Everything you need to know about the spending review in five minutes

George Osborne delivers a controversial extension of the coalition's spending cuts
George Osborne delivers a controversial extension of the coalition's spending cuts
Ian Dunt By

What's George Osborne done now?

More of the same really. The chancellor presented the Commons with the spending review for the year 2015/16 today. It's not law or a Budget, it's just an announcement of spending plans for the first year of the next parliament.

Why do it now?

Good question. He doesn't have to. There was plenty of time. But today's announcement was mostly political, rather than economic. It's arguably the clearest indication of how the Tories will run their general elections we've had yet.


And it's full of populist right-wing measures, of course. Osborne gave the game away a bit at the end when tackling welfare. There are no more welfare cuts on the horizon, but the chancellor was keen to do some tabloid-friendly tinkering with jobseekers' allowance. Claimants will have to wait seven days to claim the benefit. This is probably a stealth spending cut – a bit of trimming at the edges. Something called up-front work search is being introduced which will make claimants actively look for work before they get their benefits. Claimants will also have to show up every week, not every fortnight.  Up to 100,000 welfare claimants with poor English will be forced to take classes getting them up to the average linguistic level of a nine-year-old or face sanctions.

That's the kind of thing which usually precedes an attack on public sector workers isn't it?

Indeed it is and that is precisely what he did. Those enjoying 'automatic progressive pay', where your salary rises by virtue of 'time served', are about to not enjoy losing it. Schools, hospitals, prisons and police will all lose the system, but the armed forces won't.

Eh? If it's wrong for other public sector workers, why not the armed forces?

Don't ask pertinent questions.

So it's a spending review written by the Sun's editorial team then?

Yes and no. There are some wrinkles, notably on the basic state pension.

How so?

Well Osborne may be chancellor but he's also the Tories' election strategist. He spotted a potential weak spot in Labour's new love for austerity. Shadow chancellor Ed Balls used a speech earlier this month to say he would support the government's plans for a cap on the welfare system. And he said he'd include the basic state pension in it. That would entail a real terms cut. Today, Osborne said he wouldn't follow Balls' lead. That puts Labour on a dangerous side of the debate and at risk of losing the grey vote altogether. It's a clear effort by Osborne to create a politically-damaging dividing line. On the other hand, it allows Balls to portray himself as the man making the tough decisions – an image the chancellor has rather cultivated himself. There are several senior writers in the Tory press who think Balls is doing the running on this one and are quietly impressed by the shadow chancellor. Watch this space for more developments.

Any other Labour dividing lines?

Plenty, the most dubious of which was the 'temperature test' for winter fuel payments. Labour propose scrapping this benefit for those on the 40p or 45p tax bracket. Osborne is scrapping it for expat Brits who live in warm countries. The good news is it involves contravening EU law. The bad news is it sounds like a pasty tax waiting to happen. Apparently the chancellor hasn't learned his lesson about temperature based systems. The test will be (I'm not making this up): 'Is it warmer than the south-west of England?' The answer to that question, apparently, is yes if you live in Spain, France, Portugal, Greece, Malta, Gibralta or Cyprus.

Is this welfare cap going to work out?

Perhaps. It certainly has plenty of holes in it. Housing benefit, DLA, incapacity benefits were included, but jobseekers' allowance, which tends to rise rather quickly when unemployment goes up, is not. It's also rather weak. If the cap is breached the Office of Budget Responsibility (OBR) issues a public warning. The government then has to take action or... well, nothing really. Live with it.

What about the government departments? Any notable winners manage to fight off Osborne's threats?

Vince Cable got away with a pretty modest cut, after insisting forcefully that the Department for Business is, after all, suppose to be creating growth. He's only losing six per cent and science and apprenticeships are protected completely. Intelligence agencies also did well. They're actually getting a 3.4% rise. Health, schools and international development were ring-fenced, with Osborne offering up money for another bout of free schools. The NHS actually gets a real-terms rise of 0.1% following a cash increase of £2.1 billion. There's a seven per cent cut at the Department of Culture, Media and Sport, five per cent of which will hit community sport, museums and arts, but free museum entry is here to stay. The Department of Transport gets a nine per cent cut but rail administration and Transport for London are footing the bill. There's a five per cent rise for its capital spending which will be repeated every year until 2020, including a proposed Cross Rail 2 acting a bridge between north and south London. Funds are being provided to local councils so they can keep freezing council tax for another two years (GENERAL ELECTION KLAXON). The Ministry of Defence and Home Office fared well, the latter not least because of a six per cent rise in visa costs.

...And the losers?

There are quite a few unloved ones around the Cabinet table. Local government was cut by ten per cent. Osborne accompanied that with a joke about "lean" Eric Pickles' weight. The Ministry of Justice was subject to another barrage, with ten per cent savings excepted. Police will be displeased with another budget cut, although counter-terror operations are being ringfenced. The Department for Environment, Food and Rural Affairs is losing nearly ten per cent, although flood defence systems are protected. The Department of Energy and Climate Change is in the same boat and facing a ten per cent cut.

Anything else?

Getting tired, losing will to live. Sorry, where were we? There's £300 billion of capital spending on the way. Osborne appears to recognise that he was wrong to cut capital spending in 2010, but his new boost of £50 billion in 2015/16 is all based on gross investment, not the net figures you'd typically use for this sort of thing. That's a problem, because it excludes deterioration of existing assets. Even on that measure it's largely unchanged. There's room here for Labour to secure a major political gain by making radical promises on social house building, but it has to be prepared to make the case for borrowing to fund long-term development first.

How did Osborne do overall?

Well he looked dreadful. He's never the most Spartan of men, but today he was pale and tired. He looked like it was the first time he's been outside since the Budget. As usual, his voice cracked, but this time it happened after six minutes.  Tory backbenchers looked weary and resigned. They didn't appear particularly supportive. The simple fact of the matter is that this is happening because his plan failed. At the comprehensive spending review in 2010 Osborne was predicting 2.9% growth for this year and hoping for a barrage of tax cuts in time for the general election. That now looks laughable. Ed Balls didn't put in a particularly convincing performance at the dispatch box, but he didn't really need to. The first victim of the chancellor's performance has been his own reputation.


Load in comments
Politics @ Lunch

Friday lunchtime. Your Inbox. It's a date.

Newsletter update