Ahead of Wednesday’s Pre-Budget Report, Prime Minister Gordon Brown is set to announce how the Government plans to reduce public spending – starting with the streamlining of Whitehall and shelve or abolishing low-priority programmes.
Mr Brown said he will make efficiency savings worth £12 billion over four years as he tries to show he can halve the country’s massive budget deficit in that time.
On Wednesday Chancellor Alistair Darling is expected to confirm annual borrowing will top £175 billion.
Mr Brown will announce £3 billion of additional efficiency savings identified by the Government since the Budget in April.
Of that, £1.3 billion will be achieved by streamlining central government indicating that certain programmes will have to be delayed or abandoned.
“In order to protect the frontline services we value at a time when budgets are tighter it means we need to do what households up and down the country do to prioritise the necessities and postpone the things we can do without,” adding that the Government will be “relentless” in finding new ways to save money and take the “tough decisions” needed to realise them,” he said.
“We have already promised savings of £35 billion a year by 2011 on top of the £26.5 billion a year already delivered through the Gershon review.
“But by identifying new ways of working – and being prepared to make the tough choices – we can deliver in excess of another £12 billion in efficiency savings over the next four years. This includes £3 billion of new efficiency savings identified since the Budget – of which over £1.3 billion will come from streamlining central government.”
The Prime Minister placed a new emphasis on “value for money” and said that technological advances can enable services to be both responsive and more cost-effective.
One of New Labour’s flagship IT projects, the controversial NHS IT system, is set to be scaled back significantly after Mr Darling told Andrew Marr that it was “something that I think we don’t need to go ahead with just now “.
The scheme, which is one of the world’s biggest civilian IT, is already hugely over budget and several years late.
Following the Chancellor’s announcement Treasury officials rushed to explain that the government was looking for “significant savings” of around £600 million over the medium term by cutting back some features that are less important for patients. A senior health department official, meanwhile, said bluntly that “the chancellor mis-spoke” in saying the project to create an electronic medical record would be scrapped.
Unions expect cuts in senior civil service jobs of up to 20% as part of the Government’s plan to slash public spending while – the Prime Minister said – protecting frontline services.
But union leaders attacked what they described as “irresponsible” cuts in civil service jobs. The FDA, which represents senior civil servants, branded the move “crude electioneering”.
Its General secretary Jonathan Baume said the senior civil service had grown over the past decade because ministers had “significantly extended” the role of central government.
He added: “It is likely that, in the first period of a new Parliament, ministers will need all of the currently available resources to take forward manifesto commitments and likely reforms to public services in the coming decade, even if the senior civil service eventually contracts in size as these reforms bed down.”
Senior civil servant who’s salaries are above £150,000 and £50,000-plus bonuses would require ministerial approval. Top public sector earners would also be “named and shamed”, he said, warning that some had “lost touch” with reality.
The Treasury is also planning to introduce a one-year ’supertax’ on bankers bonuses in a bid to raise hundreds of millions of pounds. It is believed that those close to the Chancellor favour this over taxing banks directly as it does not run the risk of weakening them further.
Speaking to the Financial Times Chris Sanger, head of tax policy at Ernst & Young, said the most likely mechanism to meet these ambitions would be a special tax for high-income individuals who receive a large proportion of their income in one month of the year. “The impact would be to change the nature and system of banking pay,” he said.
But banking chiefs have reacted angrily to the news, Angela Knight from the British Bankers’ Association (BBA) called such taxes “populist, political and penal,” adding that focusing tax plans specifically on bankers would send the wrong message to the rest of the world about the UK’s position as a banking centre.
“We have already seen quite a few companies shift out of the UK,” BBA chief executive Angela Knight told the BBC. It might be popular to put very high taxes on a few [bankers], but we need to know how we would look internationally.”
Other savings planned include getting more services online, which could cut £600m from telephone and paperwork costs, and a 50% reduction in consultancy fees and 25% in marketing.
