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Deficit £4.4bn lower due to departmental underspends

Government departments cut spending by £6.7bn more than they had planned to in the year to March, official Treasury data demonstrates.

The planned reduction in spending was £4.4bn, but spending was actually down by £11bn compared to 2010-11. According to analysis by the Institute for Fiscal Studies (IFS), only £900m of this will be carried forwards to the next year, with the rest reallocated by the Treasury.

The biggest underspend in the last year was in the NHS, with £1.7bn less than planned. This represents 1.6% of the NHS’s 2011-2012 budget. However, smaller departments cut spending even further, with the Department of Energy and Climate Change experiencing a 13.9% underspend.

The significant underspend means the Government is on track to reduce the deficit twice as fast as initially planned, with the total deficit £4.4bn lower as a direct result.

However, critics of the harsh spending cuts have urged Government to promote economic growth and secure employment rather than instigating more underspend.

The IFS suggests the large underspends may be due to departments trying hard to ensure they do not overspend at a time of severe financial pressure, or that departments may be looking ahead to future cuts and deciding that achieving these faster would leave them in a better position to keep to tight budgets.

“Whatever the motivation behind the underspends, to the extent that departments are underspending while still maintaining the quality and quantity of public services being provided, this is good news,” the IFS stated.

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Image c. Peter M under an Attribution-Non Commercial-No Derivs 2.0 Generic licence.


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