Savings (2010-11)

Wednesday 26th May 2010 Written Statements

[The Chief Secretary to the Treasury (Mr David Laws)]

The coalition agreement set out that the Government would make modest cuts of £6 billion to non-frontline services within the financial year 2010-11 to help tackle the UK’s £156 billion deficit.

The Chancellor of the Exchequer and I have set out this week details of £6.243 billion of savings from Government spending in 2010-11 in line with the coalition agreement.

Spending on health, defence, overseas aid, schools, Sure Start and education for 16 to 19 year-olds has been protected in this exercise, with in-year efficiencies recycled back into budgets.

Outside local government and the devolved Administrations, the savings are allocated across different areas as follows:

£1.15 billion in discretionary areas like consultancy and travel costs;

£95 million through savings in IT spending;

£1.7 billion from delaying and stopping contracts and projects, including immediate negotiations to achieve cost reductions from the major suppliers to Government;

£170 million from reductions in property costs;

At least £120 million from a recruitment freeze across the civil service for the rest of 2010-11;

£600 million from cutting the cost of quangos; and

£520 million by reducing other lower-value spend.

In addition, £1.165 billion of savings will be made in local government by reducing grants to local authorities. Alongside this, the Government will remove the ring fences for over £1.7 billion of grants to local authorities in 2010-11, giving them greater flexibility to find the required savings.

The devolved Administrations will have the option of either making savings this year or deferring their share of the savings, which totals £704 million, until the next financial year.

As part of these savings, the Government will deliver £10 million from reducing first-class travel, and will limit the ministerial entitlement to a dedicated car and driver, saving at least one third from the cost of the Government car service.

The savings allocated to each department are as follows:

Department for Education—£670 million;

Department for Transport—£683 million;

Communities and Local Government—£780 million;

CLG Local Government—£405 million;

Business, Innovation and Skills—£836 million;

Home Office—£367 million;

Ministry of Justice—£325 million;

Law Officers’ Departments—£18 million;

Foreign and Commonwealth Office—£55 million;

Department for Energy and Climate Change—£85 million;

Department for Environment, Food and Rural Affairs—£162 million;

Department for Culture, Media and Sport—£88 million (includes responsibility for £27 million of savings from the Olympic Delivery Authority);

Department for Work and Pensions—£535 million;

Chancellor’s Departments—£451 million (includes £320 million of savings in annually managed expenditure from reducing the Child Trust Fund);

Cabinet Office—£79 million; and

Devolved Administrations—£704 million.

Reductions to departmental budgets will be made immediately, and reflected at both the Budget on 22 June, and in Main Estimates, which will go before Parliament.

The great majority of the £6.243 billion of savings will be used to reduce the deficit. However a total of £500 million will be reinvested as follows:

£50 million of Government investment in further education colleges, which colleges will be able to leverage to create a £150 million fund to provide capital investment to those colleges most in need.

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

£170 million to safeguard delivery of around 4,000 otherwise unfunded social rented homes to start on site this year.

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

Barnett consequentials in these areas will be paid at the same time as devolved Administrations make their contribution to the £6.243 billion, making a total of £500 million reinvested savings.

The savings will be driven by the new efficiency and reform group, whose board will be chaired jointly by the Minister for the Cabinet Office and Paymaster General, the right hon. Member for Horsham (Mr Maude), and myself. The group will be formed by pulling together existing capabilities, drawing on expertise of officials from across Whitehall. As well as helping Departments to deliver savings, the group will oversee an immediate freeze on non-critical spending on consultancy, advertising, and recruitment of non-frontline civil service staff. The group will be comprised of existing civil servants, and will be located within existing premises, with no additional cost to departmental budgets.