Following the announcemnt of cuts across the welfare and the public sector, HRreview offers sector-by-sector analysis.


Health research spending will be protected.

NHS spending will increase by 0.4% annually in real terms over the next four years, seeing its budget grow from £103.8bn to £114.4bn by the end of 2015.

This will be consumed by a £1bn social care fund and a further £200m for a new cancer drugs fund. There will also be more money for “talking therapies”, for which charities have long campaigned.

The health service is a key employer with more than 1m staff. The real test for the NHS will be whether pay shoots up in the coming years.


Schools have been promised four years of increased funding just as a demographic bulge places strain on primary classrooms.

The extra spending is designed to help schools deal with a rise in the numbers of children, as well as delivering the coalition’s £2.5bn pupil premium. This is aimed at supporting the education of the nation’s most poor.

Capital spending will be cut by 60% by 2014 after the controversial scrapping of Labour’s Building Schools for the Future programme. £15.8bn will, however, go on refubishing 600 schools.

The government will raise the school participation age from 16 to 18 by the end of this parliament. It will also scrap the Education Maintenance Allowance, a grant intended to keep 16-19-year-olds from poorer homes in education. This will be replaced with “targeted support” for those facing financial barriers to education.

There will also be 15 free hours of early education and care for all disadvantaged two-year-olds. The existing 15 hours a week of free care for all three and four year olds will be maintained.

The chancellor outlined savings including cutting central administration by a third and abolishing five education quangos.

Home Office and the Police

The £5 billion police share of the Home Office budget will be cut by 20%.

Theresa May’s Home Office is one of the biggest losers in the CSR with her overall £10.2bn budget facing a cut of nearly 25%. May is believed to have attempted to limit the police cut to 17% but was forced to settle for 20% in late negotiations with the Treasury. HMIC said cuts beyond 12% would hit frontline services but Osborne offered a new definition of the frontline saying it won’t affect visibility or availability of the police. Which implies that there will be very little money left in the pot to spend on actually investigating crime.

Chief constables have indicated that cuts on this scale could lead to 11,500 police job losses in the eight out of 43 police forces that have so far put a figure on their plans.

The precise affect on frontline policing will depend on success in reforming police pay and conditions.

The Home Office’s £850 million share of the counter-terrorism budget has been protected with a “flat-cash” settlement – ie only has to absorb inflation.


Anyone under the age of 55 hoping to retire on the state pension at 65 will be disappointed today after the chancellor said he was raising the state pension age to 66 in 2020.

The plan is a climbdown from George Osborne’s scheme in opposition that raised the retirement age by one year by 2016.

Women are hardest hit, as their current scheme for moving from 60 to 65 years will be speeded up.

George Osborne said the rise was necessary to pay from re-linking the state pension with earnings from 2012.

However, current pensioners were rewarded with a permanent annual winter fuel allowance. As Osborne said: “cold weather payments should be for life and not just general elections.”

There were a series of changes to benefits sketched out in the speech saving around £7bn, including a rise in the age threshold for single people on housing benefit that means that a single person under 35 will be unable to live alone on housing benefit.

Social care

The government promised an extra £2bn in four years for social care but questions remain over whether this money will materialise as the cash appears not to be ringfenced in local council budgets.

The money will come from two sources – a direct grant and via the NHS – but all will also come from through local authorities.

Overall, council grants will be cut by 7.1% a year for each of the four years of the spending review, but Osborne said local authorities would be given more flexibility in how to spend the money, with only school and public health funding being ring-fenced. This implies that social care remains unprotected.


George Osborne’s own department has committed to overall resource savings of 33% in real terms by 2014-15 by reducing staffing levels, streamlining internal processes and halving the net cost of its building, possibly by subletting unoccupied parts.


The chancellor confirmed that an estimated 490,000 public sector jobs will go by 2015.

So far 42,000 civilian posts in defence, 14,000 jobs in justice and 10,000 at HM Revenue & Customs (HMRC) have been identified!

In central government they will span Whitehall with every department cutting at least 33% in administrative costs, which consist largely of staffing. Some areas, including parts of HMRC, will be computerised to cut the wage bill. The state retirement age will rise to 66 by 2020 instead of 2024 and public sector employees’ pension contributions will rise by 3% from April 2012.

Brendan Barber, the general secretary of the TUC, said: “[Osborne] has loaded cuts on to benefits and welfare payments. Those who are most vulnerable have lost the most today.

“But the biggest tragedy of all is that the spending review is likely to fail on its own terms. These cuts will depress the economy by causing a million job losses and undermining business and consumer confidence.”

Local government

Councils across England will have their funding cut by 28% over the next four years as part of swingeing package of measures to hit town halls announced today.

Chancellor George Osborne revealed the plans alongside “a massive devolution of financial power” from central government to councils that gives local authorities more control over where money is spent – and more responsibility for where cuts are made.

Osborne announced a 7.1% reduction in local government funding each year until 2014 and said ring fenced grants would be scrapped and absorbed into a single revenue grant.

The new settlement for local government will also see an extra £2bn for social care over the four year period, Osborne said.

The treasury has also set aside £650m to help councils meet the coalition pledge to freeze council tax bills from next year, although it is unclear whether this is new funding.

Higher education

The chancellor praised universities as “jewels in our economic crown” but gave no detail about an expected cut to the grant for teaching. Osborne promised a detailed response to Lord Browne’s report on university finance, published last week, and said this would include plans to provide financial support to encourage teenagers from the poorest households to stay in education.

Browne’s report rested on an assumption that the government would cut funding for teaching worth about £9,900 per student over the course of a degree. Better-off graduates would have to pay more for their degrees, Osborne said today, and this will pave the way for cuts in government funding. “This will enable us to reduce considerably the contribution that general taxpayers have to make to the education of those who will probably end up earning much more them.”

Osborne also announced what he said was “the largest ever investment in adult apprenticeships’, consisting of an extra 75,000 placements a year, although the “train to gain” programme will be axed.
Jeevan Vasagar

Business, innovation and skills

The Department for Business, Innovation and Skills has agreed a 7.1% cut in its annual budget, which was £21.1bn last year. Vince Cable has fought hard to ensure the science budget is frozen at £4.6bn although savings of £324m will be found within this. The green investment bank is to get £1bn from the government with the rest coming from the private sector.

24 quangos will be axed.

Energy and climate change

The Department of Energy and Climate Change (Decc) takes one of the smallest overall cuts of just 5% per year with nuclear power, green energy and climate change initiatives escaping relatively unharmed.

Highlights include “up to” £1bn for a single commercial scale carbon capture and storage (CCS) plant to capture emissions from coal power stations. Three more have been sidelined.

The promised green investment bank gets £1bn, with possibly more to follow from future asset sales – one sixth of what green advocates say is needed.

Offshore wind power and energy saving will receive £200m.

Feed-in tariffs, which allow anyone generating electricity to sell it to the grid at a premium rate, go ahead, but look likely to take a £40m cut. The renewable heat incentive, a subsidy for small-scale projects such as ground source heat pumps, will be cut by 20% or over £100m by 2015.

The CRC energy efficiency scheme, a business tax on energy consumption promised for next year, will now go direct to the exchequer rather than being recycled back to business.

The government’s commitment to international climate change stays at £2.9bn, while the Carbon Trust and Energy Saving Trust are now “under review”.


Rail passengers have been spared the immediate pain of higher-than-expected fare increases in January after the Department for Transport deferred price hikes for one year. However, the cost of season tickets will be ratcheted up sharply from 2012 onwards, when tickets prices will increase by three percentage points above inflation for the next three years. The current price cap limits increases on season tickets and off-peak long distance fares to one percentage point above inflation. Very rough, and quick, industry estimates reckon the Treasury will gain an extra £900m or so from the new price cap by 2014/2015.

Boris Johnson, the London mayor, has his eyes on the 2012 election and appears to have secured enough investment to tell voters he has looked after the capital. Osborne has given the go-ahead to the £16bn Crossrail project and a multi-billion pound investment that will put faster, more frequent services on major tube routes. There is also a silver lining for some regions: the A11 to Norwich will be upgraded and the Mersey Gateway bridge project will go ahead.

It appears that the DfT’s status as a large capital-sepnding department has spared it from the worst of the cuts: the total settlement represents a 15% cut in its £15.9bn budget.