Public Sector Budget 2010

AnnieM, March 30, 2010

It has been deemed a phoney budget, the most ‘un-political’ of all Darling’s budgets to date – and a safe bet for the imminent general election.

As such, there were no big surprises, even though the financial movers and shakers in the City banks breathed a collective sigh of relief when there was no mention of bank bonus cuts. Perhaps payback time for the banks will be left for another year, another budget. And clearly, the really big cuts - the public sector cuts - are not going to be addressed until after the general election. It would have been too much of a risk – a political suicide? - to attempt to tackle the public sector deficit until the next government (whoever it may be) is home safe in a newly formed Parliament.

Although Darling’s 2010 budget does err rather cynically on the side of caution, in his defence,  anyone would be hard pressed to disagree with the majority of the budget: many of the proposals are ‘safe seats,’ as it were.  So here follows the main budget issues that has specific relevance to public sector services:

Tax

  • Older workers will receive an extension on their tax credits
  • From April, pensioners will no longer pay tax on the first £10k of their pension
  • Income tax will be increased to 50 per cent for those earning more than £150k
  • Parents of children under two will receive an additional £4 a week in child tax credit.

Education

  • £270m will be spent on a modernisation fund for universities, which in turn, will help to create an extra 20,000 university places

The cost of this modernisation fund will ultimately be met by the large economic gains of a better educated workforce and therefore a narrower skills gap.

Services

  • £100m will be provided for local road repairs
  • £2bn will fund green transport and energy initiatives
  • Winter fuel payments for pensioners will be paid for another year.

Employment

  • The Youth Employment Guarantee will be extended until March 2012

This initiative enables those under 24 the means to work or undergo work-related training if they have been unemployed for six months or more.

  • Redeployment of one third of civil servants

The Ministry of Justice for example is moving 1,000 staff out of London to cut costs. Whether this is a good thing (especially in light of all the recent strikes) is debateable.

  • The length of time the over 65s have to work before they can receive work credits will be reduced.

In addition to Darling’s 2010 Budget, Government departments later announced their specific spending cuts. These included:

  • Ministry of Justice to cut the cost of civil servants by 20 per cent
  • Department of Health to cut procurement costs (estimated savings: £1.5bn) and to significantly reduce sickness absence (estimated savings: £555m)
  • Department of Environment, Food and Rural Affairs to cut spending on finance and HR (estimated saving: £100m)
  • Department of Communities and Local Government to cut spending in procurement, back office and marketing (estimated savings: £130m).

These proposals, while sensible in theory, are somewhat lacking in solid approaches towards implementing these savings. Being vague won’t get us places. Take for example the Department of Work and Pensions which aims to make savings by ‘getting better value out of major contracts’. Surely getting the best value out of an outsourced service should be the priority anyway? And how exactly, does the Department of Health plan to ‘reduce sickness absence’? It’s a mystery, clearly.

For many, the gaping hole left in the budget which failed to address the public sector deficit will prolong the agony of many public sector workers. Yet it is likely that government ‘solutions’ for the deficit will become apparent over time: cuts and ‘efficiency savings initiatives’ will be introduced gradually in an effort to minimise media coverage.  So for now it’s about keeping eyes and ears peeled for any changes within the sector because, as I’ve said all along, they will happen – it’s just a question of when.

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