Tuesday, 02 September 2014
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Chancellor reveals government spending targets

Crossrail to proceed, £1bn for CCS and continuity of investment in science and research are some of the highlights from today’s Comprehensive Spending Review (CSR).

Delivered earlier today by the chancellor George Osborne, the CSR revealed spending targets across all government departments between now and 2014/15.

The Department of Energy and Climate Change (DECC), for example, will reduce resource spend by 18 per cent and the department’s admin budget will drop by 33 per cent, while overall capital spend will increase by 41 per cent.

Similarly, the resource spend at the department for Business Innovation and Skills (BIS) and the Department for Transport (DfT) will be reduced by 25 per cent and 21 per cent respectively.

Capital spending at DfT is to be reduced by 11 per cent in real terms while its admin budget will be reduced by 33 per cent.

It isn’t known yet how cuts in these departments will be made but the chancellor, speaking in Parliament, stressed that science and innovation are key to maintaining growth.

Highlights from the DfT include £14bn funding over the spending review period to Network Rail to support maintenance and investment, including major improvements to the East Coast Mainline, station upgrades at Birmingham New Street and network improvements in Yorkshire.

A spokesman for Network Rail said: ‘Network Rail is pleased that the government has recognised the need for sustained investment in infrastructure for a rail network that continues to attract more passengers.

‘Investment in infrastructure is vital to the UK economy. At a time when the government’s top priorities are reducing the deficit and driving economic growth, we should be trying to focus investment decisions on how to grow the economy and how to deliver the best value for money.’

The government also stated that it is going ahead with plans to deliver a new high-speed rail network, while spending on the London Underground network will be protected.

Crossrail, linking Heathrow and Maidenhead to the west of London with Shenfield and Abbey Wood to the east, is to proceed, although the government said it will seek efficiency savings.

In response, Terry Morgan, Crossrail chairman, said it is looking at engineering-led solutions and reprogramming of the central tunnels construction programme to make substantial savings.

At BIS, the science budget is to be maintained with resource spending of £4.6bn a year by 2014/15. More details about the impact of the CSR on the science budget can be found here.

A total of £220m in funding is being made available for the delivery of the UK Centre for Medical Research Innovation in London and in Oxfordshire £69m will be provided for the Diamond Synchrotron.

BIS is expected to take a leading role in the new £1.4bn Regional Growth Fund, which it claims will support projects with ‘significant potential for private sector economic growth and employment, particularly in areas dependent on the public sector’.

BIS is also slated to invest up to £200m by 2014-15 to support manufacturing and business development with a focus on high-growth businesses.

In a similar vein, spending on adult apprenticeships will increase £250m a year, providing 75,000 apprenticeship places every year by the end of the Spending Review period.

At DECC the CSR has been credited with ensuring that Britain remains on course to meet its 2020 environmental targets, which call for a 34 per cent reduction in greenhouse gas emissions and for 15 per cent of energy to be from renewable sources.

To support this, £1bn will go toward the world’s first commercial-scale carbon capture and storage demonstration plant and £200m is available for low-carbon technologies including offshore wind technology and manufacturing infrastructure at port sites.

Government funding for the National Nuclear Centre of Excellence, however, is to cease.

From 2011/12, £860m in funding will be available to the Renewable Heat Incentive, which is claimed to drive a more-than-tenfold increase of renewable heat over the coming decade. Further details regarding the £1bn Green Investment Bank and feed-in tariff can be read here.

Reacting to the CSR, Tom Foulkes, director general of the Institution of Civil Engineers (ICE), said: ‘Despite downward pressure on departmental budgets across the board, government has resisted the temptation to compromise projects with the potential to kick start economic recovery and drive the low-carbon agenda such as Crossrail and CCS.

‘Upscaling of renewable energy and low-carbon technologies are crucial if we are to avoid a “dash for gas” response to the growing energy gap in future.

‘However what industry needs now to push forward with these vital programmes is more clarity, for example, how the £200m set aside for offshore wind technology and manufacturing at port sites will be allocated.’

Reduction targets

The Department of Energy and Climate Change

Over the course of the Spending Review period, the Department of Energy and Climate Change will reduce resource spending by 18 per cent in real terms and increase capital spending by 41 per cent in real terms. The department’s administration budget will be reduced by 33 per cent.

The Department for Business Innovation and Skills

In line with the Browne recommendations, the government is changing the way that higher education is funded, moving away from the current model to one where those who benefit make a greater contribution to the cost.

This means the overall resource budget for higher education, excluding research funding, will reduce from £7.1bn to £4.2bn, a 40 per cent, or £2.9bn, reduction by 2014-15.

The Department for Transport

Over the course of the Spending Review period, the Department for Transport will reduce resource spending by 21 per cent in real terms and capital spending by 11 per cent in real terms. The department’s administration budget will be reduced by 33 per cent.

The Ministry of Defence

Over the course of the Spending Review period, the Ministry of Defence (MoD) will reduce resource spending by eight per cent in real terms and reduce capital spending by eight per cent in real terms. The department’s administration costs will also be reduced by 33 per cent.

The department will make at least £4.3bn of non-frontline savings, of which around £3bn is planned from efficiency programmes, over the Spending Review period.

Source: HM Treasury


Readers' comments (1)

  • It is good that in general science spending will no be hit. On the DECC spending issue, its largest single spend, nuclear cleanup, is being ring fenced and so the rest obviously takes a bigger hit. it is encouraging that the Renewable heat incentive will be implemented with only a 20% cut.

    Good news that a token “green” investment bank will be set up even with "only" £1bn, the sams sum given to “Clean coal”, a funny contradiction, like “military intelligence”..

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