Government announces £6.2bn cuts, looks to local government for 20%

Chancellor George Osborne and Chief Secretary to the Treasury David Laws have today announced measures to make £6.2 billion of savings in 2010-11. The package includes £1.165 bn of savings to be made in Local Government by reducing grants to Local Authorities.  

This means that local government will have to contribute 20% of the cuts. It leaves local government carrying the can for wasteful spending in Whitehall and footing the bill for political promises on those areas of ‘protected’ spend. The bright spot is that some ring fencing will be removed to give councils more flexibility at a local level, but to make this much more effective, councils should be given the responsibility to bring together all local public spending using a Total Place model. More details below the fold…

Key points for Local Government

• The Government will remove the ring fences around over £1.7bn of grants to local authorities in 2010-11

• Local Government will make a contribution of £1,165m towards the overall saving of £6.2bn across Government in 2010-11 through reductions to individual grants to Local Authorities

• There will be no reduction to formula grant (£29bn)

• £270m from ending lower value RDA spending

Education and Families

• Schools, Sure Start and spending on education for 16-19 year-olds will be protected from these in-year cuts

• £320m will be saved from reducing and then stopping government contributions to the Child Trust Fund. The Government intends to introduce legislation to scale back payments from August this year and then stop payments from 1 Jan 2011

• £80m will be saved from closing the British Educational Communications and Technology Agency (BECTA) and other savings in Department for Education quangos

Savings across Government

• £1.15bn in discretionary areas like consultancy and travel costs

• £95m through savings in IT spending

• £1.7bn from delaying and stopping contracts and projects, including immediate negotiations to achieve cost reductions from the major suppliers to government

• £170m from reductions in property costs

• at least £120m from a recruitment freeze across the civil service for the rest of 2010-11

• £600m from cutting the cost of quangos

• £520m by reducing other lower value spend.

Areas for investment

A total of £500m out of the £6.2bn of savings will be used to invest in improving Britain’s growth potential:

• £50m of Government investment in Further Education colleges, which they will be able to leverage up to create a £150m fund to provide capital investment to those colleges most in need

• £150m to fund 50,000 new apprenticeship places, focused on small and medium enterprises

• £170m to safeguard delivery of around 4,000 otherwise unfunded social rented homes to start on site this year, protecting 3,500 jobs and prioritising provision for the most vulnerable

• £50 million for action to tackle backdated business rates bills, including a freeze on payments for 2010-11

Departmental Savings:

Department Departmental contributions in 2010-11

Department for Education 670

Department for Transport 683

Communities and Local Government 780

CLG Local Government 405

Business Innovation and Skills 836

Home Office 367

Ministry of Justice 325

Law Officers’ Departments 18

Foreign and Commonwealth Office 55

Department for Energy and Climate Change 85

Department for Environment Food and Rural Affairs 162

Department for Culture Media and Sport 88*

Department for Work and Pensions 535

Chancellor’s Departments 451**

Cabinet Office 79

Devolved Administrations 704

TOTAL 6243

Source: HM Treasury