The Office for Budget Responsibility (OBR) was formed in May 2010 to make an independent assessment of the public finances and the economy for each Budget and Pre-Budget Report. It is being chaired, on an interim basis, by respected fiscal and macroeconomic expert Sir Alan Budd.

• Office for Budget Responsibility website (opens in new window)
• Office for Budget Responsibility Terms of Reference (PDF 196KB)

The first pre-Budget forecast was published by the Office for Budget Responsibility on Monday 14 June 2010.

• Office for Budget Responsibility Pre-Budget Forecast, June 2010 (PDF, opens in new browser window)

http://www.hm-treasury.gov.uk/data_obr_index.htm

• Video and Audio: Public Spending
• Commons Hansard: Public Spending
• About Parliament: Ministerial statements

Oral statements are made after Question Time (or at 11am on a Friday). Statements usually relate to matters of policy or government actions.

At the end of a statement, MPs can respond or question the government minister on its contents.

http://www.parliament.uk/business/news/2010/06/statement-on-public-spend...

Notes

• Securing our future health: Taking a long term view; Derek Wanless, HM Treasury, 2002
• In announcing that they will not implement the previous government's plans to introduce free personal care at home, ministers also said that the government would consider what more can be done to promote re-ablement and provide respite care for carers in light of the available resources.
• The King's Fund's partnership model would see the first 50 per cent of someone’s care costs paid for by the state. For every £2 contributed over and above this by the individual, the state would contribute a further £1 in ‘matched funding’. So, if someone takes up the full package of care they are assessed as needing, once the matched funding element of this is included, the state would pay 67 per cent and the individual 33 per cent.
• All costs in 2006/07 prices.

http://www.kingsfund.org.uk/press/parliamentary_activities/the_emergency...

Emergency Budget

The Budget usually takes place in March or April. Indeed, there was a Budget statement made by the previous Chancellor of the Exchequer, Alistair Darling MP, on 24 March 2010. However, in election years, after a change of Government, a Budget will usually be introduced by the incoming Chancellor of the Exchequer, whether or not the outgoing Chancellor has already delivered one.

What is in the Budget?

The Budget statement will include:

• a review of how the UK economy is performing
• forecasts of how the UK economy will perform in the future
• details of any changes to taxation.

What happens after the Budget statement?

It is customary for the Leader of the Opposition to respond to the speech given by the Chancellor rather than the Shadow Chancellor.  The Shadow Chancellor makes his response the day after the Budget statement.

The Budget Debate will continue on Wednesday 23 June, Thursday 24 June and will conclude on Monday 28 June.

The Budget statement will be shown live from when the Chancellor begins his statement on Tuesday 22 June and can be viewed via the link below.

• Video and Audio: Budget statement

Further information:

• About Parliament: The Budget
• Education: The Budget
• HM Treasury: Budget 2010 (external link)
• Frequently Asked Questions: The Budget
• Podcast: The Budget

http://www.parliament.uk/business/news/2010/06/emergency-budget-2010-/

http://news.bbc.co.uk/1/hi/politics/10362367.stm

A BBC report http://news.bbc.co.uk/1/hi/uk/10504916.stm

The Chancellor launches the Spending Challenge website for the public

From today, anyone can go to the new Spending Challenge Public engagement website and submit their ideas.

The Government believes that the people who use our schools, hospitals, transport systems and other public services are the best people to comment on how to get more out of our services, while tackling the country’s record deficit.

This year Britain had the highest annual borrowing of any country in the G20. The Government believes urgent action is needed to tackle the deficit. Last month’s Budget set out a plan to balance the books by 2014-15, including substantial reductions in public spending.

It is going to require tough decisions, and that means approaching the Spending Review in a completely different way in order to re-shape how we all benefit from and use public services.

In a period of just two weeks, the workers who deliver our public services have sent in more than 60,000 suggestions.

From today, the whole country is being asked to send in ideas during July and August, and to tell the Government what they think about the ideas that are put forward.

Alongside the website, the Chancellor and other Ministers will be taking part in seminars and visits across the country. They will be listening to the public’s ideas in person and seeking views on how public spending should be cut, while protecting the vulnerable in our society.

Chancellor of the Exchequer George Osborne said:
 
‘We are facing the challenge of a lifetime. After years of Labour waste, there is now simply not enough money to go round.

That’s why I’m asking everyone across the country to send in their ideas. We need to tackle this huge national debt and make our economy stronger, and it’s your ideas that will help us do that by improving public services and saving money. ‘

Notes for Editors

1.The link to the Spending Challenge website is : http://spendingchallenge.hm-treasury.gov.uk/.

2.The Chancellor launched the Spending Challenge website on 24 June 2010. The first phase was aimed at the public sector and had received 61,888 ideas (as of 08 July). A sample of the ideas submitted can be found here: http://www.hmtreasury.gov.uk/spend_challenge_ideas_1.htm

3.  The Spending Review Framework can be found on the Spending Review section of the HM Treasury website .

4.  The Spending Review will be a complete re-evaluation of the Government’s roles in providing public services. It will do this by:

- thinking innovatively about the role of the Government in society
- taking the difficult decisions to reduce the deficit collectively as a Government; and
- consulting widely using all talents to deliver a stronger society and a smaller state.

5.  The ideas generated throughout the summer will inform the decisions taken on the allocation of money between Government departments over the next 4 years. The Spending Review, which will set out how much each department will have to spend will be published on 20 October.

6. People will also be able to get in touch via the democracy UK section on facebook where they can discuss and debate spending priorities and submit ideas for where cuts can be made.

7.  Non-media enquiries should be addressed to the Treasury Correspondence and Enquiry Unit on 020 7270 4558 or by e-mail to public.enquiries@hm-treasury.gov.uk .

http://nds.coi.gov.uk/content/detail.aspx?NewsAreaId=2&ReleaseID=414347&...

Yesterday the Office for National Statistics published a very interesting paper on public debt. For the first time in an official publication, it brings together estimates of all those off-balance sheet Enron items we've blogged so often - public sector pensions, PFI, state pensions, bank bail-outs, nuclear decommissioning - the lot.

And it gives a pretty evenly balanced commentary on the kind of liabilities involved, and some of the estimating problems. Yes, much of this material has been published in dense technical form before, but this paper is much more accessible and mercifully much shorter (a mere 26 pages).

The paper opens with a statement it's worth quoting in full because we might almost have written ourselves:

"Just as for companies and households, the public sector’s balance sheet is central to assessing its financial health. Such a balance sheet would set out the public sector’s assets – what it owns or is owed – and its liabilities to others. A limitation of traditional balance sheets is that the liabilities they include are defined quite narrowly and so exclude a range of potential obligations to others. To ensure that fiscal policy setting expenditure, taxes and government borrowing – is as well based as possible, and in the interests of transparency, the publicly available information on the range of public sector assets and liabilities needs to be as complete as possible."

To which we can only say, hear, hear.

The bottom line is that the ONS is now actively considering whether to include a whole raft of those Enron items in the official measure of public debt. And here's their summary of how that might look (you'll have to click on image to read):

So what does that lot add up to? The Mail's Steve Doughty has done the sums and makes it around £4 trillion - that is, well over four times the current official £0.9 trillion National Debt (Public Sector Net Debt - PSND). The largest additional items - all of which we've blogged many times - are:

• Debt of nationalised banks - ONS reckons RBS and Lloyd's debt will add £1-1.5 trillion; they're still working on the exact number but will definitely be including it within the next few months
• Unfunded public sector pensions - ONS says the liability is up to £1.2 trillion (interestingly, that's an external estimate from actuaries Towers Watson, rather than the lower - and now discredited - official figure)
• Unfunded state pensions - ONS quotes official estimates of £1.2-1.4 trillion
• PFI - ONS quotes a figure of £200bn (undiscounted)
• Nuclear decommissioning - £45bn

Now, the ONS has not committeed itself to adding all of these to the monthly figures for Public Sector Net Debt, but it does sound as if it intends to publish regular updates of wider public sector liabilities. Which we wholeheartedly support.

Of course, in estimating these wider liabilities, we will expect the ONS to maintain its own high standards of integrity and impartiality.

For example, the official figures it quotes for unfunded state pension liabilities are almost certainly a serious under-estimate. Whereas they quote £1.2-1.4 trillion, external analysts calculate a figure at least twice that (eg see this excellent IEA paper by Nick Silver, which conservatively puts it at £2.75 trillion, and this blog for how, in terms of the ongoing liability, it isn't difficult to come up with numbers that are a multiple of even that).

Also we're not convinced by the ONS practice of netting off liquid assets in its main published figure for public debt (PSND). What taxpayers need to know is the size of our gross liabilities. Sure, there may be some assets to set against those liabilities, but those assets can never be entirely secure even if they are supposedly liquid. For example, the deposits our local authorities placed with the Icelandic banks were netted off as liquid assets, but as we later found out, they were most assuredly not secure. And the same goes for the liquid assets of RBS and Lloyds, which ONS are proposing to net off against their liabilities. Doing so will reduce the net debt figure by about £1 trillion, even though taxpayers are actually on the hook for the entire gross debt.

Still, overall, this is another step in the right direction. It is absurd for the nation to depend on external analysts and bloggers with fag packets to calculate the real National Debt, when we employ an army of statisticians who could do the work so much more thoroughly.

The ONS must get cracking and publish the results openly and fearlessly. It's time for us to know the complete and unexpurgated truth about our finances.

http://www.taxpayersalliance.com/waste/2010/07/how-big-is-our-state-pens...

Chancellor George Osborne must create a more "joined-up" approach to spending cuts to deliver true value for money, a Conservative think-tank has warned.

The Centre for Social Justice accuses the government of a "blunderbuss" approach to reducing spending.

The group, set up by Work and Pensions Secretary Iain Duncan Smith, says setting overall savings targets could hit schemes already giving good value.

But the Treasury said it would protect frontline services.

The chancellor has asked most Whitehall departments to set out how they could save 25% to 40%

The Centre for Social Justice report says ministers may be tempted to cut each existing project's budget, instead of getting rid of those which are failing.

http://www.bbc.co.uk/news/uk-10836527

http://www.centreforsocialjustice.org.uk/default.asp?pageRef=37

The Spending Challenge is your chance to shape the way government works and help get more for less as we tackle the deficit.

We’ve had an overwhelming response from you: over 100,000 suggestions, including more than 44,000 ideas from the public.

To ensure the public ideas are considered in time for the Spending Review and that you get a chance to consider and rate them, the Spending Challenge website has now closed. It will reopen shortly with a new facility that enables you to rate the ideas already received.

At the end of August, we’ll then take the best ideas and investigate them in further detail. The most promising will be taken forward in time for the Spending Review on 20 October.

The start of the new phase of the website doesn’t mean it’s too late to submit your ideas - these can continue to be submitted in the usual way.

The Spending Challenge website was launched on 24 June, and was initially open to people who work in the public sector to get their professional insights and views on everything from how to cut back on wasteful spending to how to radically change the way services are provided. Over 65,000 suggestions were received in just two weeks.

We put together an anonymised sample of the ideas. They ranged from how we could save money and the environment by cutting back on publications and printing, to how we need to stop unnecessary spending of budgets at year end in a “spend it or lose it” culture. The ideas were imaginative and thought provoking. Not all are easy to implement but everyone single one will be considered, and the best ones will be taken forward.

Alongside this, Ministers have been getting out and about across the country to hear your opinions and ideas first hand.

Spending Review 2010

In 'The Spending Review Framework', the Government published details of the process and principles that will underpin the Spending Review., This will be published on Wednesday 20 October 2010 and will set out spending plans for the years 2011-12 to 2014-15.

Last year, Britain had the largest deficit in peacetime history and the highest in the G7 and G20. If this rate of borrowing is allowed to continue, it could threaten the UK’s economic stability. It could lead to higher interest rates, tax rises and less money for services such as schools, hospitals and policing.

The Government has said that reducing the deficit is the most urgent issue facing Britain today. That is why it has committed to a significant acceleration in the reduction of the deficit over the course of this Parliament.

The Spending Review Framework announced the formation of the Public Expenditure (PEX) Cabinet Committee to advise the Cabinet on the high-level decisions during the Spending Review. Alongside this, it also announced that there would be an officials committee at Permanent Secretary level, chaired by the Cabinet Secretary and the Permanent Secretary to the Treasury, to build the Government’s collective understanding of the issues, ensure support for the overall principles and approach and discuss cross cutting issues.

Our web content was reviewed and amended following the 2010 General Election to remove information related to the previous administration.

The content that was located on this page prior to the Election is still available on the National Archives UK Government web archive (opens in new browser window).

http://www.hm-treasury.gov.uk/spend_index.htm

CSJ Response to the Government's Spending Review Framework: Maximising Social Value

Treasury review of public spending misses the fundamentals, warns CSJ in new report

The Treasury’s urgent review of state spending misses the fundamentals and needs drastic changes if it is to secure genuine value for money, an influential think-tank warns in a new report published today.

The report from the Centre for Social Justice criticises the Treasury for failing to identify the benefits to society that public expenditure is seeking to achieve.

Ministers are effectively flying blind, under orders to cut programmes by up to 40 per cent but with confused guidance about their departments' objectives and how they should choose between spending options.

The danger of this approach is that effective programmes, making a real contribution to the country’s well-being will be axed, while other wasteful or pointless spending will survive.

Gavin Poole, Executive Director of the CSJ, warns: “Our fear is that cuts will be made the wrong way. Instead of assessing the true productivity of programmes and cutting those that are ineffective, we will see salami-slicing: equal cuts off all programmes, good and bad.

“We will see cuts based on political calculation from politicians and cuts based on administrative ease for Civil Servants.

“What we won’t see is an overarching rational approach which looks at what works in achieving the Government’s core objectives.

“We won’t see this because so far there has been no clear statement about what outcomes the Government is trying to achieve.

"Ministers are effectively flying blind, under orders to cut programmes by up to 40 per cent but with confused guidance about their departments' objectives and how they should choose between spending options."

“The Spending Review Framework announced the end of the public service agreement targets, but was completely silent on what should replace them.”

The CSJ’s report has been submitted to George Osborne, the Chancellor, with the aim of injecting a more rigorous and businesslike approach to the spending review, due for completion by October.

It recommends that the Treasury adopts the disciplined, business-oriented approach to public spending pioneered in the USA by Washington State. It has set up an independent body known as the Washington State Institute for Public Policy to assess the cost-effectiveness of social spending.

WSIPP has produced startling results. When it found that the intensive early intervention initiative Nurse Family Partnership generated almost $3 in savings for every dollar invested, the state invested in this programme and culled less effective ones.

The CSJ report urges the Treasury to follow business practice and put return on investment at the heart of its spending decisions. It should take into account not just the financial value created from a spending programme, but the social value as well. This way worthwhile programmes will be expanded and ineffective ones identified and scrapped.

For copies of the Response to the Spending Review framework, click here

For media inquiries, please contact Nick Wood of Media Intelligence Partners Ltd on 07889 617003 or 0203 008 8146 or Alistair Thompson on 07970 162225 or 0203 008 8145.

NOTES TO EDITORS

The Centre for Social Justice is an independent think tank established, by Rt Hon Iain Duncan Smith MP in 2004, to seek effective solutions to the poverty that blights parts of Britain. 

In July 2007 the group published Breakthrough Britain. Ending the Costs of Social Breakdown. The paper presented over 190 policy proposals aimed at ending the growing social divide in Britain.

Subsequent reports have put forward proposals for reform of the police, prisons, social housing, the asylum system and family law. Other reports have dealt with street gangs and early intervention to help families with young children.

The Rt Hon Iain Duncan Smith MP stood down as Chairman of the Centre on his appointment as Secretary of State for Work and Pensions in May 2010 and is now the Founder and Patron.

http://www.centreforsocialjustice.org.uk/client/images/CSJ%20Response%20...

http://www.hm-treasury.gov.uk/d/spending_review_framework_080610.pdf

Public spending in the UK in 2008/9 amounted to over £10,000 per person or about 43% of national income (Crawford, Emmerson and Tetlow 2009) while net receipts from tax and social security contributions exceeded £8,000 per person or about 35% of national income. These transfers of resources between individuals and the state, either as cash payments or as supply of goods, affect individual standards of living and do so in ways that differ markedly between different households. Assessing the impact of government activity on the distribution of household living standards is essential to the evaluation of public service provision but raises challenging conceptual issues that we discuss in this report.

Full version (external link)

http://www.ifs.org.uk/publications/5234

The Government's current spending review could shape the future of transport for years.

As detailed in our Smarter Cuts report, cuts to bus or rail services could have devastating impacts. By contrast, big cuts to road building would be a benefit in themselves, and could save money better spent on sustainable transport. 

Track developments and join the debate

As we work to get the best outcome for sustainable transport, we'll post briefings, reports, and results here:

• Read our Smarter Cuts report, which shows how the Government can minimise the impact of cuts
• Find out why green transport is vital to the economy, providing almost half a million jobs
• Read our briefing on the Emergency Budget of June 2010
• Find out why vital bus services are under threat

We're also beginning the debate about the best place to make cuts, and will submit revised comments before the autumn's pre-Budget report. We're keen to hear your views about what the Government should cut and what it should protect.

Tell us what you think using our quick web form

http://www.bettertransport.org.uk/campaigns/climate_change/spending-revi...

The IFS's analysis of the Budget seems pretty unequivocal: once you look across a number of years and take all the changes into account, the poor lose more.

The Treasury's defence seems to be:

• Measures such as reducing corporation tax will promote growth.
• The budget 'encouraged' more people into work.
• Pensioners will benefit from rises in the state pension of 2.5%, prices or earnings, whichever is higher.

Unfortunately, these arguments don't really stack up to a progressive Budget.

Growth

Economists will no doubt continue to argue about whether the Budget will promote growth. However, growth in itself does not guarantee fairness. A country can have strong economic growth and steeply rising poverty. Think back to the UK in the 1980s.

Growth can contribute to fairness in a number of ways including:

• Providing jobs that genuinely lift people out of poverty (decently paid, secure, allowing progression and enabling people to balance work and caring).
• Facilitating government and charity spending on programmes benefiting those on low incomes.

However, neither of these is guaranteed. Nor do they necessarily wipe out the damage that could be done by increasing poverty in the meantime.

Moving people into work

One way the Budget aimed to do this was by cutting various benefits, such as housing benefit for long-term Job Seeker's Allowance (JSA) claimants. However, this will only move people into work if they are able to get jobs. And moving people into work does not necessarily take them out of poverty. Too many families find that getting a job leaves them on a low income, with little prospect of moving up. Our research suggests that the nature of the UK labour market is a major barrier to tackling poverty.

Raising the Income Tax Personal Allowance also aims to encourage work. This was one of the 'big ideas' of the budget, and a major achievement for the Lib Dems. It undoubtedly benefits people working on low incomes. The extent to which people on higher incomes also benefit from it was limited by the freezing of the higher tax rate. However, the IFS today claims that people in the top half of the income distribution still benefit more than those in the bottom half.

The reforms to the welfare system being considered by Iain Duncan Smith hold out some hope. Simplifying the benefits system and creating smoother transitions for people moving in and out of work would be very helpful. IDS’s long-held goal of letting people keep more of their earnings before they lose benefits would make an enormous difference. However, it would be expensive, and would either require more money from the Treasury or even greater cuts to other benefits. The new Work Programme is also looking positive, in particular the move to making jobs of at least a year the key target for providers. But there are still questions about how tailored and effective the support will be for the many more vulnerable people now being moved on to JSA.

Pensions

Pensioners will undoubtedly benefit from the improvement to the state pension. This is a change that JRF supports in the long term. One of the big achievements of the Labour government was a major reduction in pensioner poverty. Even before the Budget, pensioners who claimed everything they were entitled to could reach a minimum decent standard of living. This compared very positively with childless working-age adults, who could only reach 40% of their minimum income standard.

Children

Finally, it was claimed that the Budget would not raise child poverty, due to the rise in Child Tax Credit (which balances out the cuts in Child Benefit, for the first two years at least). However, the IFS suggests that this may not turn out to be the case, once cuts to Housing Benefit and Disability Allowance are taken into account. In addition, the public spending cuts that are coming in October may well have a disproportionate effect on both services and jobs for people in poverty. New research the JRF has commissioned from the IFS will assess this in the Autumn

http://www.jrf.org.uk/blog/2010/08/budget-hits-people-in-poverty

http://www.jrf.org.uk/focus-issue/cuts-spending-and-society