Spending Review: reaction

The chancellor outlined his plans for cutting £11.5bn from public spending in 2015. MT looks at industry reaction.

by Emma Haslett
Last Updated: 11 Jul 2013

The good news is that nothing in the spending review was unexpected (apart from, perhaps, the shadow chancellor's surprisingly accurate desription of the PM and the chancellor as 'Zippy and Bungle').

Here's a summary of Osborne's announcements:

  • Government spending will total £745bn in 2015/16
  • The goverment will pump £3bn into affordable housing
  • Museums and arts organisations will receive a 5% cut to their budget
  • On defence, there will be a 1% real-terms increase to the military equipment budget, while the procurement and private finance initiative (PFI) contracts will be renegotiated
  • The resource budget at the department for business, innovation and skills will be cut by 6%, although capital spending will rise by 9%
  • The science budget will rise to £4.6bn
  • A £2bn growth fund will be made available for local enterprise partnerships
  • £5bn of investment in new infrastructure projects (to be announced in more detail on Thursday)
  • £185m for the Technology Strategy Board - the government's technology investment organisation

Some reaction from the business world (or read an as-it-happened summary of Osborne's speech here):

John Cridland, director general, CBI

'The Chancellor has carefully walked a tightrope of protecting growth, while making sizeable savings to pay down the debt. Infrastructure is rightly singled out as the most effective engine for growth, as we urged. While the Government talks a good game on infrastructure we’ve seen too little delivery on the ground so far.

"It is critical we see a real pipeline of projects announced tomorrow, so investors know what schemes are going ahead, where and when.

'Other pro-growth areas including science, innovation, skills and exports have also been shielded from cuts. The £185 million boost for the Technology Strategy Board - a crucial anchor for innovation - is particularly welcome. With stretched government finances it is tough but necessary to target automatic progression pay in the public sector.

'It is encouraging to see that Government will have greater control of the welfare budget through the new cap. The next big challenge to address is the issue of ring-fencing to ensure that efficiency flows across all parts of the public sector.'

John Longworth, director general, British Chambers of Commerce
'In many respects, businesses will be encouraged by what they have heard from the Chancellor. He and his team have signalled important investments in areas like transport, export support, science, education, innovation and defence procurement, which are of great importance to companies of all sizes. Business will also be pleased to see an end to automatic increases in public sector pay, and will support moves to begin to tame welfare spending.

'Yet more must be done. For our economic future to be great, rather than just acceptable, Britain needs a more radical shift in public expenditure to underpin a truly enterprise-friendly environment. Infrastructure, exports, and access to finance must be top priorities not just for the next few years, but for decades to come.

'The Chancellor has done his best to set out a prudent fiscal position and re-prioritise resources in favour of growth, given the constraints he was under. But we have only just started to reshape public spending to support growth and business will want to see more action. Westminster as a whole, together with the mandarins of the civil service, must recognise that from 2016 onwards, Britain needs a fresh approach to public spending to ensure its future competitiveness – even if the economy is improving.'

Richard Ford, partner, Pinsent Masons
'The £2bn Single Local Growth Fund reinforces Local Enterprise Partnerships' position as players in the economic and infrastructure investment market. They are developing well into a "Carlsberg" public-private intervention model - effectively "refreshingly reaching the parts which others find hard to reach". The Government LEP initiative is one which we feel is working well.'

Graeme Leach, chief economist, Institute of Directors
'The spending review leaves business feeling like Oliver Twist. More please, Chancellor. Please could you go further and faster with spending restraint? Please could you shift even more expenditure from current spending towards infrastructure? Please could you widen the welfare cap to include pensions? But please could you also do less ring-fencing of spending in departments such as the NHS.

'The Chancellor made many welcome announcements in the Spending Review, including the 1% limit to public sector pay growth and the intention to curtail automatic pay progression - regardless of performance - within the public sector. This, combined with previous policies aimed at decentralising public sector pay,  is creating a quiet revolution in public services. Taken together with the commitment to accelerate the free schools programme, the Spending Review had a radical supply-side dash.'

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