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Background to the Spending Review

  • Published: Wednesday, 20 October 2010

The Chancellor, George Osborne, has presented the government’s Spending Review, fixing spending budgets for each government department up to 2014-15.

The Spending Review comes at a time when the state is spending more money than it raises in taxation. It is having to meet the gap – called the deficit – by borrowing at record levels.  Last year, the government borrowed one pound in every four that it spent and the UK currently spends £43 billion on debt interest, which is more than it spends on schools in England.

Themes for public spending priorities

The government has said that tackling Britain’s deficit is its top priority and that it is necessary to secure sustainable economic growth. It says that the consequences of not acting could be serious: higher interest rates, business failures and rising unemployment.

In its approach to public spending choices, the government has set itself three themes:

  • promoting long-term growth, and creating the conditions for a private sector-led recovery
  • fairness, with all sections of society contributing to tacking the deficit, whilst protecting the most vulnerable and providing opportunity for the poorest
  • public service reform, improving transparency and accountability; giving more power and responsibility to citizens

Encouraging growth

The government says that the economy has become unbalanced and too reliant on public spending and unsustainable debt.  Sustainable growth must be based on expansion in the private sector, not the public sector.

The Spending Review announces the following actions :

  • investing over £10bn for maintenance and investment in key road and local transport schemes across the country
  • investing in areas where public capital can generate returns – such as rolling out superfast broadband, a regional growth fund, and a green investment bank
  • supporting growth, skills and research – such as apprenticeships and investment in science

Fairness

The Spending Review also sets out a vision for a fairer Britain.  It sets out reforms that aim to ensure those who need it most continue to receive support. The government also wants to give a greater focus on services that offer opportunities for social mobility.

The government's key priority is to tackle the deficit. This is to ensure that future generations are not burdened with unsustainable debts, higher taxes and fewer public services.

Plans agreed in the Spending Review to build a fairer society also include:

  • protecting schools spending, and introducing a new fairness premium which will support the poorest in the early years and at every stage of their education
  • ensuring that the amount a household can receive from welfare is no more than an average family gets by going out to work
  • withdrawing Child Benefit from higher-rate taxpayers
  •  making social housing more responsible, flexible and fair
  • making £1.5 billion available for the Equitable Life Payments Scheme
  • maintaining the commitment to spend 0.7 per cent of Gross National Income (GNI) on international development aid by 2013

Reform

The Spending Review implements a major programme of public service reform. The objective is to change the way services are delivered by redistributing power away from central government and enabling sustainable, long-term improvements in services, by:

  • localising power and funding
  • cutting burdens and regulations on front line staff
  • increasing diversity of provision in public services
  • improving transparency, efficiency and accountability of services

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