Comprehensive Spending Review

Comprehensive Spending Review

(First Published November 2010)

The Comprehensive Spending Review was published by the Coalition Government today, and the implications of this are just starting to be analysed. But even at this early stage, it seems clear that in all areas of public expenditure, the government will be looking for more efficiency and economy in the ways in which money is spent. Even in areas such as the NHS, which has been left relatively unscathed, examples of savings and more productive ways of delivering health services will be expected, to the tune of £20 billion pounds by 2014. The level of cuts in local councils will also have an impact on the work commissioned from them, affecting charities and not-for-profit organisations. Reductions of budgets in the culture, media and sports ministry will also have an impact on smaller organisations in performing arts, although museums have done relatively well out of the review.
Plenty of food for thought.

Brief highlights below from the news headlines:

  • 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

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, and an additional 15 hours of early years support for young children per week to be allocated.

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.

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.

Local Government
What’s being cut: Budget cut of 26% over four years. Bureaucracy and red tape to be reduced , and greater flexibility and freedoms over the allocation of funding given to local authorities. Additional £2 billion for social care by 2014/15. Greater requirement for imaginative and creative ways in which to meet the needs of local people. Cuts to Fire Services will only take place after 2012, and an £6.5 billion will be allocated to decent housing

So, what are the implications?
There is still some way to go before the full implications of the spending review will be known, but it is clear that some, if not all, of the following will result from these changes:

  • Massive cultural change will be required to fulfil the government’s ambitions. All public sector organisations will need to change the way in which they work to meet the conflicting demands of high expectation levels form service users, and lower rates of funding.
  • Much more emphasis on partnership working e.g. across sectors (health, education and social care in particular)
  • Impact of changes to benefits on issues around poverty, deprivation and housing. Will this put a strain on other services? How will the third sector respond to what is certain to be a higher demand on their services, whilst at the same time, charitable donations are falling? Can the tension between different public sector bodies be managed more effectively so that the energy that goes into protecting budgets allocated to the different services is directed into more productive work?
  • Importance of managing transition really effectively or the ability to manage the day-to-day delivery of services will falter. Managing in a time of radical change is always challenging, and those organisations that do not manage the transition well, will find their position in the market place severely jeopardised.
  • There will be opportunities for new players in the market, taking the form of either competition or collaboration. The private and voluntary sector will spot new models of service delivery and there will be a greater number of different business models e.g. social enterprise.
  • Change to regulation and regulators doesn’t mean less focus on performance, but it does sweep away much of the bureaucracy. Organisations will be expected to determine their outcomes and demonstrate their success. If not they are at risk.
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