Spending Review: Osborne wields axe

Chancellor George Osborne has announced the government's four-year Spending Review to Parliament, revealing some of the deepest cuts in public spending in decades.

The key announcements:

• About 490,000 public sector jobs likely to be lost
• Average 19% four-year cut in departmental budgets
• Structural deficit to be eliminated by 2015
• £7bn in additional welfare budget cuts
• Police funding cut by 4% a year
• Retirement age to rise from 65 to 66 by 2020
• English schools budget protected; £2bn extra for social care
• NHS budget in England to rise every year until 2015
• Regulated rail fares to rise 3% above inflation
• Bank levy to be made permanent

Here, department by department, are more details:

Business, Innovation and Skills

Annual budget: £21.2bn
What's being cut: Annual cut of 7.1% or 25% over the period
Administration costs to be cut by £400m with 24 quangos axed. The Train to Gain programme to be axed. University funding to be cut and reform of student tuition fees building on Browne review. The science budget is to be frozen - in cash terms - rather than cut as had been feared. Funding for 75,000 adult apprenticeships a year.

Cabinet Office

Annual budget: £2.6bn
What's being cut: £55m cut in budget. Support for citizenship and "big society" projects. Cabinet Office officials to move into Treasury. Civil List cash funding for Royal Household to be frozen next year. New system of funding for Royal Household from 2013.

Communities and Local Government

Annual budget: £33.6bn
What's being cut: Councils will see a 7.1% annual fall in their budgets. But ring-fencing of local authority revenue grants will end. Funding for Redefinition of social housing, changed terms for new rental agreements. Aim to build 150,000 new affordable homes over next four years.

Culture, Media and Sport

Annual budget: £2bn
What's being cut: Budget cut 24% over four years. Administration costs to be cut 41% while core arts programmes will see a 15% fall in funding. Free museum entry to remain in place. BBC licence fee to be frozen for next six years. Corporation will also fund World Service and BBC Monitoring. Adds up to equivalent of 16% savings over the period.


Annual budget: £46.1bn
What's being cut: 8% cut over four years
The RAF and navy will lose 5,000 jobs each, the Army 7,000 and the Ministry of Defence 25,000 civilian staff. The Harrier jump jets and the Ark Royal aircraft carrier are being axed while the planned Nimrod spy planes will be cancelled. Key spending decision on Trident to be delayed until 2016.


Annual budget: £57.6bn
What's being cut: Overall, a 3.4% real term fall over four years. Five quangos to be abolished. But direct funding to schools in England is to be protected, their budgets rising from £35bn to £39bn. Confirmed £2.5bn "pupil premium" for teaching for disadvantaged pupils. Educational Maintenance Allowances to be replaced. Sure Start budget to be protected in cash terms.

Energy and Climate Change

Annual budget: £3.1bn
What's being cut: 5% annual budget cut, equivalent to 18% over the period. Plan for tidal barrage on the Severn estuary scrapped. But £200m funding for wind power development and £1bn for green investment bank.

Environment, Food and Rural Affairs

Annual budget: £2.9bn
What's being cut: 8% annual cut, equivalent to 29% over the period. More money for flood defence.

Foreign Office

Annual budget: £2.2bn
What's being cut: 24% cut in funding over four years. Reduction in Whitehall-based diplomats.


Annual budget: £106.4bn
Outcome: The NHS in England will get a 1.3% real terms rise in funding by 2015. New cancer drug fund to be provided. But £20bn in efficiency and productivity savings sought in NHS by 2014. An extra £2bn for social care by 2014-15.

Home Office

Annual budget: £10.2bn
What's being cut: Budget cut of 6% a year, equivalent to 24% fall over the period.
Police budget cut by 4% a year, focused on bureaucracy rather than manpower. Aim to maintain "visibility and availability" of officers on beat. UK Border Agency budget to fall 20%. Counter-intelligence budget to fall 10%.

International development

Annual budget: £7.7bn
What's being cut: The overseas aid budget is to be protected from cuts but not the department's other costs. Budget to rise to £11.5bn over four years to meet UN aid commitment. Aid to China and Russia to stop and reduction in administration costs.


Annual budget: £9.7bn
What's being cut: Budget to fall by 6% a year, equivalent to 23% over the period.
Plan for new 1,500-place prison to be dropped. 3,000 fewer prison places expected by 2015. £1.3bn capital investment in prison estate. Law Officers' Department budget to be cut by 24%. Cut in Crown Prosecution Service administration costs.

Northern Ireland/Scotland/Wales

Annual budget: £55.5bn
What's being cut: Scotland's block grant to fall by 6.8% by 2014-5. Central funding for Wales is to be cut by 7.5%. Northern Ireland funding to be reduced by 6.9% over four years.


Annual budget: £13.6bn
What's being cut: 21% budget cut over four years. £30bn set aside for capital spending, including £500m for Tyne and Wear Metro and Tees Valley bus network. Crossrail project to go ahead in London. Rise in regulated cap on rail fares to 3% above inflation for three years from 2012.


Annual budget: £4.4bn
What's being cut: 33% cut in budget over four years. Bank levy to be made permanent. £900m to target tax evasion. £1.5bn in compensation to Equitable Life policyholders hit by its near collapse. 15% cut in funding for Revenue and Customs.

Work and Pensions

Annual budget: £9bn in departmental spending
Separate welfare and pensions budget: £192bn
Outcome: State pension age for men to start rising from 65 in 2018 - six years earlier than planned - and reaching 66 by 2020. Rise in retirement age for women to accelerate, also reaching 66 by 2020. The measures combined will save £5bn a year. Reform of public sector pensions to save £1.8bn by 2015, with employees likely to contribute more. Winter fuel allowance, free bus passes and TV licences for 75-year-olds protected. Cuts to child benefit for higher rate taxpayers to generate £2.5bn. £2bn investment in new universal credit. Weekly child element on child tax credit to rise by £30 in 2012 and £50 by 2012.

What's being cut?: A further £7bn in welfare savings planned on top of £11bn already announced. A new 12-month time limit for the one million people on employment and support allowance to find work or face benefit cut. 10% cut in council tax benefit budget. New threshold on housing benefit. Maximum savings award in pension credit to be frozen for four years. Increased working hours threshold for working tax credits for couples with children. New total benefits cap per family

1st Floor, Midlands House, Hayes Lane, Lye, Stourbridge, West Midlands, DY9 8RD Tel. 01384 422002 : 07734 255403
Copyright Stourton Accountancy Services Ltd