Spending review 2010
In the Spending Review (PDF), published in October 2010 marked the beginning of a new era in public finances with concentrated spending retrenchment to commence from April 2011.
Deloitte believes the significance of this change should be qualified in two ways. First, total spending will remain as described in the Emergency Budget of June 2010. Spending overall will continue to increase in cash terms by over £40 billion over the period. Although the UK’s structural deficit of about £149 billion will be reduced from 11 per cent of GDP to just 1.1 of GDP by 2015-16, national debt will continue to rise to around £1.3 trillion by 2015-16 and remain at high levels for many years to come.
Secondly, there remains significant uncertainty as to how specific areas of work set out in the Spending Review document will be implemented. Cost reduction, localism and decentralisation, improved business process efficiency, better procurement and workforce reform each imply programmes that have not yet been described in great detail. The Departmental Business Plans published in November 2010 draw together high level spending allocations, Structural Reform Plans and a timetable of actions to paint a high level picture reform across each department. But gaps in the detail remain and it is likely that the real work to plan how reform can be executed is still in progress.
However, the Government’s overall intention is unambiguous. The Spending Review gave a clear message that we can expect a programme of fundamental change to the role and functions of government: how departments operate, how they interface with private and third sector partners, where they allocate their resources and a change to the State’s core obligations to citizens.
The Chancellor also confirmed that public sector headcount will fall by around 490,000 over the period. Deloitte analysis suggests that the impact of this change may not be as profound as first thought, with the private sector able to absorb part of the reduction, and the churn rate across public services able to offset further the need for widespread compulsory redundancies. But as we describe in the public sector workforce reform section below a wider challenge for public bodies will be to ensure they retain the skills and high performing people essential to their businesses, and review their capabilities in light of shifting departmental roles and responsibilities.