Question to the HM Treasury:

To ask His Majesty's Government whether the 2 per cent productivity, efficiencies and savings target mentioned in the Autumn Budget is the same as, or additional to, the reduction in administration budgets by 2 per cent announced in Fixing the foundations: public spending audit 2024–25 (CP 1133) in July; and whether they expect that these savings will be sufficient to fund public sector pay settlements in 2025–26, or whether any above-inflation pay rises will require separate and additional improvements in efficiency and productivity.

In the Autumn Budget, the Chancellor set a 2 per cent productivity, efficiencies, and savings target for all departments for 2025-26. This builds on plans to bear down and reprioritise administrative budgets to help fund 2024-25 pay pressures announced in Fixing the foundations: public spending audit 2024-25. Administration budgets cover the costs of all central government administration other than the costs of direct frontline service provision.

As set out in the Autumn Budget, departmental settlements for 2025-26 will need to fund the next round of public sector pay awards, and departments will set out their affordability evidence to the Pay Review Bodies (PRBs) in the usual way, taking account of expected inflation over the next financial year, forecast by the OBR to be 2.6%. If the PRBs recommend pay awards above the level departments have budgeted for, the government will have to consider the justification – for example where there are especially acute recruitment and retention demands, or where productivity improvements can unlock further funding.