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Comprehensive Spending Review : 20 October 2010

The coalition government’s long-awaited spending review has been unveiled. The cuts are among the deepest seen in many years. On average Whitehall departments will experience a 19 per cent cut in their budgets as the government seeks to reduce the deficit with £83 billion of savings. The Chancellor described the cuts as informed by fairness, reform and growth.

The most stark of the announcements included the loss of 490,000 public sector jobs, £7 billion of additional welfare cuts on top of the £11 billion already planned, and the decision to raise the state retirement age for both men and women to 66 by 2020. The NHS, however, is to benefit from a small, real terms rise in income, while schools are to see their budgets increase from £35 billion to £39 billion.

Businesses will be interested to learn that the government will be creating an extra 75,000 adult apprenticeship places and moving ahead with its consultation on how best to make the PAYE system less of an onerous administrative duty for employers.

The Green Investment Bank, which will encourage the low carbon economy, is to go ahead with an initial capitalisation of £1 billion.

An outline summary

Spending reviews have been part of the governmental landscape since the late 1990s, but none have garnered quite the anticipation of the one which the Coalition government has just delivered.

The cuts revealed in their full extent

The Chancellor, George Osborne stood up in the House Commons to detail the largest series of public spending cuts seen in decades.

Lessons and challenge from the spending review

In many ways the spending reductions made by the Chancellor were largely anticipated. The size of the current deficit has grown to over £160 billion this year and it was acknowledged by most that decisive action needed to be taken in order to head off a deeper deficit problem in years to come.

Low carbon economy

The Department of Energy and Climate Change will find that its resource spending is to be reduced by 18 per cent in real terms over the next four years.

Transport

The government has committed itself to £30 billion of investment in the transport system but has also announced that capital spending by the Department of Transport is to be cut by 11 per cent.

Pensions

One of the headline statements in the spending review was the anticipated confirmation that the state retirement age for men and women is to be equalised at 65 by November 2018.

Tax

Like most other government departments, HM Revenue and Customs (HMRC) is to lose some of its budget as a result of the spending review.

Employment and PAYE

It was widely expected that the spending review would focus on welfare funding. One of the areas to be affected by the cuts is employment.

What they said about the Comprehensive Spending Review

The response to the Comprehensive Spending Review was, of course, mixed with some condemning the severity of the cuts while others applauded the boldness and approach to the announcements.

In advance of the review

There continues to be considerable publicity surrounding the Government's spending plans. The Conservative party conference heralded changes to the child benefit and we now await further details which we expect will be included in the 20 October announcements.