Immediate reaction to the Spending Review

As is the way with these things nowadays, Ministers have spent the last few weeks raising (and lowering) expectations of what the Spending Review (SR) might bring. And since the emergency budget back in June we’ve known what the overall numbers were going to be. So, inevitably, there was a fair amount that we already knew (or expected) in the Chancellor’s statement. However, in an attempt (no doubt carefully constructed) to exceed people’s dire expectations, the Chancellor took some delight in announcing that the overall average cuts to Departmental spending was 19% (rather than that 25% that had been mooted).

Winners and losers
However, the cuts are not evenly spread across Whitehall and among the hardest hit will be Communities and Local Government, which sees its capital spending (mostly social housing) cut by 71% and other spending reducing by a half. Local authorities will see their budgets cut by 7% each year for the next four years (that’s 25% by 2015). Clearly this will have a huge impact on voluntary and community groups.


And despite George Osborne’s prediction that the richest will pay most (as a proportion of income) to reduce the budget deficit, the Treasury’s own figures show that, after the richest 10% of the population, the biggest ‘losers’ will be the poorest 10%. I’m struggling to see the fairness in that. And the cuts to welfare and benefits were as substantial as we’d feared, although the Chancellor managed to throw in a few sweeteners in the form of extra money for social care and protection for winter-fuel payments and free television licences for older people.


In the Budget, we saw that despite the Chancellor’s claims, the impact of spending cuts was falling disproportionately on particular groups and areas (for example, women, children, poor households and the north of England). There’s little in the Spending Review to reassure me that anything has changed in this respect.


There was some good news for the sector, with the announcement of a £100m transition fund to support civil society (voluntary and community groups and social enterprises). Civil Society Minister, Nick Hurd, has done well to extract new money from the Treasury in the current climate. The Cabinet Office says this will ‘provide short-term support for voluntary sector organisations providing public services’, which appears to be quite narrow in its scope. We also need to find out whether this transition fund is different to the ‘consolidation fund’ that is proposed in the ‘Supporting a Stronger Civil Society’ consultation that the Office for Civil Society launched last week. Nonetheless, despite this welcome investment, £100m is just a drop in the ocean given the scale of public spending cuts already taking place; the increased demand for the services charities offer and the increased role the government wants civil society to take.

Another rare ‘winner’ was the Regional Growth Fund, which received an additional £400m (on top of the £1bn announced in the emergency Budget). This has the potential to be good news, but only if it’s used productively to renew and revitalise the economy, particularly in areas that are heavily dependent on public sector funding. Given the apparent lack of ambition in many of the Local Enterprise Partnership (LEP) proposals to date, I’m deeply sceptical that current LEP proposals will deliver what local communities need on the ground.


The Chancellor announced that the new Green Investment Bank will go ahead with £1bn of funding being committed, despite speculation that this may have been scrapped. This is perhaps another example of managing expectations; with people being pleased it is going ahead, albeit with a woefully inadequate amount of funding. Given the scale of the challenge we face in tackling climate change and in modernising our economy, the green economy must grow quickly if it is to help fill the 500,000 or so public sector jobs that are forecast tol be lost.


Banks doing their bit
Banks – seen my many, including myself, as the cause of the economic mess we’re now in – came in for some attention. We welcome a permanent bank levy and the Chancellor’s assertion that it will generate more than the £2.5bn that last year’s tax on bankers’ bonuses did. The Chancellor’s commitment to ‘extract the maximum sustainable taxes’ is stronger than we’d anticipated, but a levy on its own does nothing to change the system and avoid making the same mistakes in the future. And of course, the words need to be followed up by action. Yesterday, Reverend Jesse Jackson spoke at the Responsible Credit Convention in London about the need for a Community Reinvestment Act to be introduced in the UK, to make the banks more transparent and accountable – something we would like to see introduced as a matter of urgency.


Deserving and undeserving
What really disturbed me about George Osborne’s speech was when he referred to the Equitable Life policyholders as ‘deserving’ – and I agree they are deserving. However, I can only presume that the Chancellor used the term ‘deserving’ in order to distinguish them from ‘undeserving’ people. This language harks back to the nineteenth century workhouse – hardly the progressive agenda that the likes of Phillip Blond would have us believe is informing the government’s approach. Since every word is carefully checked, polished and tested to create precisely the ‘right impression’ with the ‘right people’, I can only assume that this is deliberate and planned (but admittedly quite subtle).

Though by no means definitive analysis, I often like to look at a ‘word cloud’ (that is a picture of the words used, with those used most frequently being the biggest). The Chancellor’s statement is worth a look. Interestingly, though perhaps unsurprisingly, ‘spending’ is much larger than ‘cuts’ – you could be forgiven for thinking this was a very different statement!


There’s still an awful lot we don’t know. We have some numbers and a few (carefully chosen) key announcements for the news headlines, but it will take weeks, if not months, for us to really get a handle on what the Spending Review means in practice. But we know already that there will be some pretty tough times ahead.


more soon…..


Toby Blume
Chief Executive
Urban Forum


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