Government Spending Review unveiled

Posted on October 20th, 2010 | Categories - Financial News

Chancellor George Osborne has announced the largest spending cuts the UK has seen since World War Two with over £80 billion in cuts, to be phased in over the next four years. The cuts represent an average reduction of 19% in departmental funding.

Mr Osborne said: “Today is the day when Britain steps back from the brink, when we confront the bills from a decade of debt. It is a hard road, but it leads to a better future”.

Leader of the Labour party, Ed Miliband, said the chancellor was taking an “irresponsible gamble” with the economy and “many of the frontline services people rely on”.

Some of the main headlines include:

 

  • The State Pension age for both men and women will be raised to 66 from 2020, six years earlier than had previously been planned, although benefits will remain at the level set by the previous government.
  • Local councils will have the money they receive from central government cut by 7% from April next year.
  • £7 billion will be cut from the welfare budget with reforms to incapacity, housing benefits and tax credits.
  • As previously announced child benefit will be axed for higher rate tax payers, it is now believed that this will save £2.5 billion, which is more than was previously thought.
  • Legislation on the introduction of a permanent tax levy on banks will be published by the government tomorrow.
  • The budgets for the Home Office (6%), HMRC (15%), Foreign Office (24%) and Justice (6%) will all fall, although the budget for the NHS and International Development will not be cut.
  • In addition, the much debated defence budget will be cut by 8% which will result in 42,000 job losses over the next five years.

Whitehall will itself also deliver savings of £6 billion, double the figure previously announced.

The Office of Budgetary Responsibility believes that the cuts will lead to 500,000 job losses in the public sector within the next four years.

The review also stipulated that the BBC must freeze its license fee for the next six years and cover the cost of Welsh channel S4C and the World Service, which amounts to a 16% cut in its budget.

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