Q&A: Spending Review

Chancellor George Osborne is to outline the government's spending plans for 2015/16. Here's a guide to the event.

What is a Spending Review?

The brainchild of former chancellor Gordon Brown, spending reviews are used to set out the maximum amount government departments can spend over a set period of time. It is then up to the 17 individual departments to decide how to slice up the cake.

When is it being held?

Chancellor George Osborne will set out the details in a speech to MPs in the House of Commons on Wednesday 26 June at 12:30 BST

Why does it matter?

The most important routine task carried out by any government - after deciding tax levels - is working out how much cash to spend and on what. It will have a direct impact on the public services we all use. But it will not cover all public spending - major items like social security, pensions and debt interest are not part of it.

What period does it cover?

This Spending Review covers a single financial year - 2015/16. That is much shorter than previous reviews, which have usually covered three or four year periods.

Why is it such a short period?

The deep cuts outlined in George Osborne's first spending review, in 2010, covered a four year period and were meant to fix Britain's public finances within a single parliament. But the economic recovery has not been as strong as expected, so Mr Osborne has had to squeeze in extra cuts for 2015/16, taking us beyond the next general election.

So Labour could reverse all of the cuts if they win the next election?

Labour has said it will stick to the spending plans announced by Mr Osborne for 2015/16 if it returns to power in the May 2015 election.

Why is the Spending Review being held now?

Chancellor George Osborne says he wants to give certainty and stability to government departments. Critics say it is about making the coalition parties appear tougher than Labour on spending.

What is expected to be in this Spending Review?

Mr Osborne needs to find a further £11.5bn in savings from government departments in 2015/16. That means big cuts to the budgets of many departments already feeling the squeeze from the 2010 review.

Where will the axe fall?

We know where it won't fall - schools, the NHS and overseas aid will continue to be protected. That adds up to 60% of all departmental spending. But it also means the other departments will have to bear a heavier burden, with average budget cuts of 8%. If all departments were included in the review the average cut would be 2.8%.

What do we already know?

The past few weeks have seen furious behind-the-scenes wrangling as ministers pleaded with Mr Osborne and Chief Secretary to the Treasury Danny Alexander to be spared the axe.

All 17 departments have now reached a deal with the Treasury. Headlines include:

  • Home Secretary Theresa May has agreed to substantial budget cuts of 7.7% at the Home Office but secured protection for counter-terror policing. Other areas, such as immigration, will be squeezed however.
  • The Ministry of Defence has reached an agreement which will include civilian jobs going, but no reduction in military capability, according to Mr Osborne.
  • The culture department - at one stage facing rumours it would be scrapped altogether - will face cuts of 8%, less than some arts organisations had feared.
  • Local government has been hit with a cut of 10%.
  • The business department has reached a deal that will see it face a budget cut of slightly less than the typical 10%.

How do departments make these savings?

It is up to them. Most stress the importance of protecting "frontline" services and cutting waste. But some critics have warned that this round of cuts could seriously affect services, particularly at a local level.

What happened in the last Spending Review?

George Osborne unveiled cuts averaging 19% across all departments - apart from health, schools and international aid which were "ring-fenced". This was less than the 25% cuts some had feared but still represented the biggest overall reduction in public spending in decades. Local government, the foreign office, justice, rural affairs, the home office and welfare were among the hardest hit.

Why are more cuts needed now?

The coalition was committed to wiping out Britain's record budget deficit within five years - through 80% spending cuts and 20% tax rises. But the figures were based on an economic recovery that failed to materialise, meaning tax revenue was much lower than expected.

Will this be the final round of public spending cuts?

It seems very unlikely to be the last of the spending cuts, whichever party wins the next general election. Two leading think tanks recently warned that Britain faces a further seven years of austerity, but better than expected growth could change things - as could a future government deciding to increase taxes instead of cutting spending further.

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