Comprehensive Spending Review (CSR) Special | CSR in summary | CSR Press Coverage | Week in Review | The week ahead
Comprehensive Spending Review (CSR) Special
After much anticipation, and not a little trepidation, the Chancellor this week announced details of the Government’s Spending Review which fixed spending budgets for each Government department up to 2014-15.
With the government pledging to eliminate the structural deficit by 2015, Departments had been told to consider cuts of up to 40%. But while some tough decisions have been made, our view is that in some ways this is not as bad as it could have been. There were also some positive announcements in the protection of the science and education budgets and support for low carbon technologies.
Further details are outlined below and you can read our formal response here. The Spending Review also published lots of numbers, but we await further information on some of the detail and how it will be delivered.
Finally, however, we have agued that the government still needs to provide greater clarity on its strategy for growth, including how it will it will work with the private sector to leverage investment. We hope that this will be set out in further announcements expected in the next few weeks, such as the government’s proposed Manufacturing Framework
CSR in summary:
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Public Spending |
Total public spending is to increase from £702bn in 2011/12 to £740bn by 2014/15. Spending by government departments will fall by a cumulative 8% in real terms over the period, including real terms growth for the Departments for Heath; Work and Pensions and International development. |
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Capital Spending |
The Chancellor was announced an £2bn per year for capital spending, but this will still leave capital budgets over 45% lower at the end of the spending review period. He also outlined the go-ahead for a number of specific projects, such as Crossrail. As expected the Severn Estuary Barrage will not go ahead. |
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The BIS budget |
Will fall by 7.1% a year for the spending review period, the minimum it had been requested to find. Most of these savings will have to be found by cuts to the University budget; the science budget is being protected at £4.6billion a year, but this will still amount to a real term cut. We wait to see what the impact will be on business support, a review of which is expected to be published soon. |
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Skills |
The Chancellor announced that what he described as lower priority programmes like Train to Gain will be abolished and adult learners and employers will have to contribute more to further education. However, he also outlined a funding increase of 50% for adult apprenticeships, which would create 75,000 apprentices a year by the end of the Spending Review period. We await more detail on this. |
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Regional Growth |
As announced earlier, a Regional Growth Fund will be set up with £1bn of funding for two years, but the Chancellor announced a further £500 million for the fund for a third year. |
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Support for manufacturing/Ports Competition |
The Spending Review also included £200 million a year by 2014-15 to support ‘manufacturing and business development’, with a focus on supporting potential high growth companies and the commercialisation of technologies. This also includes funding for a network of research and development technology and innovation centres. The model upon which these could be based was set out in the Hauser Review, earlier this year.
An additional £200 million will be invested in manufacturing facilities at port sites and technology innovation to support the development of offshore wind power. |
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DECC’s Budget |
DECC’s resource budget will fall by 5 per cent a year during this spending review. However, the capital budget will receive a large increase, mostly to cover the nuclear decommissioning. |
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Green Investment Bank |
A Green Investment Bank would go ahead in 2013/14, with £1bn of initial funding, with further funding intended to be secured from the private sector and potentially any income from sales of public assets. EEF has long argued for this kind of mechanism to support green investment, but although £1bn sounds like a lot of money it may not be enough to leverage the billions of pounds of extra private sector cash needed. We also need further details on how the Bank will operate in practice. |
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Carbon Reduction Commitment |
Without any prior warning the Government announced that revenues raised from the Carbon Reduction Commitment, will now be retained by the Exchequer, instead of recycled to the participants as originally intended. The Treasury has estimated that this will cost the affected business around £1bn.
EEF is extremely disappointed with this decision, both in terms of its potential impact on members and the way in which it has been made without consultation. We will be making strong representations to government to see if there is anyway that the impact can be mitigated and lessons can be learned ahead of a forthcoming consultation on the Climate Change Levy and Climate Change Agreements. |
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Carbon Capture and Storage (CCS) |
The government has confirmed that £1bn funding will be made available for the creation of a commercial scale CCS demonstration plant. |
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Defence Review |
As part of the Strategic Defence Review, the Ministry of Defence is to see a cut of 8% to its budget. It was a mixed outcome for UK manufacturing capability, with an announcement that the aircraft carriers will go ahead, but other programmes such as Nimrod will be cancelled. |
CSR Press Coverage
Our response to the Spending Review was covered in, amongst others, the FT, Daily Telegraph, Daily Mail and the Birmingham Post whilst our specific criticism of the changes to the Carbon Reduction Commitment (CRC) was covered in the FT (registration required), Daily Telegraph and Guardian.
Week in Review
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↓ Public Sector Finances |
Public sector net borrowing was £16.2 billion in September and net debt rose to 57.2% of GDP. |
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↓ Retail Sales |
Retail sales saw their second consecutive monthly fall in September however compared with a year ago total sales were 2.4% higher. The underlying trend in growth in sales has been slowing over the past quarter. |
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↑ Trends in Lending |
The Bank of England’s data show that lending to businesses increased in August, nut noted that the availability and terms of credit were improving for large businesses while conditions continued to remain more difficult for smaller companies. |
The week ahead
Tues 26th: GDP 2010q3 preliminary estimate
Fri 29th: Lending to individuals
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