The Comprehensive Spending Review.

Today (20/10) the UK Chancellor, George Osborne announced the results of the government's Comprehensive Spending Review. As the name suggests this is an comprehensive review of the UK government's spending. It was billed as the moment the government would announce all the spending cuts that would reduce the national deficit and save the British economy. What we got was a political performance that was more concerned with preserving the central state and it's Conservative ideology then economic responsibility. This began over the last couple of days with ministers and civil servants leaking horror stories of 500,000 government workers losing their jobs and Whitehall departments having their budgets cut by 25%. So when it was announced today that those government employees only may lose their jobs over the next five years and departments like the Ministry of Justice and the Home Office would only see their budgets cut by 6% suddenly it didn't seem so bad.

Obviously a cut of 6% to a department like the Home Office is not an insignificant figure. However the main bulk of the cuts will be borne by local government departments at council level rather then national government departments at Whitehall level. While the spending review made an extra £2bn available to fund social care local councils have seen the block grants they receive to pay for things like schools, hospitals and refuse collection etc cut by 27% . Under the terms of the Conservatives "Big Society" these councils are also being asked to massively increase the amount of the services they provide substantially increasing the amount of political blame they're going to receive for any cuts to services. So I guess the full slogan for the Big Society policy is; "We're all in this together but some of us are more in it then others!"

This shifting of blame is also the principle behind the policy of allowing GP's/Family doctors rather then NHS managers to procure treatment for their patients. On the face of it this sounds like a really good idea after all who better to decide what treatment a patient needs then a fully qualified doctor? The problem is though that while deciding what treatment a patient needs is a medical problem getting that treatment to the patient is an administration problem. Most doctors didn't spend five years at medical school training to be glorified call centre clerks. Therefore the idea of the policy is that as GP's struggle to negotiate the bureaucracy fewer patients will receive the care they need cutting NHS spending without the government having to admit that it's cutting NHS spending. Of course the Conservative Party's corporate donors will love the policy because as NHS care becomes harder and harder to access those who can afford to will take refuge in private health care providers.

By far the area hit hardest by the spending review is social welfare spending including pensions. The big saving being made here comes from an accountancy trick. The government is changing the measure of inflation it uses to determine payment increases from the Retail Price Index (RPI) to the Consumer Price Index (CPI). Unlike RPI CPI doesn't take into account mortgage payments. As only a minority of people actually have mortgages CPI is considered to be the better measure of inflation. However the reason the government have switched to CPI is that is gives a lower figure. This simple change should save the government £6bn, more then half the £11bn they're cutting from the welfare bill. Of course the increase in prices of things like regulated train fares will still be calculated using RPI.

The rest of the savings in the welfare bill will come from restricting access to welfare payments. The state retirement age will increase to 66 years old for both men and women. This represents another year of work for men and another six years of work for women. The myriad of unemployment, sickness and tax credit benefits will be replaced by a single "Universal Benefit." The exact details of this new system are yet to be released but from what we do know the objective of the change will be to reduce the number of claimants rather then improve the way the system works. Also the government has gone to great pains to avoid announcing that it is phasing out social or council housing. Existing social housing tenants will see no changes. However new tenants will face having their eligibility to live in social housing re-assessed every five years and their rents will now be pegged to 80% of the market rate. Along with the changes to Housing Benefit that were announced in the emergency budget this change could have catastrophic effects if the housing market doesn't behave as predicted leading to tens of thousands of the poorest in society being forced into homelessness.

There is also a strong political aspect to the cuts to the Ministry of Justice and the BBC.

The Ministry of Justice is a big and expensive department which is responsible for all the Courts, the probation service and the prisons which simply devour money. This poses a difficult question over which of it's responsibilities will bear the 6% cut to it's budget. Obviously public safety dictates that it can't come from the prisons, the probation service or the criminal courts. That means the majority of cuts will come from the lesser used courts such as the Supreme Court, Employment Tribunals and the County Courts. These function to resolve civil and financial disputes like debt recovery and issues like a local council's duty to house homeless people. With cuts to all services and local councils being put under immense pressure by central government the number of these types of disputes is likely to rise massively increasing the workload of these courts. Along with the cuts to Legal Aid that have already being announced cutting the budgets of these types of courts is going further reduce peoples access to the law and the rights afforded to them by the law.

As for the BBC it is basically funded by a £150 per customer, per year subscription fee, known as the license fee, which is set by the government. As an act of generosity the Labour government stepped in and announced that it would be paying this fee on behalf of all pensioners over the age of 75. Today the Conservative government announced that it would no longer be doing this. However it also told the BBC that it would no longer be able to charge over 75's this fee. This means that the BBC gets a huge hole in it's budget while the government gets to pretend that it is still helping the over 75's. Added to the news in the strategic defense review that the cost of the BBC's World Service will now have to be met by the BBC rather then the Foreign Office this leaves the BBC's budget very stretched. The idea being that with viewers still demanding big entertainment shows the BBC's news output will have to be cut reducing it's ability to inform the public and hold the government to account. It also increases the likelihood that the BBC will soon be broken up with the profitable parts of the business being sold to Murdoch's NewsCorp and the unprofitable parts of the business disappearing altogether.

The Comprehensive Spending Review was certainly very comprehensive so there are still lots of details and figures I need to look at. However it doesn't appear as though it's gone anywhere near far enough to act as a deficit reduction plan. That means we can expect to see yet more tax increases and spending cuts as the recovery plan is tweaked in coming budgets.