Is today the day that Britain stands back from the brink?

"Is today the day the Britain stands back from the brink?" That was George Osborne’s opening statement yesterday at the announcement of the Coalition Government’s Spending Review to set out where the £81 billion spending cuts will fall over the next four years.

It is clear from the statistics being thrown around that drastic action had to take place to tackle this issue. Two particular startling facts painting a bleak picture – the country is currently borrowing £1 for every £4 spent while £43 billion is spent on the country’s debt interest, which is more than is spent on schools in England.

The top line view of the spending cuts is:

● approximately 490,000 jobs to be lost in the public sector

● the deficit to be eliminated by 2015

● 19% average departmental cuts which are less severe than the 25% expected due to £7bn extra welfare cuts, including changes to incapacity, housing benefit and tax credits

● extensive cuts to government departments – Home Office 6% with cuts to police spending, Foreign Office 24%, HM Revenue and Customs 15%, Justice 6% and Defence 8%

● the rise in state pension age to 66 for men and women has been brought forward to 2020 as a surprise announcement

● councils will have their budgets slashed by 7% from April next year but will hand more control over to them as to how they utilise their budget

● a permanent bank levy to be introduced with details to follow later in the week

● the BBC will freeze the TV licence fee for 6 years, take over the running of the World Service and S4C which in real terms is a 16% cut to their budget

There was some good news amongst the spending cuts:

● the science budget has been ringfenced by the Coalition at £4.6 billion per year although, when inflation is taken into account, it is a real terms reduction of under 10%

● the NHS budget will slowly increase by 0.1% a year

● the schools budget will rise from £35 billion to £39 billion

● the international overseas development budget has been increased to £11.5 billion over the next four years

It is clear that the human factor of the 490,000 jobs set to go in the public sector overshadows to some extent the drastic action that had to take place to plug the country’s budget deficit. The country is in a new era where there will be innovation to cope with the limited budgets and extensive job losses.


Written by Sean O'Riordan, a Solicitor in the Nelsons Commerce and Technology group. To find out more about our Commerce & Technology group, click here.