– CSR Key points!!

Key points from the Comprehensive Spending Review

Delivering the Comprehensive Spending Review (CSR) in the House of Commons today, the Rt Hon George Osborne, Chancellor of the Exchequer, stated that the following reforms will take place:

The Department for Communities and Local Government

• Social housing will be reformed to provide a more tailored response to individual need at lower cost. Investment alongside this reform will deliver up to 150,000 new affordable homes by 2014-15. Meanwhile, investment via the Decent Homes programme will continue to improve the existing social housing stock.

• CLG’s overall resource budget will reduce by 33 per cent in real terms over the period. Within this, CLG will devolve £1.6 billion to local government. This means the reduction in the department’s resource budget will be 51 per cent in real terms by 2014-15.

• CLG will make reductions of 42 per cent in real terms on administration costs. This will be achieved through the closure of the Government Office network, reducing the number of Arms Length Bodies by 17 and reducing the size of the department. As a result of this settlement, programmes including the Working Neighbourhoods Fund, Growth Area Funding and the Thames Gateway programme will end, in order to rationalise funding streams, make savings and take a more disciplined approach to Government spending.

• Fire resource expenditure will reduce by 13 per cent in real terms over the Spending Review period. Within this, central government grants to local authorities will be reduced by 25 per cent over the period. To achieve this level of savings, the Fire and Rescue Service will need to modernise, increase efficiency and deliver workforce reform. It will be for individual fire authorities to decide how to make these savings.

Local Government

• Local authorities will have to make significant savings over the Spending Review period, in line with other parts of the public sector. Many councils are already fundamentally reviewing their roles and services, including using greater personalisation and increasing delivery through the voluntary and community sector. In 2011-12, £200 million will be available to councils to accelerate reforms of local services.

• To support these reforms, the Government will devolve significant financial control to councils. Ring fencing of all revenue grants will end from 2011-12, except simplified school grants and a new public health grant; the number of separate core grants will be radically reduced from over 90 to less than 10, including a single non ring-fenced Early Intervention Grant worth around £2 billion by 14-15; and more than £4 billion of revenue grants will be rolled into formula grant.

• The first community budgets will be run in 16 local areas from April 2011 for families with complex needs. These will pool departmental budgets for local public service partnerships to work together more effectively, help improve outcomes, and reduce duplication and waste. All places may be able to operate these approaches from 2013-14. Councils and their partners will also have greater flexibility to work across boundaries in health, policing, worklessness and child poverty.

• The Government is ending the previous top-down performance framework for councils. Local authorities and their partners will be able to cease reporting any of the 4,700 local area agreement targets, and those that are kept will not be monitored by Government. In implementing the new Transparency Framework, the Government will work with councils to reduce the amount of data local government is asked to collect by central government, and develop a single, comprehensive list, to be reviewed annually.

Department for Business, Innovation and Skills

• In order to focus spending on frontline services, BIS will reduce spending on administration by £400 million a year by 2014-15. The number of Arms Length Bodies will be reduced from 57 to 33, with 9 still under consideration. This includes abolishing Regional Development Agencies as announced in the Budget, saving £1.5 billion a year by 2014-15, some of which will be reinvested elsewhere.

• Colleges will be freed from bureaucracy by simplifying the funding system, streamlining Arms Length Bodies and abolishing central targets. The Government will also improve the quality of information and advice for students, including through the development of an all-age careers service. Alongside these greater freedoms and reductions in bureaucracy, colleges will be expected to make savings including through greater efficiencies and pay restraint.

• The Government will significantly lower the overall cost of the further education system by abolishing Train to Gain and by reducing spending on budgets which do not directly support learners. Meanwhile, the balance of funding will be shifted from the taxpayer towards the individuals and employers who benefit, including though the introduction of student loans, and by exploring mechanisms to increase employer contributions such as voluntary training levies.

Department for Work and Pensions

To provide a fair and affordable platform for the introduction of the Universal Credit the Spending Review also announces a package of reforms to the existing welfare system which will deliver net AME savings of £7 billion a year by 2014-15, including by:

• Capping household benefit payments from 2013 at around £500 per week for couple and lone parent households and around £350 per week for single adult households, so that no family can receive more in welfare than median after tax earnings for working households. All Disability Living Allowance claimants, War Widows, and working families claiming the working tax credits will be exempt from the cap;

• Withdrawing Child Benefit from families with a higher rate taxpayer from January 2013 so that people on lower incomes are not subsidising those who are better off, saving £2.5 billion a year by 2014-15; and

• Controlling the costs of tax credits by:

1. Reducing the percentage of childcare costs that parents can claim through the childcare element of the Working Tax Credit (WTC) from 80 per cent to its previous 70 per cent level in April 2011, saving £385 million a year by 2014-15;
2. Changing the eligibility rules so that couples with children must work 24 hours a week between them, with one partner working at least 16 hours a week in order to qualify for the WTC, saving £390 million a year by 2014-15;
3. Freezing the basic and 30 hour elements of the WTC for three years from 2011-12, saving £625 million a year by 2014-15; and
4. Increasing the child element above indexation by a further £30 in 2011-12 and £50 in 2012-13, in addition to the £150 and £60 increases provided at the June Budget. This will ensure that the overall outcome of the Spending Review will have no measurable impact on child poverty in the next two years.

• Time limiting contributory Employment and Support Allowance for those in the Work Related Activity Group to one year, to improve work incentives while protecting the most severely disabled and those with the lowest incomes, saving £2 billion a year by 2014-15;

• Increasing the age threshold for the Shared Room Rate in Housing Benefit from 25 to 35. This will ensure that Housing Benefit rules reflect the housing expectations of people of a similar age not on benefits, saving £215 million a year by 2014-15;

• Reducing spending on Council Tax Benefits by 10 per cent and localising it, saving £490 million a year from 2013-14, while protecting the most vulnerable. In addition, the Government will provide greater flexibilities to local authorities to manage pressures on council tax from the same date;

• Removing the mobility component of Disability Living Allowance for people in residential care, where such costs are already met from public funds, saving £135 million a year by 2014-15;

• Freezing the maximum Savings Credit award in Pension Credit for four years, thereby limiting the spread of means testing up the income distribution and saving £330 million a year by 2014-15;

• Helping homeowners facing difficulties by extending for a further year the temporary change to the Support for Mortgage Interest scheme, to reduce the waiting period for new working age claimants to 13 weeks and increase the limit on eligible mortgage capital to £200,000, both of which were due to expire in January 2011;

• Making permanent the temporary increases to Cold Weather Payments provided in the past two winters, at a cost of £50 million a year, so that eligible households receive £25 for each seven day cold spell recorded or forecast where they live; and

• To ensure dignity in retirement, the Government will uprate the basic State Pension by a triple guarantee of earnings, prices, or 2.5 per cent, whichever is highest.

HM Treasury