PLMR Analysis | Comprehensive Spending Review 2015

PLMR

Our full video analysis of the Autumn Statement and Comprehensive Spending Review 2015

An Introduction

 

Sarah Clarke works across multiple sectors, including health and social care, charities, and life sciences, supporting clients to engage with stakeholders, and achieve their political and media objectives.

In this year’s Autumn Statement, the Chancellor has proved himself to be quite the political gambler. As expected, the statement saw a raft of deep cuts across Whitehall, but was also tempered by policy announcements which demonstrated his shrewd political judgement. Overall day-to-day departmental spending will be cut by £20bn, with the biggest losers being transport, environment and energy, seeing their budgets fall by 37%, 15% and 22% respectively.

After the tax credits debacle that unfolded following his Summer Budget, Osborne came to the dispatch box on the back foot politically. But, rather than choosing to play it safe, he chose to bet big.

In a bold – almost brazen – move, he dropped the tax credit cuts entirely, demonstrating this is a government which is responsive to the public. It was a spectacular u-turn that would have sunk a less confident politician, but by making the announcement early in his statement (and following it up with a surprise announcement that there would be no policing cuts), Osborne stole Labour’s thunder and blunted the Shadow Chancellor’s two best lines of attack. Similarly, a doubling of the housing budget was aimed at tempering concerns over a housing crisis.

This was an important moment for Osborne, who was ultimately laying out how the government’s long-term economic plan will be achieved with a view to the next General Election, where his own personal goals will no doubt be fixed on securing the keys to Number 10.

John McDonnell was left floundering, even resorting to quoting from Mao’s Little Red Book (to hoots of delight from the Government benches). As with all major economic announcements, the real verdict will come in the coming weeks as the details are digested and debated – but Osborne will have been pleased with his performance today.

Charities

 

Nathan Hollow is an Account Manager at PLMR. He provides media, reputation management, and public affairs advice to a range of organisations, with a particular focus on the third and health & social care sectors. He also leads PLMR’s work for a major military charity.

A mixed day for the charity sector, but the Chancellor’s windfall on tax receipts meant many anticipated cuts never transpired.

Some big announcements included a quadrupling of the National Citizen’s Service to 300,000 volunteers, and a promise not to reduce the valuie of the Big Lottery Fund.

On the flip side, the Charity Commission budget will be frozen for the next four years, a real terms 8.5% cut. An interesting decision given the revelations that took place throughout the summer.  There was also a delay, to March 2016, for the start of the review into charity business rates, but at least there was confirmation that the Gift Aid Small Donation review will launch in December this year.

Of course one of the biggest surprises on the day was the announcement that revenues raised from the so called ‘tampon tax’ will be used to fund women’s health charities.  About £15m a year will be distributed in the same style as LIBOR fines, with the Chancellor calling for charities to submit their bids. On the LIBOR fund itself, there was usual annoucement of further awards, with £25million given to a number of Military charities, as well as matched funding for Great Ormond Street’s Christmas appeal with the Evening Standard.

Communities and Local Government

 

James Ford is a Senior Consultant at PLMR. He is a former aide to Mayor of London Boris Johnson and was a public affairs manager at the London Chamber of Commerce and Industry.

The Chancellor described his plan to hand control of business rates to local authorities as a ‘revolution’. It is certainly a seismic change, giving councils control of £26bn in funding and the power to cut local business rates in order to stimulate local growth.

The new generation of ‘Metro Mayors’ created by the Government’s devolution agenda will also have the power to charge a premium on business rates to fund local infrastructure schemes. (A similar levy has been used successfully in London to help fund Crossrail).

Councils will be able to retain 100% of the money raised through the sale of local council property – though critics have pointed out that this revenue will only be a one-off.

Defence

 

Nathan Hollow is an Account Manager at PLMR. He provides media, reputation management, and public affairs advice to a range of organisations, with a particular focus on the third and health & social care sectors. He also leads PLMR’s work for a major military charity.

The real action on defence spending took place on Monday with the Strategic Defence and Security Review announcing £178bn of defence spending over the next 5 years.

Compared to the last SDSR five years ago, the country is still poor but the world is significantly more dangerous. In response the government has been left with no choice but to increase spending.

Following recent national security issues, Osborne had found £12bn of funding above what was expected, ensuring defence continues to meet the NATO mandated level of 2% of GDP.

The Army and RAF were the main winners from the SDSR, with two new strike forces and additional squadrons of Typhoon and F35 fighter jets. Meanwhile the Navy recieved a number of new Type 26 frigates, but not in the numbers required to project British power in all the places we may want to be present.

Delays to the start of the new Trident programme, and a substantial increase in costs to £31bn (with an extra £10bn contingency pot), means the current system will be creaking by the time it is replaced, pushed far beyond its original operational life.

Alongside a substantial increase in funding for the security services and cyber warfare – the battle ground of the future – came the somewhat odd annoucement of a Cold War-esque ballistic missile defence system.

All in all the Armed Forces will be happy with the settlement they have received. Many will believe it has come five years too late, but will be relieved that anticipated cuts never transpired and the weapons of the future are now on order.

Education

 

Ollie Lane is an Account Director with PLMR. Previous to this he was Chief Press Officer at the Department for Education, leading on all schools issues and gaining positive coverage across the media for the Government’s education reforms.

The biggest education announcement was Osborne’s decision to end what he called the “unfair and arbitrary” school funding formula – and the variations can indeed be stark. For example Knowsley in Merseyside receives nearly £750 less per pupil than affluent Wandsworth. But this is one of the few Tory boroughs likely to end up worse off than Labour ones – and for many this was a political decision by Osborne, although he was supported by the National Association of Head Teachers (NAHT) and Association of School and College Leaders (ASCL) headteacher unions.

Osborne also made much of the protection of the schools budget – but in a period of rising pupil numbers, the real-terms protection translates into a cut of around 8%. And there was also a big win for Further Education – with the Chancellor maintaining the base rate for providers of 16-19 education.

Energy and the Environment

 

Nick Albrow is a Senior Account Manager. He plays a key role in PLMR’s Education and Energy Practices, leading profile raising, political engagement and crisis communications campaigns for several high profile clients.

It was a tough day for the energy and environment sectors, as the corresponding Government departments saw their budgets cut.

The Department for Environment, Food and Rural Affairs saw its funding reduced by 15%.  However, there was more positive news for areas in flood zones. Osborne announced a £2bn fund for flood defences, so expect to see the wetter regions of the country vying for their share of this much-needed cash over the coming months.

The Department for Energy and Climate Change faced similar gloomy news with budget cuts of 22%. However, there wasgood news for the gas industry, as Osborne committed £1bn to a new Shale Wealth Fund for local communities where fracking takes places.

This came on the back of Energy Secretary Amber Rudd’s speech last week which outlines the Government’s energy strategy and committed to closing all the UK’s coal power stations by 2025, and replacing them with – the Government hopes – cleaner gas power plants.

Health and Social Care

 

Ros Trinick is a Director at PLMR. She provides strategic communications advice enabling clients to achieve their objectives in positive media engagement, political lobbying and reputation management.

On plans for the health and social sector we heard nothing new today from the Chancellor, as key proposals had already been released over the weekend and in the health announcement yesterday.

Perhaps unsurprisingly, the NHS was a key beneficiary of government goodwill, and has been promised an additional £10bn of funding – £6bn of which will be frontloaded next year. It was also announced that £600 million will be set aside for mental health services, with Alistair Campbell being praised for his work in bringing this issue to the top of the political agenda.

There was also a nod to the widespread concerns around the national, and indeed global, nursing shortage. A new student loan for nurses will help to create ten thousands training places.

Addressing the social care sector, the Chancellor committed to an additional £1.5bn for the Better Care Fund, which is aimed at speeding up the process of integration. Councils will now have the power to levy a 2% tax which will be ring-fenced to pay for social care. The Chancellor projected that this would raise an extra £2bn a year by the end of this parliament for service provision and delivery.

Transport

 

James Ford is a Senior Consultant at PLMR. He is a former aide to Mayor of London Boris Johnson and was a public affairs manager at the London Chamber of Commerce and Industry.

The Spending Review included a significant increase in investment on new transport infrastructure, with funding set to hit £61bn in this Parliament (up by £20bn on the previous Parliament).

Road and rail will be the big beneficiaries, with money put aside for HS2 and £300m for a fund to develop new transport projects like Crossrail 2.

This is not all new money however. The Chancellor cut operational funding – which pays for the day-to-day cost of maintaining transport services like bus routes – by 37% in order to increase capital spending – which pays for new infrastructure that delivers new routes, extra capacity and faster journeys – by 50%.

Passengers are therefore likely to see new stations and new roads but are likely to either see their local bus services reduced or the fares they pay rise.

Scotland

Michael-John De La Haye is a Consultant at PLMR Scotland. Prior to this he was a parliamentary advisor working for a SNP MSP within the Scottish Parliament.

The Chancellor cited an OBR forecast which said North Sea oil revenues were down 94%. He added: “We would have seen catastrophic cuts to Scottish public services. Thankfully, Scotland remains a strong part of a stronger United Kingdom. Scotland’s block grant will be over £30bn in 2019-20.”

Scotland’s first minister has welcomed a ‘U-turn’ by the Chancellor on tax credit cuts. Scottish Secretary David Mundell MP said “Scotland has got a good financial settlement”. Ruth Davidson MSP has said the chancellor’s Autumn Statement is a clear sign that the Conservatives are the party of working families.

The Scottish Conservative leader said she backed George Osborne’s decision to maintain tax credits and the decision to help first time buyers with a doubling of the housing budget. Meanwhile, Labour’s shadow Scottish secretary, Ian Murray MP said “the chancellor’s U-turn on tax credits is a victory for Labour”.

However, the Scottish Greens have said chancellor George Osborne’s spending review “heaps misery” on Scotland. Patrick Harvie MSP, the Greens’ finance and economy spokesperson, said: “The Chancellor’s apparent U-turn on tax credit cuts is a mere pretence, and vast numbers of people will still lose out, either now or under Universal Credit instead”.

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