Public spending cuts less than expected, but innovative thinking required

The Spending Review, announced by the Chancellor, sets out how £4 trillion of government money will be allocated over the next five years.

Last year, the deficit was halved compared to its 2009/10 level. The Chancellor expects it to be eliminated over the next four years and the government will be running a surplus – raising more than is spent. A return to a surplus in excess of £10bn in 2019/20 is forecast, but this will require the economy to continue to grow. Although GDP growth forecasts range from 2.3% to 2.5% per annum over the next five years, there are already clear signs of a global slowdown, reflected in our own manufacturing sector.

Overall, The Office for Budget Responsibility forecasts a £27 billion improvement in public finances over the next five years, compared to expectations at the time of the Budget, due to lower debt interest and the effects of better tax receipts.

While policing, NHS, education, international aid, foreign office and defence budgets have been protected, significant cuts to operational budgets are being made across many Whitehall departments over the next five years. Those affected include transport (a 37% cut), health (25%), energy (22%), and culture (20%).

Adrian Brook, Moore Stephens’ Head of Public Sector, comments: “The improvements in public finances have meant that public spending cuts are less than some had forecast. Nevertheless, these come on top of the previous cuts and a number of Whitehall departments are facing double digit cuts over the next five years. With the ‘quick win’ savings already used, Government will be compelled to not just to reshape its service delivery models, but resize them. This will have all sorts of implications, mostly around ways of working and how departments are structured, if an appropriate level of public services is to be maintained.”

Sarah Hillary, Head of Moore Stephens’ Governance, Risk & Assurance team says: “For some time now Government Departments and the wider Public Sector have been responding to the challenge of having to do more with less. It is clear that the Government does not wish to compromise on the quality of public services and so the emphasis has to continue to be on transformation to maximise the efficiency of structures and activities to deliver those front line services.”

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