The Spending Review

On behalf of the Coalition Government, the Chancellor has now set out the findings of the Comprehensive Spending Review. After much speculation and jockeying for protection of funding streams the full implications for the development industry, the operation of Local Government and the economy as a whole are now becoming clearer.

• 490,000 public sector jobs to go over the next 4 years
• A reduction in the budget of the CLG by 33%
• Promotion of radical devolution of power and greater financial autonomy to Local Government
• Central Government funding to councils to decrease by around 26 per cent over the next four years with Council Tax frozen in 2011-12
• Capital funding from all departments to councils will fall by around 45 per cent over- the Spending Review period

BACKGROUND

The Spending Review (SR) is a Treasury-led process to allocate resources across all Government departments, according to the Government's priorities. Spending Reviews set fixed spending budgets over several years for each department and it is then up to departments to decide how to distribute this spending within their areas of responsibility.

The 2010 SR covers the four years from 2011 to 2015.

CONTEXT

Public spending levels were set in the June Budget, looking at how much Government can spend whilst meeting its plan to reduce the deficit, given the level of forecast economic growth and taxation.

The June Budget announced a number of initiatives including a Regional Growth Fund to operate in England, providing funding to support proposals from private and public-private bodies that will create new business and employment. Alongside, this we have seen confirmation of the removal of Regional Development Agencies and their replacement with Local Enterprise Partnerships.

The Spending Review now sets out the long-term vision for public services and a programme of other key reforms to deliver the further reductions in spending. Major savings are to be made through welfare reforms, increasing the state pension age and reducing public sector pensions.

One of the most significant areas of cuts is to the operation of Local Government and it is at this interface where the main effects on the development industry will be felt.

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