Commentary led by Jim Pickard and Alex Barker of the FT’s political team, Michael Hunter, markets reporter, Gordon Smith, FT.com’s deputy news editor, Martin Sandbu, editorial writer and co-ordinated by Darren Dodd, of the UK newsdesk.
The chancellor sat down in the House of Commons at 1.33pm
JP: Osborne’s stroke of genius is to announce departmental cuts of 19 per cent – just lower than the 20 announced by Labour in March. Let’s wait to find if he is comparing apples with pears.
Average savings in departmental budget to be lower than the average implied in Labour’s March budget. Instead of average cuts of 20 per cent, there will be cuts of 19 per cent per department
Osborne says: “The measures set out today bring sanity to our public finances”
£15.8bn to refurbish schools
Schools budget to rise from £35bn a year to £39bn
More on education: Early years education budget for schools to rise over each of the next four years. New £2.5bn pupil premium for disadvantaged children. And Sure Start services budgets will be protected in cash terms
Now for transport: The cap on rail fares will rise to retail price index plus 3 per cent for 3 years from 2012. £30bn to be invested in various transport projects over the next 4 years. M25 will be widened between 10 junctions. Crossrail will go ahead among other investments in Britain’s transport infrastructure
The BBC’s online budget will fall and it will not expand its activities competing with local media
Pilots of super-fast broadband to be started in the coming months
Now for the BBC: The BBC will take from the government the responsibility for the World Service. The licence fee will be frozen for the next six years
Osborne says there will be £1bn to set up a “green investment bank”
JP: There is a 50 per cent increase in funding for apprentices. But the chancellor isn’t spelling out which schemes will suffer to pay for this – my bet would be the £1bn ‘train to gain’ fund (used to help companies send staff on training).
£220m invested in the UK Centre for Medical Research and Innovation at St Pancras. £200m to be invested in developing wind technology
Now for science: The science budget is protected at £4.6bn a year
On education: The idea of a “pure graduate tax” has been rejected
JP: The Equitable Life announcement is as expected: it was leaked a few weeks ago.
Osborne continues: Equitable Life policy holders will receive £1.5bn. With-profits annuity holders to be paid in full. Payments to start next year
AB: Lots of obscure changes to benefits saving around £7bn. One that interested me is the change to the age threshold on housing benefit for single people. It basically means that any single person under 35 will be unable to live alone on housing benefit. They’ll need to flat share from now on.
The government is targeting £20bn of NHS savings by 2014-15
Now for health: Total health spending will rise every year over and above inflation in every year covered by the spending review. Osborne says. Spending to be £114bn by 2014. Savings made from efficiencies within the NHS will be re-invested in healthcare
Cold weather payment increase to be made permanent, Osborne continues
Child element of the Child Tax Credit up by a further £30 in 2011/12 and £50 in 2012/13 above indexation, helping 4m of the poorest families, he says. No further changes to child benefits are required aside from the abolition of payments to higher rate tax payers which saves £2.5bn a year
The government is targeting £7bn a year of savings from the welfare budget, he adds
The working tax credit eligibility rules will be changed so couples must work 24 hours a week between them, Osborne says
Extra £2bn set aside to implement universal credit
JP: The grants for social housing are being slashed by 60 per cent – down from 8.4bn over 3 years to 4.4bn over four years. That could mean a big drop in new homes built by the sector.
Local authorities will be given greater autonomy to manage council tax revenues
There will be a shake-up of tax credit system for families
AB: The savings of £1.8bn savings from public sector pensions that Osborne wants to find imply an increase in contributions of around 2 per cent. That effective pay cut for millions of public sector workers will be higher once exemptions for the armed forces and low earners are taken into account.
JP: First big example of a decision fudged, as Osborne says pension contributions will go up for state workers – but does not say by how much. We will have to await Lord Hutton’s final report and further consultation.
Final salary pension scheme for MPs to end, says the chancellor. Single universal tax credit scheme to be created and introduced over next two parliaments
Jamie Chisholm from our markets team adds: Forex, equity and gilt traders apparently watching the statement in the pub. Not a twitch so far.
There must be an increase in public servant pension contributions, says Osborne
JP: Osborne is taking credit for relinking pensions to earnings – yet Labour had already set the scene for this. That is why MPs are goading each other across the floor.
Osborne continues: The state pension age for men and women will be raised to 66 by 2020
MS: It will be interesting to see the charts showing the rich will shoulder the biggest burden, even including their use of public services. Aiming to maximise tax take from banks is quite a new attitude to the sector. Uncertainty remained pretty big until today.
£900m to be spent on targeting tax evasion and fraud to target £7bn of tax losses
Code of practice for banks to be implemented from next month
Osborne: Legislation on permanent levy on banks to be published tomorrow
Four out of 15 banks signed up to the UK financial code of conduct
The government’s objective in taxing banks aims to extract maximum sustainable tax revenue from banks without driving them abroad
AB: Osborne has not been keen about using percentages. He prefers deploying absolute numbers and partial numbers without comparisons. Probably understandable when it’s a cut of more than 60 per cent (social housing). This is a trick Gordon Brown relentlessly used as chancellor.
Higher-income taxpayers will contribute more to the deficit reduction plan both as a proportion of their income as well as in absolute terms
Reforms to criminal justice system to include cuts to Ministry of Justice budget to £7bn
Next month, each governement department will publish a business plan setting out spending priorities so that they can be held to account
Chancellor continues: Ministry of Justice cost reductions of 6 per cent per year
MS: One victory for Gordon Brown: protecting DFID spending is now requirement for decency
Home Office spending to be cut by an average of 6 per cent a year
Prioritising counterintelligence spending in national and local police forces
Police spending to cut by 4 per cent a year until 2014-15
International Development budget up to £11.5bn by 2014/15
Savings of 24 per cent in the Foreign Office budget will be reached by cutting the number of Whitehall-based diplomats among other measures
Osborne confirms cut for defence forces at 8 per cent over length of spending review
JP: Confirmation that council finances to be cut by 30 per cent in real terms, as we reported in this morning’s FT. Brace yourself for charges to go up and services to be slashed. Eric Pickles will seek good publicity for a one-year freeze in council tax, costing 650m. I’m not sure this makes up for the cut of about 16bn (in cash terms) to council grants, currently at 80bn a year.
AB: We probably should be wary of the increase in cuts to waste. Osborne said his estimate of savings from the admin budget had now increased from £3bn to £6bn. But that still amounts to the 33 per cent cut in Whitehall admin he promised in opposition. Worth remembering that most admin budgets are made up by staff costs. That means job losses.
Osborne says social housing system will be reformed – the terms for existing social tenants will remain unchanged, new tenants will pay 80% of local commercial rents. Housing stock to be improved through existing programme
Martin Sandbu: Seems like one-half of “massive devolution of fiscal control” – end ring-fencing on spending side, but what about local tax-raising powers?
All ring-fencing of local government grants will be abolished
Local councils to cut spending by 7.1 per cent for 4 years, Osborne continues
JP: Part of the cabinet office is moving into the treasury. My intell is that this just a foretaste for a major shake-up of the entire Whitehall estate.
Temporary additional facility of £1m to to support the costs of the historic Diamond Jubilee
The Royal Household will then receive a new sovereign support grant linked to a portion of the revenue of the Crown Estate
The Civil List cash freeze for one-year remains; total Royal Household spending will fall by 14 per cent in 2012-13 while grants to the Household will be frozen in cash terms
Treasury budget to be cut by 33 per cent over next 5 years
Cabinet office budget to fall by £55m by 2014-15
Unless we deal with the deficit, many more jobs will be in danger, Osborne says
JP: It hasn’t taken Osborne to trot out his favourite cliche: ‘we’re all in this together’. Less than ten minutes in.
The best estimate for headcount reduction in the public sector over the next four years remains 490,000 people including some redundancies
The administrative budgets of every major government department will be cut by a third, Osborne says
Public sector reform – the spending review’s far-reaching programme of public sector reform begins by addressing waste to save costs, Osborne says
JP: Osborne is several minutes in but it’s still largely throat-clearing. We have heard much of this before in the June budget.
Capital spending to be £51bn next year then falling to £49bn, £46bn and £47bn in 2014-15, £2bn higher than previously stated
Total government spending in 2011/12 will be £651bn; in 2012/13 it will be £665bn and in 2013/14 £679bn
Osborne continues: The current spending totals set out in the Budget for each of the next four years are the same as set out today – the figures have not changed
JP: Labour MPs don’t agree with Osborne’s claim that Britain is out of the financial danger zone – that prompted loud and sustained murmurings.
Now for the meat: I can confirm the budget I set out today will achieve a balanced budget by 2014-15, he says
To back down now and abandon our plans would be the road to economic ruin, he adds
The new Office of Budgetary Responsibility has audited today’s statement, the chancellor says
Alex Barker: One of Osborne’s big political attacks in this spending review will be over the average level of departmental cuts. We expect him to spare public services from the 20 per cent cuts planned by Labour (he said there would be coalition cuts of around 25 per cent). Capital spending may also be increased. It’s a pretty transparent attempt to trip up Alan Johnson and underline that Labour also planned wield the axe. But be careful. He may well be comparing apples and pears. We’ll have to see the details – this could well be a wheeze with budget baselines.
The action taken since May has taken Britain out of the financial danger zone, says Osborne
The UK is paying £43bn per year in debt interest
UK has the largest structural deficit in Europe at £109bn
Tackling budget deficit is unavoidable says Osborne
JP: The big question is how much detail will we get. Many ministers had argued for getting the bad news out in one fell swoop; that seems unlikely however. Many big decisions have been deferred – meaning further weeks of grim news.
12:31 The Chancellor stands up in the House of Commons to deliver the government’s comprehensive spending review
Jim Pickard says: Prime minister’s questions began at noon. Consider it a skirmish before the main event at 12.30. The house is packed with MPs, journalists and visitors and the air is thick with anticipation. After all today’s CSR is one of the biggest events in recent history.
We are sat up on the green benches of the lobby gallery looking down on Miliband vs Cameron.
Miliband was not too bad, although he sounded slightly petulant on occasions. He tried to nail the government over Ken Clarke’s recent warning that Europe was not immune to a double-dip recession. But Cameron side-stepped the charge.
Miliband also remains vulnerable to Cameron’s accusation that he doesn’t have a realistic alternative: ‘Let me give him one piece of advice – if you haven’t got a plan you can’t attack a plan. He hasn’t got a plan so he has nothing to say’.
Senior labour figures admit in private that the coalition charge of ‘deficit denial’ has stuck in the public mind. The new leader’s challenge is to change that perception.
Welcome to our live coverage of the Comprehensive Spending Review. Leave your comments in the box at the bottom of this post
The FTSE 100 was trading 16 points higher at 5,719.47 ahead of the chancellor’s much-awaited spending review, sterling was up 0.1 per cent against the dollar at $1.5718 and the yield on 10-year denominated gilts was down 1 basis point on the day at 2.984 per cent
For news, analysis and interactive graphics on the spending review, visit www.ft.com/csr
Jim Pickard
Kiran Stacey