In his budget speech, the Chancellor said (in terms of public spending), “we have to cut our cloth accordingly”.
He reported that the most significant change the Office for Budget Responsibility (OBR) has made since November is their decision to revise down potential UK productivity growth. This is in the light of their downward revision of growth in the world economy and in world trade. In their words, the outlook is “materially weaker”.
As a result, the Chancellor has asked ministers to lead a further Government drive for efficiency and value for money, with the aim of saving a further £3.5 billion in the year 2019-20. The Chancellor believes that this is more than achievable as it represents less than half a percent of Government spending in four years’ time.
Given the revised forecasts, the Chancellor has had to take further action to control spending and make savings, and therefore remain on track to deliver the £10bn+ surplus in 2019-20 forecasted in the Autumn Statement. However, there is little room for manoeuvre in his spending plans and no margin for error.
Adrian Brook, Moore Stephens’ Head of Public Sector, commented: “The revised downward economic forecasts have led the Chancellor to take further action on public spending. The further £3.5bn reduction comes less than four months since he announced double digit cuts for a number of Whitehall departments over the next five years. With the OBR saying that the world has become more uncertain and therefore the risk of further bad news for economic growth, the Government will be compelled to work within tight spending constraints for the foreseeable future. The Government will need to innovate if it is to maintain an appropriate level of public services.”
For further information, please contact Adrian Brook