected.

As reported by PSE’s sister title NHE, the chancellor is expected to announce an urgent £3.8bn injection in the NHS in 2016-17 to help mitigate growing pressures resulting from staff and bed shortages, rising demand and swollen provider deficits.  But parts of the health budget that pay for things like nurse training, hospital inspections and public health could face cuts. 

Plans to mitigate the effect of tax credit cuts are also expected, after reforms suffered a major defeat in the Lords last month

PSE will be providing full coverage of the Spending Review and its implications. 

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