Better services while spending less?

Publication date

Wednesday, November 25, 2015

Approval date

Wednesday, November 25, 2015

When the Conservatives came to power in 2010 (with the Lib Dems), government spending took up 45% of national income. According to Chancellor George Osborne, it now takes under 40% and is forecast to reach 36.5% by the end of the Spending Review.

Spending less does not mean poorer services, he told Parliament, far from it. He then explained how he would square this tricky circle. Here’s a summary of his Autumn Statement.

Apprenticeships

The apprenticeship levy is to be set at 0.5% of employers' pay bill. This should raise £3 billion a year. There will however be a £15,000 allowance, so "98% of employers" will not pay.

Education

A new school funding system will come into force from 2017, following consultation. The Chancellor said that sixth form colleges will be able to become academies, so that "they do not have to pay VAT".

Free school meals and the pupil premium will be maintained.

Employment

The independent Office for Budget Responsibility (OBR) has told the Chancellor that his plans will result in "more than a million" more jobs created over the next five years.

Energy

A new Shale Wealth Fund which could be worth £1 billion will be used for those communities affected by fracking industry. Spending on energy research will be doubled (although DECC's day-to-day spending will fall by 22%). The Chancellor expects his reform of the renewable heat incentive to save £700 million.

Enterprise Zones

The Chancellor announced that 26 more Enterprise Zones will be established. They will include 15 in towns and rural areas "from Carlisle to Dorset to Ipswich".

Growth

Forecast at 2.4% in 2015, GDP will stay at that level next year and rise slightly in 2017 to 2.5% before falling back to 2.4% in 2018 and 2.3% in 2019 and 2020.

Housing

The housing budget will be doubled to £2 billion to deliver "400,000 affordable new homes" by 2020. There will be a 3% increase in stamp duty for buy-to-let properties and second homes, effective from next year. duty. The revenue will be reinvested back in local communities.

Right-to-buy will be extended to housing association tenants (as promised in the Conservatives' election manifesto) with an immediate pilot scheme in five housing associations.

Local Government

Councils will be allowed to levy a 2% council tax precept, potentially worth £2 billion, but all the money raised must be spent on social care. DWP job centres will be "co-located" with local authority buildings.

Local authorities will be able to keep 100% of receipts on assets they sell to spend on local services. The central government grant to councils is to be scrapped with councils keeping all revenue from business rates by the end of this Parliament. The uniform business rate will be abolished.

NHS

While a £10 billion real increase has already been announced, with £6 billion to be paid next year, £22 billion of efficiency savings must be made. There will be an extra £600 million funding for mental health services. Grants for student nurses are to be scrapped and replaced by loans.

Northern Powerhouse

Rail electrification for Trans-Pennine, Midland and Great Western lines will go ahead and Transport for North will be set up to identify how best to drive economic growth in the North through strategic investment in transport. The Government will support Hull during its year as City of Culture (2017).

Pensions

From 2016, the basic state pension will rise by £3.35 to £119.30 a week. This will be the biggest real-terms increase in 50 years, according to the Chancellor.

Police

There will be no cuts in police budgets ("the police protect us and we are going to protect them").

Small businesses

The Chancellor expects 600,000 small firms to benefit from an extension to the small business rate relief scheme.

Taxation

Perhaps the biggest surprise in the statement: everyone knew the Chancellor would have to do something about tax credits (following defeat in the House of Lords) but not many expected the £4.4 billion cuts to be scrapped altogether. Possible, according to Mr Osborne because of improved public finances. With universal credit on its way, the tax credit taper rate and thresholds therefore remain unchanged.

Promising further attacks on tax avoidance, Mr Osborne said that action would be taken against "disguised remuneration schemes" and stamp duty avoidance.

Transport

The Chancellor gave a £250,000 commitment to help with "Operation Stack" — the present system whereby lorries are parked on the M20 whenever there are problems at the port of Dover.

Having outlined the largest road investment programme since the 1970s, Mr Osborne then gave drivers the good news that the UK now has a "permanent pothole fund".