26 Jun 2013 02:08pm

Osborne cuts HMRC budget in Spending Review

Chancellor George Osborne unveiled his Spending Review today with some hefty cuts for government departments including HMRC

Along with a raft of cuts he also announced an increase in investment in infrastructure, and reforms to the jobseeking process and the benefits system to deliver “a Britain on the rise”.

HMRC will see a 5% reduction in its budget in 2015/16, the Department for Business, Innovation and Skills (BIS) will see a budget cut in 6%, and the Department for Work and Pensions will have to find savings of £9.5bn.

In December’s Autumn Statement, Osborne said HMRC would be exempt from public spending cuts to help it focus on tackling tax avoidance and evasion. Today, after outlining that the department will see its budget cut from £3.4bn in 2014/15 to £3.3bn in 2015/16, he also said the department would raise £1bn more in collecting tax than the previous year.

While we've been acting, the challenges from abroad have grown

George Osborne

The Treasury and Cabinet Office budgets will be cut by a further 10% in the year 2015/16, said Osborne, as will the Communities budget, which has already been slashed by more than 50% by minister Eric Pickles.

“While we’ve been acting, the challenges from abroad have grown”, the chancellor told a busy and noisy House this afternoon. “We have to deal with the world as it is, not as we would want it to be.”

Overall public spending will be reduced by £11.5bn in 2015/16, and £5bn of that reduction will come from efficiency savings in departments including justice, local government and the Treasury.

Public sector payrises will be limited to 1% for the year, and progression pay in the civil service, which Osborne described as “antiquated” and “deeply unfair,” will be ended by 2016. Keeping pay awards down and ending progression pay means the government can “better limit job losses”, he said.

Nonetheless Osborne warned that up to 144,000 more public sector jobs will be lost by 2015/16

The Chancellor claimed that there had been three private sector jobs created for every single job lost in the public sector.

Keen to stress that the CSR today was focused on “fairness”, however, George Osborne said the top fifth of the population in terms of income will lose the most from this spending round.

Turning from cuts to investment, Osborne said an additional £50bn of capital investment would be put into infrastructure projects in 2015.

Tomorrow, he said, chief secretary to the Treasury Danny Alexander will outline infrastructure projects worth £100bn.

Despite BIS seeing job cuts, the business capital investment budget will increase by 9%, which will be ploughed back into apprenticeships and increasing exports through UK Trade and Investment. 

He promised to balance the books and that promise is in tatters

Ed Balls

“Today we raise our national game,” he said.

Funding for councils to freeze council tax was also extended for two more years from next April.

Those seeking work will need to come to the Job Centre weekly in order to qualify for Jobseeker’s allowance, rather than fortnightly as they do currently. And nobody will qualify for work benefit until they have signed up to a new Upfront Work Search programme, which involves matching CVs and jobs in a new central database.

The government also announced that those jobseekers who don’t speak English will have to attend language classes before receiving any benefit.

“If you’re not prepared to learn English, your benefits will be cut,” said Osborne.

The state pension will also not be included in a new welfare cap.

Osborne said that annual borrowing will have fallen from £157bn in 2010 to £108bn this year. He said the government is also spending £6bn a year less in interest payments on its debts than under Labour.

The Foreign Office Budget is to be cut by 8%, the Home Office budget is being cut by 6%, the Department of Culture, Media and Sport will see a 7% cut, and the Ministry of Justice budget is being reduced by 10%.

Further cuts will be made at the Transport department (9%), and the department for energy and climate change budget (8%).

The chancellor said the government believed it was better to get better public services at lower costs. He said the opposition plan to this strategy had “collapsed into incoherence”.

But shadow chancellor Ed Balls said, “He promised to balance the books and that promise is in tatters. It doesn’t have to be this way.

“Where is the proper business bank that business say they want?” he asked.

Helen Roxburgh


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