Spending review: our correspondents’ verdicts

Spending review conceals ‘a lot of pain’
Gary Gibbon, Political Editor

George Osborne’s making much of having undershot Labour’s notional departmental spending average of 20 per cent. But that’s a dubious comparison. And it conceals a lot of pain … on public sector jobs, public sector pensions, welfare, still on capital spending, despite the £2bn uplift.

There’s detail still to come on the impact of the housing budget cuts, just what various constabularies intend to cut in terms of police numbers and much, much else. The £6bn forecast for administrative savings on top of all the savings already announced will be classified by some as an “heroic assumption” – for the record it’s the one third cut the Tories promised in opposition. It will be largely jobs as that is what administrative costs are largely taken up by.

Labour says it will prove later on that the money flashed around by Nick Clegg last week for the pupil premium was raided out of other parts of the Education budget and makes a nonsense of the schools budget being protected. They’ll also say that the tiny increase in spending on schools doesn’t anyway match 0.7 per cent increase pencilled in by Ed Balls as Schools Secretary which he always said was necessary just to stand still with increasing school rolls.

Read more analysis from Gary Gibbon here.

The numbers
Faisal Islam, Economics Editor

The word “progressive” was notable through its absence in today’s statement by the Chancellor.

George Osborne famously pronounced at the Emergency Budget: “This is a progressive Budget”, before those claims were slowly dismantled by the IFS. There was never any chance that the Chancellor would announce that: “This is a progressive spending review”.

The actual impact of today’s spending review measures are undoubtedly and visibly perfectly regressive, according to the Treasury’s own chart on page 98.

Even if you include the tax changes from the Budget (which were principally inherited from Labour plans), the percentage hit in the Treasury’s own distributional table shows the poorest 10 per cent are the second worst hit.

The Treasury view is that they have got the fiscal consolidation as progressive as would be imagined. Over at the DWP, they say that the impact of the new Univeral Credit will also benefit the poorer deciles that are particularly hard hit.

The most shocking number was the monumental mistake that saw the saving from clawing back child benefit from higher rate tax payers surge from £1.2 billion to £2.5bn. As we here at Channel 4 News have argued for the past three weeks, the number of households affected is far in excess of the 1.2 million originally claimed. It is more like 1.5 million people with someone earning above £42,500.

Read more analysis from Faisal here.

Health services
Victoria Macdonald, Social Affairs Correspondent

As expected, the Coalition Government has protected health spending – 1.3 per cent in real terms over the four years. That will put it up to £114bn by 2014/15. Some of this will be helped by a 33 per cent reduction in the administration budget and a 17 per cent decrease in capital spending.
And within that money we will see extra funding for social care. That will rise by £2bn per year by 2014-15.

There will also be an expansion of access to talking therapies (although that will depend on enough trained therapists), the new cancer drugs fund, which was announced earlier, funding for priority hospital scehemes and NHS health research.

On the other hand, and this is very disappointing, they have abandoned the promise by the Labour government to expand free prescription entitlements to those with long-term conditions and nor will they implement the one to one nursing for cancer patients and the one-week wait for cancer diagnostics.

There are some practical measures such as no longer requiring Primary Care Trusts to deliver hard copies of ‘Your Guide to NHS Services’ to every household. This will save somewhere between £1.5m and £2.5m over the four years and seems sensible given the pressures on the NHS.

But therein lies the rub. The pressures are increasing rapidly with the growing elderly population and for all the government might talk about real terms spending they are at the same time demanding £20bn of savings over the four years. This is already having an enormous impact with the closures of accident and emergency units and job losses. One estimate is 15,000 jobs gone over the past nine months alone.

There is a consensus that there will be pain as the NHS works out how to make these savings.

Higher Education
Victoria Macdonald

So the fear of an 80 per cent cut in the money given to universities for teaching only half came true. Forty per cent, nevertheless, remains a huge amount for higher education institutions to lose and the likelihood is that it will be courses like English, the humanities and the arts that will suffer disproportionately because of the government’s promise to fund the scieneces, technology, engineering and maths-based subjects.

Although the Coalition Government has promised to respond at a later date (possibly as early as tomorrow) to the Browne Review, published last week, there was a clear indication of things to come.

George Osborne, the Chancellor of the Exchequer, said: “Clearly better-off graduates will have to pay more – and this will enable us to reduce considerably the contribution that general taxpayers have to make to the education of those who will probably end up earning much more than them.”

Further education will also be cut by £1.1bn or 25 per cent over the next four years and “adult learners and employers will have to contribute more”, the Chancellor said.

There will be a new £150m National Scholarship fund to support students from disadvantaged backgrounds – part of a £7bn package announced by Nick Clegg last Friday, which also included his pupil premium and the funding of pre-school places for two-year-olds, also from disadvantaged backgrounds.

Ministry of Justice
Andy Davies, Home Affairs Correspondent

For months now there has been speculation about the gravity of the cuts facing the Ministry of Justice. Today’s announcement that 23% will be cut from the budget over the next 4 years will hardly send shock waves through the criminal justice system.

Remember – this was a department whose boss, Ken Clarke, positively embraced (at least in public) the opportunity to slash spending in his Ministry and usher in his “rehabilitation revolution”. It will, however, have major ramifications for the future landscape of the penal system.

The prison population will shrink, courts will be closed, fewer people will have access to legal aid (up to £350m cut from budget), and those supervising offenders in the community have already warned that they will have to make tough decisions over which offenders to prioritise.

Declaring himself to be “quite comfortable” with this settlement this morning, Ken Clarke questioned why there were “11,000 foreigners”, as well as those with mental health problems, in prison. His public contempt for what he calls the “warehousing’ of criminals”, together with today’s far-reaching budget cuts will see – we have now learned – a likely reduction of 3,000 prisoners in England and Wales by 2014-15.

It is a relatively small percentage of the current prison population (85,000) but the ambition is clear. The diversion of offenders away from prison to be placed on schemes such as community payback is a central feature of Mr Clarke’s “radical reforms”, but it will present the Ministry of Justice with one its biggest challenges.

As Channel 4 News revealed last night, a leaked MOJ memo anticipates that more than 9,000 prison and probation staff jobs will go over the next four years.

“The Front Line”, details the memo, “will bear the brunt”. But how robust, precisely, is the front line? When Channel 4 News surveyed Probation Trust Chief Executives (those in charge of supervising offenders in the community) earlier this year, only 15 per cent of those who responded said that the Probation Service currently “had the capacity to cope effectively with a move away from short custodial sentences to more community-based sentences”.

It is an alarming assessment. The probation chiefs also warned that even with just a 10 per cent cut to their budgets, not a single one of them surveyed could offer the required levels of public protection all of the time. They are now facing much bigger cuts than that.

Foreign Office and DfID
Lindsey Hilsum, International Editor

Sigh of relief at the Department for International Development – cry of anguish at the Foreign Office.

DFID’s budget, as predicted, will rise until it reaches 0.7 per cent of GDP in 2013. But the Foreign Office has to cut its budget by 24 per cent, primarily by reducing the number of diplomats based in Whitehall. It will no longer fund the BBC World Service, one of its most prestigious activities – the BBC will fund it from the frozen licence fee.

For years now, DFID’s power has been waxing and that of the Foreign Office waning. It started under the last Tory government and continued through Labour administrations. Tony Blair made sure that key foreign policy decisions were made in Downing St not at the Foreign Office. The new Foreign Secretary, William Hague, pledged to redress the balance – but today’s budget suggests that he may not succeed.

Read Lindsey Hilsum’s blog in full here.

Science research
Tom Clarke, Science Correspondent

Britain’s scientists and engineers reacted warmly to the news that research budgets have been frozen, but not cut. While this translates to around a 10 per cent cut in real terms over four years – it is far less than many of them feared.

“It is wonderful to learn that Government has listened to the scientific community. Collectively we have made the case that funding science is not a cost but a way to invest in creating a stronger economy which is the best way to guarantee the recovery that will benefit everyone,” said Professor Colin Blakemore, former head of the Medical Research Council.

But it would be wrong to conclude that a 10 per cent cut won’t seriously impact research and development in the UK – a sector which will be central to Britain’s economic recovery in the medium to long-term.

A report by the Royal Society in March warned that any cut to UK science funding could lead to ‘brain drain’, to countries which have responded to the financial crisis by boosting research budgets. In response to the downturn US has increased science funding by $21bn. France and Germany have also committed to increase central education and research budgets.

Prof Peter Weissberg, Medical Director of the British Heart Foundation, said he was releived that science has been spared the deepest of cuts. But “even at about 10 per cent down, we’ll be playing catch-up in an international field which could see UK science left behind”.

It’s not yet clear where the axe will fall for Britain’s scientists and engineers. Money for different research areas such as medicine, physics and engineering is distributed by the research councils. They have been asked to argue among themselves how the 10 per cent cut burden is shared.

Department of Energy and Climate Change
Tom Clarke

While all about them are losing theirs, the budget for the Department of Energy and Climate Change has actually gone up by around 18per cent. However – like everyone else – it won’t have any more money to spend. Treasury has awarded it more cash to pay the increasing bill for managing Britain’s nuclear waste legacy.

One high profile cut is to the Warm Front which improves insulation and heating in low income homes. It’s been cut by two-thirds. There is no detail on how the new scheme will be delivered, but it’s expected current recipients on certain types of benefit like Disability Allowance, may lose eligibility.

The Department of Energy – being part of the “greenest government ever” – also announced £1bn for a Green Investment Bank. The scheme is very popular with environmentalists and economists alike but the £1bn seed money is about four times less than what these experts say is needed to make it deliver.

Department for Environment Food and Rural Affairs
Tom Clarke

Defra must make cuts of a third overall – around £700 million over four years. The Environment Secretary Caroline Spelman said today that much of the saving will come from Defra’s back office and cuts to “arm’s length bodies” like the Environment Agency, British Waterways, Natural England and organisations it supports, like Kew Gardens. In total 5,000-8,000 jobs will be cut from Defra and its arm’s length bodies.

A key part of Defra’s role is funding the Environment Agency to tackle flood and coastal defence. Channel 4 News understands the budget for flood and coastal defences will be cut by £61million. Defra says “efficiency savings” at the Agency will allow them to maintain the existing level of flood protection for England despite the cut. However, local authorities – not Defra – are charged with managing flood risk from surface water. It was this kind of flooding that caused much of the worst damage during the “great flood” of 2007. Today’s swingeing cuts to the Department for Communities and Local Government will almost certainly impact councils’ ability to reduce flood risk locally.

Defra also has responsibility for waste. Today it cut £3 million earmarked to build seven waste incinerators in England through PFI schemes. Again, cuts to local authority budgets could seriously undermine councils’ efforts to improve recycling and reduce landfill of waste.

Department of Culture Media and Sport
Matthew Cain, Culture Editor

Amidst all the bad news coming today there’s some surprisingly good news from the Department for Culture, Media and Sport. At least the news isn’t as bad as some were expecting.

The Department as a whole has taken a hit of 25 per cent. But the policy of free entry to national museums and art galleries will be maintained and funding cuts to all frontline arts organisations will be limited to 15 per cent – whether these are funded directly by the DCMS or through the Arts Council.

There’s some concern as to how the Arts Council will be able to afford to stick to this limit as it as an organisation has been handed an overall cut of 29 per cent. Worries are already emerging that it will have to stop funding around 100 of the 850 arts organisations it currently supports. And its other projects, such as public arts initiatives or awards ceremonies, will inevitably find themselves vulnerable.

But whatever these concerns, the news is certainly much better than the bloodbath some were predicting. Even Tate Director Nicholas Serota, who’d talked about a “blitzkrieg” recently and “the greatest crisis in the arts and heritage since government funding began”, today welcomed the news. He even went as far as thanking Jeremy Hunt, Ed Vaizey and George Osborne for their support.

So all the signs are that it’s a lucky escape. Of course it will take a while for the news to be digested and filter down to the frontline. But arts organisations up and down the country can breathe a collective sigh of relief. For now.