2016/17 Main Estimates:

Transcription

1 2016/17 Main Estimates: of Government Spending Plans for 2016/17 This document provides help for Members and staff to better understand the SPENDING PLANS OF THE GOVERNMENT, which will be voted on by Parliament through the Main Estimates in July Briefing on each Department SCRUTINY UNIT Strengthening scrutiny through specialist support If you have any questions, comments, feedback on this document s usefulness or otherwise, and any suggestions for inclusion in a future year s edition, please contact Larry Honeysett in the Scrutiny Unit honeysettl@parliament.uk

2 What are the Main Estimates? Main Estimates are the government s spending plans for each department for the new financial year, which have been developed from last autumn s Spending The Spending announced the headline spending totals for each Department for each of the next four years, plus a few specific commitments Main Estimates are our first opportunity to see detailed breakdowns of planned spending within the overall totals, for the first year only.

3 SPENDING REVIEW October 2015 Spending settlement sets DEPARTMENTAL SPENDING TOTALS (DELs) for to Decisions on changes to benefits designed to make FUTURE SAVINGS (AME). BARNETT CONSEQUENTIALS for next four years calculated for Scotland, Wales and Northern Ireland. How do get their funding? VOTE ON ACCOUNT March 2016 Parliament votes each Department an advance of funds for the first four months of the year based on last year s spending totals THE BUDGET March 2016 The Divvy Ups Further changes to future taxes and spending. The Finance Bill enacts tax changes; spending changes are enacted instead through ESTIMATES (see below). Departmental Ministers consider PRIORITIES, how to make EFFICIENCY SAVINGS and how to SHARE OUT each Department s budget Committees briefed on content of Main Estimates by Scrutiny Unit (this is what you are now reading) MAIN ESTIMATES Detail of plans, by spending programme, published for first time in MAIN ESTIMATES This includes any changes affecting spending announced in the March Budget. Block grant totals for Scotland, Wales and Northern Ireland set. Decisions on spending choices are for relevant Parliaments. Departments provide a memorandum explaining the content of the Main Estimate. May 2016 April 2016 Committees may decide to question Ministers and officials on the content of the Estimates (orally or in writing) ESTIMATES DAY DEBATES (see next slide) July 2016 Main Estimates expected to be approved by the House SUPPLEMENTARY ESTIMATES February 2017 Later in the year Departments publish SUPPLEMENTARY ESTIMATES, showing proposed changes to in-year budgets. These will be voted upon in March 2017

4 What is the role of the House and Select Committees? The formal process of considering Main Estimates in the House is quite constrained. Only two Main Estimates are selected for debate - and possible downward amendment - on the floor of the House. The subject of the debate is usually based on a select committee report- this can limit the scope of the debate considerably Other Estimates are approved without debate or the possibility of amendment However, Committees have a core task of examining the spending and performance of Examples of how they might exercise this: Calling Ministers or officials to appear to discuss spending and priorities outlined in the Main Estimate Drawing on information in the Estimates as part of current Committee inquiries Writing to questioning any issues arising from the Estimate The House of Commons Scrutiny Unit is there to assist Committees in this work. Scrutiny Unit staff can also provide oral briefing to Committees or committee members on the Estimates or other financial matters on request. Contact Larry Honeysett honhoneysettl@parliament.uk for more information. The Procedure Committee has launched an inquiry looking at the whole process of Parliamentary scrutiny and approval of Estimates and how it might be improved in the future

5 Departments (click on the link to view slides for each department): Cabinet Office Business, Innovation and Skills Communities and Local Government Culture, Media and Sport Education Environment, Food and Rural Affairs Energy and Climate Change Foreign and Commonwealth Office Health Her Majesty s Revenue and Customs Her Majesty s Treasury Home Office International Development Ministry of Defence Ministry of Justice Transport Work and Pensions Devolved Administrations: Scotland Wales Northern Ireland Sources

6 billions What the told us: Cabinet Office Resource DEL budget Annual savings of 60 million by from efficiencies such as reducing the costs of finance, HR and staff CABINET OFFICE The National Citizen Service is set to deliver up to 300,000 places by New funding for additional responsibilities: 282 million of resource funding and up to 90 million of capital funding by for a series of cross-government digital and property programmes that will deliver savings and improve services such as GOV.UK Pay Expanding support for Social Impact Bonds, providing 80 million of the 105 million total across government over the Parliament, to uplift funding for locally designed schemes, tackling issues such as youth unemployment -19% The average savings made from unprotected Whitehall in 2015/ /20. Protected funding for the National Security Secretariat and Joint Intelligence Organisation, who support the Prime Minister and the National Security Council with their security and intelligence responsibilities x2 Investment in cyber security will almost double compared to the previous 5 years

7 millions millions Resource DEL (Departmental Expenditure Limits) (in cash terms) CABINET OFFICE What new information is there? 2016/17 increases mainly due to: Capital DEL (Departmental Expenditure Limits) (in cash terms) 100m extra resource 28m extra capital 69m For cross-government efficiency policy in digital services and Government Property Unit programme. For National Citizen Service 64m reduction due to the disposal of Admiralty Arch 32m funding for GREAT Programme: 3m retained by the CO 29m Will be transferred to other government at Supplementary Estimate

8 millions millions Programme Spending: Resource DEL budget expenditure (in cash terms) 69m increase due to PM s ambition for a universal National Citizen Service providing 360,000 places by Most is spent on Government Digital Service (GDS) CABINET OFFICE Capital DEL budget expenditure (in real terms) Government Digital Service (GDS) provides digital support for the Departments by: Creating the platforms and tools that make it simple for government to build, iterate and retire services; Providing standards, policy, support, and guidance; Leading the digital, data and technology functions. Disposal of Admiralty Arch 2016/17 ring-fenced policies: 209m National Citizen Service 128m Cross government efficiency 59m Elections

9 CABINET OFFICE How is the Civil Service saving money? Better procurement Staff cuts Sources of Savings Pay freezes and pay restraint Commercial expertise and better management of major projects (Major Projects Authority) Estate rationalisation: 2 million m 2 disposed of Digitalisation and online services Centralisation of back-office functions with shared service centres? The NAO has concluded that the two shared service centres have made savings but have not achieved value for money to date Cross-government efficiency policy in digital services and Government Property Unit programme (report published 20 May 2016)

10 CABINET OFFICE Reduction in the number of government buildings in central London: 2010: : 23 (estimated) Planning and managing a transformative cyber security programme for the UK Continue to increase government transparency and digitalisation Improve support for civil society and voluntary sector Across UK, between 2010 and more than 2,000 properties vacated (28% reduction ) reduction by 2 million square metres in use by (20 % reduction) Continue to support and deliver cross-government savings through efficiency and reform

11 billions What the told us: BUSINESS, INNOVATION AND SKILLS Resource and Capital DEL budgets (in cash terms) Estimated 2bn annual reduction in spending by through replacing student maintenance grants with loans Resource includes new 1.5bn Global Fund BIS s share of government spending on Resource DEL : New apprenticeship levy on all large companies based on 0.5% of an employer s pay bill. Commitment to 3 million apprenticeships by 2020, compared to 2.4 million in last Parliament. Science funding protected: 4.7bn resource funding protected and capital rises to 1.2bn per year by Removal of student numbers cap Student loan repayment threshold frozen at 21k: more people will repay and earlier 2015/16: 4.1% 2019/20: 3.5% BIS s share of government spending on Capital DEL : 2015/16: 8.7% 2019/20: 3.4%

12 What new information is there? Resource DEL (Departmental Expenditure Limits) (in cash terms) BUSINESS, INNOVATION AND SKILLS Includes a 1.5bn reduction due to student loans now considered to be worth more than last year: new loans issued are now considered to be worth 72% of their face value vs 55% last year. Therefore, less needs to be spent impairing these loans, i.e. the RAB charge has gone down. All R&D spending is now classed as capital, under new Eurostat definitions. This moves 5.8bn from resource to capital The RAB charge has gone down thanks to: Lower HMT discount rate, meaning that future repayments are now valued more in present terms Changes to student loan repayment policy less generous: repayment threshold frozen hence more repayments forecasted Capital DEL (in cash terms) Capital AME (Annually Managed Expenditure) in cash terms Student loans: net amount* lent out continues to increase: 2015/16: 12.7bn 2016/17: 13.5bn This increase is mainly driven by the switch from maintenance grants to loans * net amount = new loans + capitalised interest repayments & disposals

13 What new information is there? (continued) Resource DEL budget expenditure (in cash terms) Reduction reflects replacement of maintenance grants with student loans (which come from AME budget) for new students from Increase mainly driven by spending on apprenticeships BUSINESS, INNOVATION AND SKILLS Extra funding for grants to support business: capital resource Spending cut 70m extra For Launch Fund investments 202m resource From DfID for overseas development assistance activities carried out by BIS New capital projects: 2015/ /21 overall funding: 82.6m 2016/17 budgets: 13m 7m Royal College of Art: a new building at their Battersea campus 0.2m STEAMHouse: an innovation centre in the West Midlands which brings together science, technology, engineering, maths and the arts. National Institute for Smart Data Innovation: a new facility to explore the possibilities opened up by digital data in Newcastle-upon-Tyne Capital DEL budget expenditure (in cash terms) 133m increase due to Government s commitment to maintain science funding in real terms Spending cut -47% What is the impact?

14 How is BIS saving money? Estate rationalisation BIS is reducing locations from more than 80 to 7 or 8 centres plus a regional footprint BUSINESS, INNOVATION AND SKILLS Shared services Utilise cross-government platforms such as GOV.UK Verify, GOV.UK Pay or GOV.UK Notify as part of departmental digital services Closing arm s-length bodies BIS is closing more than half of its 45 partner bodies, e.g.: Learning and Skills Improvement Service Sources of Savings Cuts to Skills Funding Agency Cuts to admin and staff Joint procurement Delivering savings through joint spend on common goods and services, in partnership with Crown Commercial Services Replacing maintenance grants with loans As with other student loans, exactly how much this is going to save to the government will only be clear in the long term

15 Percentage billions BUSINESS, INNOVATION AND SKILLS : Government has set a number of targets by 2020 that may prove difficult to achieve Annual value of UK exports, billions The Main Estimate does not seem to have budgeted for the planned sale of student loans. Are there further delays in demonstrating VFM? Or are the plans going ahead, with the relevant budget adjustments to appear at the Supplementary Estimates? 2020 TARGET: 1000 Proposals to replace R&D grants with loans International comparison in Productivity: Constant price GDP per hour worked (2007=100%) TARGET: BIS aims to double the proportion of people from disadvantaged backgrounds entering higher education by the end of this Parliament, from 2009 levels. 30% 25% 20% 15% 10% OBR Forecast UK has some of the lowest productivity among the G7 countries 5% 0% 2015 Target

16 billions What the told us: DCLG (Department) Resource* and Capital DEL budgets (in cash terms) COMMUNITIES AND LOCAL GOVERNMENT Capital budget planned to be 500m higher in compared to 2015/ % cut to the resource budget, including a 20% reduction in the department s paybill DCLG will continue to oversee delivery of devolution deals agreed with city regions and other areas. Resource Capital *Resource does not include New Homes Bonus funding, which was in the LG DEL at the SR Resource Spend: The government will continue to invest in the Troubled Families programme to deliver better outcomes for 400,000 families by 2020 with efficiencies found from central budgets. From the government will devolve and reform increased funding for managing temporary accommodation, giving local authorities more control and flexibility. Capital Spend: Increased budget will fund housing schemes such as Starter Homes and Help to Buy DCLG will invest in digitising the collection of local taxes to generate efficiencies DCLG s share of government spending on Resource DEL : 2015/16: 0.5% 2019/20: 0.4% DCLG s share of government spending on Capital DEL : 2015/16: 7.1% 2019/20: 7.2%

17 millions DCLG (Department): What new information is there? COMMUNITIES AND LOCAL GOVERNMENT New Homes Bonus Funding in 2016/ /20: Large reduction in the last two years 1bn transferred to DCLG s Capital budget for the Local Growth Fund* 130m from BIS 893m From DfT * Operated by DCLG and worth 12bn over the Parliament. The programme is designed to empower local communities to deliver growth by giving them greater control of public spending. New Homes Bonus funding will be transferred from Local Government to DCLG budget. New Homes Bonus funding has been transferred from Local Government to main DCLG budget. Transfer of Fire programmes to the Home Office: 93m From Resource DEL budget 41m extra For Devolution Deals 6m From Admin budget 63m From Capital DEL* budget * Included here is a 60m fire capital grant which the memorandum seems to have omitted

18 millions DCLG Resource DEL (Departmental Expenditure Limits) (in cash terms) COMMUNITIES AND LOCAL GOVERNMENT DCLG (Department) Main areas of resource spending in 2016/17: How does it compare to 2015/16? 2,000 1,800 1,600 1,400 1,432 1, m increase in New Homes Bonus 1,200 1, Included 248m for flooding support. Resources for 2016/17 ongoing costs will be obtained at the Supplementary Estimate Local Government & Public Services Housing & Planning Decentralisation and Local Growth m increase in Local Growth Fund & Cities 30m decrease in Regional Growth Fund

19 millions millions DCLG (Department) Main areas of capital spending in 2016/17: How does it compare to 2015/16? DCLG Capital DEL (Departmental Expenditure Limits) (in cash terms) 3,500 3,000 2,500 2,000 1,500 1, m increase in Local Growth Fund & Cities 32m decrease in Regional Growth Fund 1,343 1,790 Decentralisation & Local Growth ,853 HCA 3,061 COMMUNITIES AND LOCAL GOVERNMENT Homes and Communities Agency: Spending by type 3,500 3,000 2,500 2,000 1,500 1, , ,629 Help to Buy Demand-side investments Affordable housing Build to Rent Local Infrastructure Fund Get Britain Building Builder's Finance Fund Supply-side investments Other Underspent by 730m last year, 242m of which was "exchanged, i.e. rolled into this year. The remaining difference is mostly due to: + 119m for Help to Buy + 138m for Public Sector Land The HCA has produced significant underspends over the last two years. What will the consequences be if the HCA underspends again? Will it lose the funding?

20 billions COMMUNITIES AND LOCAL GOVERNMENT Local Government funding in 2016/17: How does it compare to 2015/16? % overall reduction in funding Funding from 50% retained business rates is now significantly larger than RSG Revenue Support Grant Council tax Retained business rates Average 3.1% increase to council tax bills. Includes 382m raised by the new social care precept 24% cut RSG will continue to be cut rapidly every year of the Spending to a low of 2.2bn in , before disappearing with the move to 100% retention. Funding from business rates will double and RSG disappear with the move to 100% retention of rates The net increase in funding that will result from 100% retention = The difference between 50% of rates and RSG Newly devolved responsibilities will have to at least match that amount

21 CUTS TO DCLG Resource budget COMMUNITIES AND LOCAL GOVERNMENT How are the Department and Local Government saving money? GOAL: Overall resource savings of 29% by 2019/20 Reduce supplier cost base by evaluating contract portfolio and working with Crown Commercial Services to renegotiate Use of equity, loans and guarantees Reduced use of grants Staff cuts DCLG Sources of Sources of Savings Savings Shared services: taking advantage of crossgovernment platforms, technology services and the best commercial offerings Sharing building with Home Office Disproportionate cuts to grants and increased reliance on local taxes Removing ringfences Closure of libraries and other facilities LG Sources of Savings Reduction in service levels, e.g. higher thresholds for adult social care Staff cuts Increased fees and charges Shared staff, services and facilities Rolling specific grants into formula grant and revenue support grant Outsourcing Mergers

22 COMMUNITIES AND LOCAL GOVERNMENT Percentage increase in levels of homelessness since 2009 (2010) 120% 100% 80% 60% 40% 20% 0% CHALLENGE: Rising levels of homelessness % 32% Households found to be homeless by local authority Rough sleepers (since 2010) CHALLENGE: Managing reductions in DCLG workforce without reducing strategic capability, e.g. delivery devolution deals CHALLENGE: Managing portfolio of equity, loans and guarantees, as the department s strategy increasingly exposes it to the housing market 100% business rates retention can create large divergence between local authorities? What policies will be in place to mitigate this divergence? 80% 60% 40% 20% 0% -20% -40% Gain / loss in 2015 as a share of budget, if 100% retention had started in 2010, without levies and safety net

23 billions What the told us: Department for Culture, Media and Sport Resource and Capital DEL budgets (in cash terms) CULTURE, MEDIA AND SPORT Agreed funding for a number of capital projects, from flat baseline of 400m per year, totalling 1.6bn over 2015/ /20 Share of government spending on Resource DEL for DCMS: Arts, national museums and galleries funding now protected in cash terms until Free museum entry stays. Completion of superfast broadband programme to make available to 95% of premises by Increased funding for elite sport ahead of Rio /16: 0.35% 2019/20: 0.34% Share of government spending on Capital DEL for DCMS: 2015/16: 0.92% 2019/20: 0.60%

24 millions millions CULTURE, MEDIA AND SPORT What new information is there? How does spending compare to 2015/16? Resource DEL budget expenditure (in cash terms) 1,600 1,400 1,200 1,000 1,351 1,345 Main Estimates 2016/17: No change to headline figures from the Spending, Although figures include a series of small measures to support culture and sport announced at Budget / /17 All R&D spending is now classified as capital, under new Eurostat definitions. DCMS do not indicate how much spending is re-classified in this way. Includes 20.4m reduction (13%) in Admin budget Capital DEL budget expenditure (in cash terms) / /16

25 millions millions Areas of spending: Resource DEL budget expenditure (in cash terms) Olympics Museums Galleries and Libraries Income from GLA to offset remaining costs following closure of the Olympic Delivery Authority ( 61m). 120m capital Arts and Heritage Sports 2015/ /17 Broadcasting and Media For Phase 2 of the Superfast Broadband programme in 2016/17 (50% of total cost for this Phase) Other Capital DEL budget expenditure (in cash terms) Museums Galleries and Libraries CULTURE, MEDIA AND SPORT BBC and Lottery funding is separate from these totals, in Annually Managed Expenditure Despite the commitment to provide superfast broadband coverage to 95% of the UK by end 2017, capital spend on broadcasting and media has been reduced by 14% compared to 2015/16 33m reduction (14%) in broadcasting and media budget Arts and Heritage Sports Broadcasting and Media 2015/ /17

26 CULTURE, MEDIA AND SPORT How has DCMS saved money so far? 13% reductions in grants to Culture, arts, heritage created real terms savings of 19% Administrative and Research savings of 26%, 14m Sources of Savings 8% staff savings, 46m Spend in run up to Olympics no longer needed

27 Percentage Percentage CULTURE, MEDIA AND SPORT Taking Part survey (adults activities), Yearly visits to Museums and Galleries Growth in visitors to museums and galleries Decline in the number of visits to Libraries, but growth in Museum and Gallery visits. Physical activity: percentage of people who have done at least one session of moderate intensity for 30 minutes in the previous 30 days Is government able to react to rapid changes in technology and changing consumer behaviours? Gradual fall in sport participation despite Olympics

28 billions What the told us: Resource and Capital DEL budgets (in cash terms) EDUCATION Capital spending on schools broadly maintained in cash terms, fall in real terms Share of government spending on Resource DEL for DfE: Protections to funding extended to sixth forms and FE colleges. Pupil premium, free school meals for under 7s, and children s services spending maintained. Sixth form colleges can become academies, saving VAT. Free childcare extended from 15 to 30 hours per week, but new requirement to work 16 hr per week, and to earn less than 100,000 New national funding formula for schools from Consultation in bn over Parliament to attract new teachers, particularly in STEM subjects Phasing out of whole 600m of Education Services Grant over SR period 2015/16: 17.01% 2019/20: 17.39% Share of government spending on Capital DEL for DfE: 2015/16: 10.53% 2019/20: 8.84%

29 billions billions What new information is there? Resource DEL (Departmental Expenditure Limits) (in cash terms) 1.4% increase Total resource funding of schools through Education Funding Agency grants rises slightly from 46.4 to 47.3bn. Within this, Educational Services grant is being phased out, reducing by 190m in compared to Per pupil funding protected in cash terms (including sixth forms) EDUCATION Capital DEL (Departmental Expenditure Limits) (in cash terms) 113m extra For Apprenticeships in line with increased demand Basic needs funding for local authorities up 225m (20%) Free schools, universal technical colleges and studio schools, up 260m (26%) 7.7% increase 10m extra 13m extra For early years 30 hours childcare commitment To Standards and Testing Agency for testing programme (marking, resits and times tables) 61m extra For education reforms Capital spending set to fall back again after peaking in

30 billions billions EDUCATION Programme Spending: Resource DEL Increased spending on central DFE and EFA services partly reflects growing number of academies 2.2bn is for sixth forms and will be split between LA schools and academies DfE s Admin Budget Of the extra 22m: 13.8m 3.9m is up from 313 to 335m For additional administration costs of the academy programme For implementation of a longer school day, and improving schools in the north of England. Increased number of free schools planned Capital DEL Increased number of school places (demographics) A late, one off, 0.2bn increase in the budget in 15/16 DFE has consulted on principles of a new national funding formula for schools. A further consultation on more detail is expected to follow. The new formula is expected to be phased in from Some capital money may be transferred from local authority schools to academies later in the year

31 EDUCATION The Education Secretary announced on 6 May 2016 that the government is no longer proposing that all schools will be required to convert to academies. Schools may be compelled to convert to academies if: They are underperforming The local authority no longer has a viable number of schools Number of new academy conversions by year: Percentage of schools of various types as of 1 April 2016: Number of new free schools opened by year: Percentage of academies which are in multi academy trusts: Primary: Secondary: 64% 42%

32 thousands Primary Schools: Overall effectiveness judgments, Performance of primary schools has been improving EDUCATION Secondary Schools: Percentages in the chart are rounded and may not add to 100 Actual and forecast number of pupils at state-funded schools, Growing numbers of pupils Performance of secondary schools has also been gradually improving. Pressure to build new schools: 471,000 new school places are required between 2015 and 2020 (nationally)

33 billions What the told us: ENVIRONMENT, FOOD AND RURAL AFFAIRS Resource and Capital DEL budgets (in cash terms) Capital budget remains flat over period, efficiency savings over time to reduce resource spending Capital 2.3bn to be invested in flood defences over six year period: 1,500 schemes Better protect over 300,000 homes 130m investment in DEFRA s science estates by 2021 Resource Spending: Flood defence maintenance funding to be protected Protection of over 350m of funding for National Parks, forests and Areas of Outstanding Natural Beauty Share of government spending on Resource DEL for DEFRA: 2015/16: 0.48% 2019/20: 0.43% Share of government spending on Capital DEL for DEFRA: 2015/16: 1.14% 2019/20: 1%

34 billions billions What new information is there? How does spending compare to 2015/16? Resource DEL (Departmental Expenditure Limits) (in cash terms) 2,500 ENVIRONMENT, FOOD AND RURAL AFFAIRS 2,000 1,500 1, ,789 1, / /17 Main Estimates 2016/17: Increase of 43m in RDEL compared to Spending mainly due to Budget 2016 measures on flooding Capital DEL (Departmental Expenditure Limits) (in cash terms) All R&D spending is now classified as capital, under new Eurostat definitions. This moves 50m from Resource to Capital budget m Transfer to DCLG for Local Flood and Sustainable Drainage Systems m Transfer from DfID for additional Official Development Assistance / /17

35 millions FLOOD DEFENCE BUDGET in 2010/ /17 Resource and Capital DEL (Departmental Expenditure Limits) (in cash terms) 1, ENVIRONMENT, FOOD AND RURAL AFFAIRS One-off extra funding due to the effects of storms Desmond and Eva on flood defences: 49m in total 2010/ / / / / /16* 2016/17 Resource budget One-off addition (resource) Budget 2016 additional flood defence commitment (resource) 2016/17 FLOOD DEFENCE: Budget 2016 committed an extra 700m for flood defences by 2020/21, including 80m in 2016/17 (and around 200m in each following year) Actual inclusions in 2016/17 Estimate: 40m Resource 4m For maintenance (Budget commitment, presumably part of the 700m) Capital budget for flood management Capital budget One-off addition (capital) Budget 2016 additional flood defence commitment (capital) Despite additional 44m funding in 2016/17, total spend on protecting the country from floods is planned to decrease by 14m (1.8%) from 2015/16. Is additional funding planned sufficient to make up for drop in funding over most of the previous Parliament?

36 millions millions Areas of spending: Resource DEL budget expenditure (in cash terms) Support and Environment and Animal and plant Flood protection develop farming biodiversity diseases 2015/ /17 Capital DEL budget expenditure (in cash terms) Support and Environment Animal and Flood Protection Other develop farming and biodiversity plant diseases (Departmental 2015/ /17 Operating costs) Other (Departmental Operating costs) ENVIRONMENT, FOOD AND RURAL AFFAIRS 35 72% increase ( 207m) in Departmental Operating Costs mainly due to: The 2015/16 operating cost budget being understated, as it was set before it was known where savings for 2015/16 would be made. Actual spending was in reality higher on operating costs and lower in other areas than was budgeted for (by around 83m). Costs of the centralisation of IT services 20m extra for Voluntary Exit Schemes 102 Overall increase despite 29m reduction in admin spending 191% increase ( 67m) in Departmental Operating Costs mainly due to: 26m Increase in estates budget to fund critical works 33m Investment in IT infrastructure.

37 ENVIRONMENT, FOOD AND RURAL AFFAIRS How has Defra saved money so far? HMT funded resource spend on farming reduced by 164m, 41% real terms reduction: Annual Reports suggest that a great deal of the reduction has been a result of the profile of CAP disallowance payments. Greater leverage of 3 rd party funding for protection schemes Reduced number of bodies over the Parliament Sources of Savings HMT funded resource spend on Environment reduced by 201m, 28% real terms reduction: Annual Reports suggest much of the reduction is due to Rural Development Programme England schemes, which came to an end and fewer new agreements were signed, and had greater contribution from EU funds. Staff savings through staff reductions Trends in

38 Chart showing Environment Agency response rates to investigations of fish kills Response rates: 0% 50% 100% CAP Compliance Struggles Reduced staffing and capacity impacts on confidence in regulatory regime ENVIRONMENT, FOOD AND RURAL AFFAIRS UK has 6 th highest rate of EU C.A.P penalty fines, 2.7%, resulting in 642m in fines since 2005 for England A farmer s share of retail prices Declining share of retail prices for farmers Tougher EU standards on air and water quality in the future Increased levels of extreme weather may occur due to climate change Trends in

39 billions What the told us: Resource and Capital DEL budgets (in cash terms) Previously announced levy control framework budgets, which may be revised ENERGY AND CLIMATE CHANGE 1bn previous ring fenced spending commitment for Carbon Capture and Storage abandoned Increased funding for Renewable Heat Incentive, to 1.15bn by 2020/21 250m new investment for nuclear Research and Development Doubling funding for energy innovation to 500m over 5 years Energy bills and environmental levies: New cheaper replacement for Energy Company Obligation to run from reduction in energy bills due to lower levies from Exemption to costs of levies for energy intensive industries. Warm home discount extended to at current levels of funding. 10% of shale gas revenues to go to Shale Wealth fund for local communities. Results of consultation on changes to Renewables Obligation and Feed in Tariffs, and possibly new Levy control limits beyond 2020/21, expected soon Share of government spending on Resource DEL for DECC: 2015/16: 0.29% 2019/20: 0.25% Share of government spending on Capital DEL for DECC: 2015/16: 5.26% 2019/20: 4.62%

40 millions millions What new information is there? Resource DEL (Departmental Expenditure Limits) (in cash terms) Spending 15/16 baseline excludes some one offs: 0.9bn compared to actual budget of 1.4bn: Government electricity rebate to consumers of 12 pa not repeated. This saves 310m compared to 2015/16 Carbon capture and storage funding ended, saving 35m ENERGY AND CLIMATE CHANGE No change from headline figures in SR, resource and capital totals as announced last October Capital DEL (Departmental Expenditure Limits) (in cash terms) Drop in spending on energy innovation: 2015/16: 86m 2016/17: 64m Extra 27m for heat decarbonisation Ending of Green Deal, saving 98m All R and D spending is now classed as capital, under new Eurostat definitions. This moves 26m from resource to capital

41 Programme Spending: DECC has restructured its spending lines under five main headings: ENERGY AND CLIMATE CHANGE These two are unchanged from previous years Energy security and resilience Keeping bills low Decarbonisation and action on climate change Energy legacy Nuclear decommissioning Nuclear decommissioning continues to consume a large proportion of DECC s budget: Resource DEL 120m (30%) decrease in spending on nuclear decommissioning 1/4 of Resource budget 2/3 of Capital budget Capital DEL 203m (11%) increase in spending on nuclear decommissioning Renewable Heat Incentive (RHI) Payments to incentivise generation of heat from renewable sources forecast to rise from 430m last year to 640m this year. Government is committed to spending 1.15bn per year by RHI spending is treated as ANNUALLY MANAGED EXPENDITURE, so it is additional to the spending limits (DELS) shown above.

42 National grid capacity margin during winter Capacity margin is the difference between available supply and expected peak demand Short-term capacity margin reduces before capacity market boosts the margin Affordability Fuel poverty and energy prices in each country in the UK, Security of supply The Trilemma Fuel poverty continues to affect large numbers of households. It appears to be linked to rises in fuel prices. England has redefined its measure of fuel poverty, but the previous measure is shown here for the whole of UK for comparative purposes ENERGY AND CLIMATE CHANGE Renewable energy: Further action is needed to achieve the target of getting 15% of energy through renewables by Consultation recently concluded on budget control/vfm changes to Renewable Heat initiative Reducing carbon emissions Hinkley Point decision delayed again, possibly until September Carbon budgets: DECC has met the 1 st carbon budget (23% reduction by 2012) and is on track to meet the 2 nd (29% reduction by 2017). 3 rd budget: 35% by th budget: 50% by th budget: ( ) to be set by Government soon, following committee recommendations in 2015

43 millions millions Changes from last year Resource DEL (Departmental Expenditure Limits) (in cash terms) FOREIGN AND COMMONWEALTH OFFICE 3% nominal cash increase from last year. Note that 2016/17 budget in Main Estimate is likely to be revised upwards in Supplementary Estimate. Capital DEL (Departmental Expenditure Limits) (in cash terms) 29% reduction in capital spend from last year. Capital spend can fluctuate a lot due to projects coming to an end. Change from Change from Spending

44 Reconciliation between Main Estimate 2016/17 and Spending settlement: agreement: FCO budget to be protected in real terms FOREIGN AND COMMONWEALTH OFFICE 115m Transfer from DFID for ODA 348m Transfer from DFID for CSSF conflict prevention RESOURCE DEL BUDGET: A 76% increase in Resource DEL budget mainly due to transfers from DFiD 366m Transfer from DFID for CSSF peacekeeping Changes in budget Change from Change from Spending settlement

45 millions Conflict, Security and Stabilisation Fund (CSSF) Brings together existing conflict resources (the Conflict Pool and the Peacekeeping Budget) along with defence, diplomatic, development, security and intelligence capabilities. 366m FCO peacekeeping The CSSF came into being on 1 April 2015 and replaced the Conflict Pool. Scope: Conflict reduction Development assistance Tackling threats to UK interests. Funding the UK s contributions to multilateral peacekeeping budgets and related commitments. 975m Conflict, Security and Stabilisation Fund Governed by the National Security Council DfID budget 348m FCO conflict prevention 975m of the CSSF was awarded to DFID for in the Spending Settlement. At Main Estimate, 366m was transferred out for FCO peacekeeping and 348m was transferred out for FCO conflict prevention. Change from Change from Spending Suggested questions

46 billion What the told us: Department of Health Total departmental budget (in 2016/17 real terms) % cut to budgets outside NHS England from 2015/16 to 2020/21, including public health, health education and administration budgets HEALTH NHS s * share of total DH budget: 2014/15: 86.5% 2020/21: 90.1% / / / / / / /21 NHS * TDEL Rest of DH Reform of the funding system for health students: replacing grants with student loans; abolishing the cap on the number of student places for nursing and midwifery Plan to integrate health and social care services by 2020, supported by the Sustainability and Transformation Fund (NHS) and the Better Care Fund (social care), but: 2016/17 plans were for 1.8bn of the STF to go to sustainability (paying off trust deficits), leaving only 339m for transformation. However, even this small sum could be entirely wiped out by the final 2015/16 deficit being 650m higher than the limit that was set, at 2.45bn instead of 1.8bn. The SR committed to adding an extra 1.5bn to the BCF by 2019/20, but no extra funding is available in 2016/17 and the increase is only worth 105m in 2017/18. 8% increase to the NHS * budget from 2015/16 to 2020/21 DH s share of total government spending on Resource DEL : 2015/16: 35.4% 2019/20: 37.8% DH s share of total government spending on Capital DEL : 2015/16: 11.0% * NHS England 2019/20: 9.6%

47 billion (2016/17 real terms) What new information is there? Capital HEALTH All R&D spending is now classed as capital, under new Eurostat definitions. This moves 1bn from resource to capital, but this is a reclassification that does not change the nature of the Department s spending in any way. Recurrent capital underspends: Cumulative underspend from 2011/12 to 2015/2016: 3.3bn (2016/17 real terms) Reclassification of research spending The capital budget is flat in nominal terms. This implies a 9% cut in real terms from 2015/16 to 2020/21, based on latest inflation forecasts 0 Capital DEL Capital underspend Will underspends continue into this and future years? What are the consequences, e.g. for productivity?

48 billion What new information is there? Secondary providers Resource DEL expenditure by all NHS trusts (in nominal terms) HEALTH Within increasing overall NHS budgets, DH is planning on trusts and foundation trusts spending 2.6bn less than last year, and 1.8bn less than 2 years ago. This planned reduction will only happen if: Providers deliver the efficiencies that they were already expected to achieve in 2016/17 against the five-year-forward-view counterfactual scenario of demand growth and no productivity gains: 2.3bn Providers deliver further efficiencies to eliminate the extra unplanned deficit: 1bn If deficits continue, the department will have to find savings again to offset the pressure with possible further transfers from capital to resource and less or no money available for transformation / / /17 Five Year Forward View 2016/17 local plans for efficiency savings: Providers are expected to achieve 3.3bn of efficiencies all in all this year in order to meet the Department s expenditure plans: 2.3bn planned + 1bn extra due to largerthan-expected deficits in 2015/16 Source: NHS Five Year Forward View: Recap briefing for the Health Select Committee

49 billions Local authority public health allocations 23% Real like-for-like cut From to HEALTH The transfer of responsibility for 0-5 children from NHSE to local authorities in and hides the 200m in-year cut in , and the Spending cut in Flat in nominal terms implies a reduction in real terms (due to inflation) prices, like-for-like Nominal, unadjusted Sources: - Written evidence submitted by Public Health England to CSR inquiry - Commissioning stream allocations in NHSE Paper PB /04 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Local authority public health allocations (likefor-like) as a share of total health spending* % 60% 50% 40% 30% 20% 10% 0% Share of total health spending* for CCGs, primary care (GPs) and specialised commissioning CCGs *DH RDEL less depreciation Primary Care (GP) Specialised All other

50 Demand Active prevention and public health agenda: greater support for patients, carers and community organisations. new models of primary and out-of-hospital care. Five Year Forward View The NHS needs to achieve an annual 2% net efficiency and demand saving across its whole funding base for the rest of the decade. The NHS long run performance has been efficiency of 0.8% annually, but nearer to 1.5%- 2% in recent years. 2% annual saving is heavily reliant on improvements beyond the direct control of the NHS. Efficiency HEALTH Investment in new care models and innovation. Provider "catch up" (less efficient providers matching the performance of the best); Better procurement and use of IT. 6.7bn are labelled as nationally delivered efficiency savings. The Scrutiny Unit estimates* that implementing the government s 1% public sector pay cap to 2019/20 will deliver about 5bn of these national savings 22bn of demand and efficiency savings to be delivered by 2020/21 NHS staff will be paid 10% less in 2019/20* than they would otherwise be, if their wages were growing by the economy s projected average earnings growth during this Parliament. A significant portion of efficiencies is therefore coming from capping pay increases. This cap will widen the gap between public and private sector pay. Is this growing gap sustainable? Will it undermine the NHS s ability to attract and retain staff? *Based on the difference between 1% cap and OBR forecasts for the economy s average earnings growth

51 millions billions Running costs of HMRC: How does spending compare to 2015/16? Resource DEL (Departmental Expenditure Limits) (in cash terms) Running costs of HMRC and National Insurance Fund / /17 8% cash increase from last year HMRC Resource DEL is 78m higher than SR settlement due to: extra 30m from 2016 Budget for digital transformation 49m from adjustment for depreciation - 0.8m transfers to other Capital DEL (Departmental Expenditure Limits) (in cash terms) (MILLIONS not BILLIONS) % cash increase from last year Capital DEL is 1.4m lower than SR settlement due to: extra 0.3m from 2016 Budget - 1.7m transfers to other / /17 HMRC Running Costs Spending on Benefits

52 millions HMRC: Trends in Running Costs and capital, 2011/ /20. Resource and Capital DEL budget expenditure (in real terms) 4,500 4,000 3,500 HMRC Future projections indicate that there will be an increase in the budget in followed by steady falls thereafter throughout Spending period 3,000 2,500 2,000 1,500 1, / / / / / / / / /20 Resource DEL Capital DEL HMRC has committed to deliver further annual, sustainable cost savings of 717m a year by the end of , amounting to a total of 1.9bn in cumulative savings over this period. Of these, 203m are planned to be delivered in HMRC Running Costs Spending on Benefits

53 millions billions Resource AME: Spending on Benefits and Tax credits. Spending in 2016/17 compared to 2015/16 (in cash terms) % reduction 3% reduction Child Benefit Personal tax credit 0.02 Tax free childcare forecasts are based on OBR estimates. NEW 34,000 29,000 24, % reduction 2.70 Tax reliefs & allowances 0.07 Other Personal tax credit Overall: 3.5% cash reduction from last year from 44.54bn in to 42.97bn in HMRC Reduction in personal tax credit is as a result of: Falling unemployment A rise in average earnings Operational changes targeting debt, error and fraud. Trends in 2010/ /17 (in real terms) Downward trend in child benefit and tax credit in real terms over the course of the last Spending and into the new one 19,000 14,000 9,000 4,000-1,000 Child Benefit Tax reliefs and allowances Other 2010/ / / / / / /17 HMRC Running Costs Spending on Benefits

54 millions millions What new information is there? How does spending compare to 2015/16? Resource DEL (Departmental Expenditure Limits) (in cash terms) Running costs of Treasury, Debt Management Office, OBR and other Treasury associated bodies Increase due to 6% increase in Treasury admin costs. Also in , there was 16m income from sale of Eurostar. TREASURY 50 Capital DEL (Departmental Expenditure Limits) (in cash terms) / / / /17 80m to be spent on Asian Infrastructure Investment Bank Treasury received 740m income from sale of Eurostar Resource DEL is 16m higher than SR settlement largely due to lost income from Investments UK which was transferred to Cabinet Office 2015/ /17

55 billions What new information is there? How does spending compare to 2015/16? Annually Managed Expenditure (in cash terms) Significant components: Assistance to financial institutions ( 24.9bn) UKAR* interest receivable ( 1.2bn) Sale of shares Lloyds/RBS ( 4.6bn) Change in Resource AME reflects change in Assistance to financial institutions from 24.9bn in to - 91m in TREASURY (continued) figure includes changes in the fair value of assets mainly a reduction in the value of the Bank of England Asset Purchase Facility Fund (BEAPFF) figure does not include changes to the value of assets. These will be included in the Supplementary Estimate. Currently the total in arises from income from interest on loans to financial institutions and share dividends Significant component: UKAR ( 3.6bn) Significant components: UKAR interest receivable( 750m) Resource AME 2015/ / Capital AME *Note: UKAR manages mortgage book of Bradford & Bingley and NRAM (Northern Rock) Significant components: UKAR sale of shares ( 16.3bn) Sale of shares Lloyds/RBS ( 9.2bn)

56 billions What the told us: Home Office Resource and Capital DEL budgets (in cash terms) Overall police funding protected in real terms over the next four years. The Government claims this means an extra 900m for the police, although there are suggestions that this may include additional locally raised income through council tax. The overall Home Office resource budget increases by around 300m, and then stays flat HOME OFFICE Share of government spending on Resource DEL for HO: National Crime Agency s funding protected ( 200m of capital investment). 500m extra (over Spending period?) for counter terrorism budget. 1bn for next generation 4G communications network for emergency services. Border immigration and citizenship resources to be halved through efficiencies, and investment in technology. 2015/16: 3.27% 2019/20: 3.23% Share of government spending on Capital DEL for HO: 2015/16: 0.92% 2019/20: 0.80%

57 millions billions What new information is there? How does spending compare to 2015/16? Resource DEL budget expenditure (in cash terms) % increase 2015/ /17 Main Estimates 2016/17: Resource DEL is 300m lower than Spending settlement Capital DEL is in line All R&D spending is now classified as capital, under new Eurostat definitions. This moves 34.6m from resource to capital. Capital DEL budget expenditure (in cash terms) HOME OFFICE 600 Transfer of Fire and Resilience function from DCLG: m extra For Resource DEL budget 63m extra For Capital DEL budget % increase / /17

58 millions millions Areas of Spending: Resource DEL budget expenditure (in cash terms) 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1, ,000 74m 8,257 8,353 Crime and policing Office for security and counter terrorism Spending on crime and policing is still by far the largest portion of HO expenditure. UK Border Agency/Border Force Arms length bodies (net) 2015/ /17 Extra Income from HM Passport Office and UK Visa s and Immigration (UKV&I) due to increases in passport volumes and a reviews of fees. 114m extra Resource 28m extra Capital For counter-terrorism (following Spending commitments after the Strategic Defence and Security ) Enablers 175 Crime and policing Other Office for security and counter terrorism UK Border Agency/Border Force Overall police spending is protected in real terms over the Spending period. Capital DEL budget expenditure (in cash terms) Increased capital spend to support improvements in capabilities and efficiencies across the HO operations but unclear what this actually includes 15 0 Arms length bodies (net) 2015/ / HOME OFFICE 171 Enablers 20 Other 26

59 HOME OFFICE How has the Home Office saved money so far? Reduced Police Grants by planned 16% real terms, 1bn, halved police Capital spend 140m Increased costs of Visa, Passports Sources of Savings Reduced number of Police Officers Reduced budget for Border Force

60 HOME OFFICE Increased risk of terrorism since Paris attacks from ISIS activities in Europe Total number of police officers Continued reduction in number of Police Officers Increased net migration Net migration, 1000s (as of March 31 of each year) Number of visa applications, 1000s Reductions in staff but same level of demand for services

61 billions billions Change from Change from Spending Resource DEL (Departmental Expenditure Limits) (in cash terms) INTERNATIONAL DEVELOPMENT Change from 2015/16 budget out turn - Supplementary Estimate % cash increase / /17 Capital DEL (Departmental Expenditure Limits) (in cash terms) % cash increase / /17

62 millions Change from Change from Spending Conflict, Security and Stabilisation Fund (CSSF) Brings together existing conflict resources (the Conflict Pool and the Peacekeeping Budget) along with defence, diplomatic, development, security and intelligence capabilities. INTERNATIONAL DEVELOPMENT The CSSF came into being on 1 April 2015 and replaced the Conflict Pool. Scope: Conflict reduction Development assistance Tackling threats to UK interests. C Funding the UK s contributions to multilateral peacekeeping budgets and related commitments. 975m Conflict, Security and Stabilisation Fund DfID budget 847m For MoD, FCO, HM Treasury, National Crime Agency, Home Office and the Crown Prosecution Service Governed by the National Security Council

63 billions Change from Change from Spending Reconciliation between Main Estimate 2016/17 and Spending settlement: RESOURCE DEL BUDGET (billions): SR Settlement Programme* EU attributed aid CSSF *Programme includes Admin and front-line delivery spending Main Estimate m Reduction to CSSF: Funds allocated to MoD/FCO/Treasury/Nation al Crime Agency/Home Office and the Crown Prosecution. 636m reduction: Transfer from DFID to other 160m transferred from capital back to resource to better reflect spending plans All R&D spending is now classified as capital, under new Eurostat definitions. This moves 320m from Resource to Capital budget. INTERNATIONAL DEVELOPMENT CSSF is held on DfID's baseline but funds are distributed to other as part of the Main Estimate process CAPITAL DEL BUDGET: (billions) SR Settlement 285m reduction: Transfer to capital AME for recapitalisation of CDC group Main Estimate

64 Change from Change from Spending INTERNATIONAL DEVELOPMENT 84%

65 billions What the told us: Ministry of Defence Resource and Capital DEL budgets (in cash terms) DEFENCE Increases in both capital and resource spending Resource Spend: Expeditionary force increased from 30,000 to 50,000 Two new strike brigades Capital Spend: Nine new Maritime Patrol Aircraft Two additional Typhoon squadrons An additional F35 Lightning combat aircraft squadron Share of government spending on Resource DEL for MoD: 2015/16: 8.63% Share of government spending on Capital DEL for MoD: 2015/16: 16.25% 2019/20: 9.13% 2019/20: 16.27%

66 billions billions What new information is there? How does spending compare to 2015/16? Resource DEL (Departmental Expenditure Limits) (in cash terms) / /17 Capital DEL (Departmental Expenditure Limits) (in cash terms) 8.1 Main Estimates 2016/17: No major changes to headline figures from the Spending + 230m extra + 68m For Operations All R&D spending is now classified as capital, under new Eurostat definitions. This moves 976m from Resource to Capital budget. Funding from Conflict, Stability and Security Fund (CSSF) (transferred from DFID) - 249m DEFENCE Transferred to other Departments from Resource budget, including: 242.3m to SIA for the National Cyber Security Programme (NCSP) and NCOP 30m to Cabinet Office for National Security Secretariat/Joint Intelligence Organisation / /17-104m Transferred to other Departments from Capital budget, including: 70m to SIA for the NCSP

67 millions Conflict, Security and Stabilisation Fund (CSSF) Brings together existing conflict resources (the Conflict Pool and the Peacekeeping Budget) along with defence, diplomatic, development, security and intelligence capabilities. DEFENCE The CSSF came into being on 1 April 2015 and replaced the Conflict Pool. Scope: Conflict reduction Development assistance Tackling threats to UK interests. C Funding the UK s contributions to multilateral peacekeeping budgets and related commitments. 975m Conflict, Security and Stabilisation Fund DfID budget 847m For MoD, FCO, HM Treasury, National Crime Agency, Home Office and the Crown Prosecution Service Governed by the National Security Council 68m For MoD Has the allocation of the CSSF budget been officially agreed by the National Security Council for ? The peacekeeping budget is now within the CSSF. What difference does that make to MoD?

68 billions billions Areas of spending: Resource DEL budget expenditure (in cash terms) 25 DEFENCE % increase in civilian personnel expenditure despite government s plans to reduce civilian personnel to 41,000 during Service Personnel Civilian Personnel Equipment and Infrastructure 0.9 Administration Costs 2015/ /17 18% reduction in spending on Single Use Military Equipment (equipment that can only be used for military purposes) Operations Costs Other Capital DEL budget expenditure (in cash terms) 17% reduction in spending on other capital projects This category is now largely R&D spending, including extra 1bn from the Eurostat reclassification Single Use Military Equipment Other Capital 2015/ / Other Income due to estate disposal

69 millions DEFENCE Cost of Operations and Peacekeeping: No funding requested for the cost of operations in the wider Gulf in 2016/17 (although 2015/16 funding was only requested in Supplementary Estimates) Largest area of spending: Counter- Daesh operations MoD does not indicate what the money from CSSF will be spent on Afghanistan Wider Gulf Counter Daesh Enhanced Intelligence, Surveillance and Reconnaissance Deployed Military Activity Pool Conflict, Stability and Security Fund (CSSF) 2015/ /17

70 DEFENCE How has the MoD saved money so far? Re-alignment of procurement priorities Land and buildings rationalisation Sources of Savings Reduction in number of armed forces personnel Troop withdrawal from Germany Pooling money with FCO, DfID

71 The reduction in troop numbers has contributed to the growing deficit of required numbers of armed forces DEFENCE Do the Armed Forces have the resources they need? Number of troops over the period The new Strategic Defence and Security covering new threats of ISIS and increased Russian actions in Ukraine UK military spend as a percentage of GDP The UK Military spend as proportion of GDP has reduced over time, and continues to move closer to the NATO commitment to spend 2% of GDP on Defence. Items previously not included such as pensions for retired MoD civilians are now counted as military spend.

72 billions What the told us: JUSTICE Ministry of Justice Resource and Capital DEL budgets (in cash terms) Reductions to both resource and capital spending. Resource Spend: Efficiency savings to be made from capital investments in prisons and courts Administration budget to be cut by 50%, 20% more than any other Department Capital Spend: 1.3bn to building nine new prisons 700m to digitise the courts system Share of government spending on Resource DEL for MoJ: 2015/16: 1.97% 2019/20: 1.71% Share of government spending on Capital DEL for MoJ: 2015/16: 0.92% 2019/20: 0.80%

73 millions billions What new information is there? How does spending compare to 2015/16? Resource DEL (Departmental Expenditure Limits) (in cash terms) / /17 Capital DEL (Departmental Expenditure Limits) (in cash terms)? Main Estimates 2016/17: No major changes to headline figures from the Spending 13m All R&D spending is now classified as capital, under new Eurostat definitions. Unlike most MoJ did not detail the size of this switch, but it appears to be less than 10m JUSTICE Transfer to MoJ from HMRC for tax expansion work ? % increase in Capital Spending due to the Courts and Prison reform programmes / /17

74 millions billions Areas of spending: Resource DEL budget expenditure (in cash terms) Central Funds NOMS HM Courts and Tribunals / /17 1bn reduction in Central Funds (of MoJ HQ) mainly due to: Efficiency savings: reduction of admin spending (goal: 50% reduction over Spending period) 733m forecasted fee income from HMCTS Legal Aid and Services Youth Justice Board Other Corporate Services and Central Funds NOMS MoJ states fee income has become increasingly important to MoJ financial plans, and net reductions in resource spend will largely be achieved through increased forecast fee income. Capital DEL budget expenditure (in cash terms) Increased funds for Prison Reform Programme 148 HM Courts and Tribunals Legal Services and Legal Aid 2015/ /17 Increased funds for Courts Reform Programme Youth Justice Board JUSTICE Other

75 JUSTICE How has MoJ saved money so far? Rationalisation of MoJ estate Court closures Prison closures Sources of Savings Reform of Legal Aid eligibility Staff savings Increased court fees Better use of IT Trends in

76 JUSTICE Will defendants in person lead to worse outcomes? Is defending in person a false economy? Legal Aid problems for the future? Legal Aid cases, thousands. Long-term growth in number of prisoners Will Legal Aid practitioners leave sector? Prison population, thousands Will payment by results work? Percentage of offenders who re-offend Trends in

77 billions What the told us: Resource and Capital DEL budgets (in cash terms) TRANSPORT New measures for rail passengers: compensation when trains are over 15 minutes late improving Wi-Fi and mobile connectivity on trains freezing rail fares in real terms (RPI) for the course of this Parliament Resource Capital Estimated cost of HS2 is 55.7bn in 2015 prices Resource Savings: Reducing the subsidy paid to rail franchises Phasing out the TfL Resource grant, saving 700m in Capital Spend: 46.7 billion capital investment by DfT over the next 5 years ( to ) on High Speed 2 (HS2), roads and local transport, in addition to Network Rail s investment programme. Share of government spending on Resource DEL for DfT: Share of government spending on Capital DEL for DfT: 2015/16: 13.96% 2015/16: 0.83% 2019/20: 0.55% 2019/20: 22.89%

78 billions billions 2016/17 Main Estimates: Resource DEL (Departmental Expenditure Limits) (in cash terms) TRANSPORT Commitments: 15bn For Roads Investment Strategy 57m increase for new Transport Development Fund for developing projects such as Crossrail 2 and Northern Transport Strategy 5bn For Roads Maintenance 250m extra To tackle potholes Capital DEL (Departmental Expenditure Limits) (in cash terms) Reduction due to transfer of 893m to Department for Communities and Local Government for the Local Growth Fund and the Local Sustainable Transport Fund. 300m For cycling investment 114m OF WHICH: For Cycle Ambition City scheme (construction of segregated cycle lanes) including 115km in Birmingham and 56km in Manchester.

79 billions billions Programme Spending: Resource Expenditure TRANSPORT Net Income from franchises Funding for operating and maintaining the railway network, including staff and equipment costs. Capital Expenditure This includes 230m for Operation Stack, a permanent lorry park in Kent (Stanford Lorry Park). Funding for: Renewals: major capital works such as replacement of structures and equipment; Enhancements: infrastructure upgrade schemes (e.g. enabling higher speeds, electrification, allowing heavier loads). Network Rail budget is classified as Annually Managed Expenditure.

80 TRANSPORT How is DfT saving money? Reduction in support to operators for passenger rail services Cuts to local transport revenue grants Increased franchise income Rail Executive within DfT: Bringing together all rail functions (except HS2) to strengthen commercial expertise and innovation, and ensure greater coordination of improvements. Sources of Savings Sharing services with other, for example developing digital platforms Cuts to Admin budget (-12% in real terms during ) Motoring Agencies: placing more services online

81 TRANSPORT Managing and overseeing high-cost, high-profile projects, and ensuring they deliver value-for-money Rail electrification delays and increases in costs 55.7billion Delivering the railway infrastructure that is needed to cope with fast-increasing rail passenger journeys. Balancing trade-offs between different transport modes in different parts of the UK and maximising economic benefits. MAINTAINING THE ROADS: Despite large sums spent on road infrastructure, resource spending by Highways agency and local authorities on road maintenance has been falling Delivering on the department s priority to support sustainable local travel in the face of steep reductions in local transport subsidies and grants Implications of final decision on airport expansion in the South-East

82 billions What the told us: Annually Managed Expenditure (in cash terms) Forecast Spending (OBR) WORK AND PENSIONS Spending on pensions forecast to continue rising Many admin functions were reclassified as programme Resource and Capital DEL (in cash terms) Tax credit changes announced in summer 2015 Budget were reversed in the Autumn statement 2015 (reducing saving by estimated 3.4bn). However, new claimants of Universal Credit will still receive less than they would have done in the future. By the cost of reversing the change will be only 0.5bn) Further reductions to Personal Independence Payments (aids and appliances) were announced in Budget 2016, which were rapidly dropped. The cost for of non implementation of those changes is minimal, although the change would have saved 1.3bn by Big savings required in admin of DWP of 22%, including 34% on technology and 20% in size of DWP Estate Share of government spending on Resource DEL for DWP: 2015/16: 1.84% 2019/20: 1.64% Share of government spending on Resource AME for DWP: 2015/16: 53% 2019/20: 48.3%

83 billions What has changed for DWP since the Spending? AME- welfare and pension spending: OBR s forecasts for benefits spending from Budget / /17 OBR latest Forecast Basis for Actual Budget DWP s 2016/17 Main Estimate Budgets are higher than forecasts as both include a margin for forecast error including allowance for cold weather payments. Amount by which the Welfare cap is forecasted to be broken bn WORK AND PENSIONS Welfare cap: includes HMRC spending on tax credits, child benefit excludes state pensions and some DWP benefits OBR welfare spending forecast (March 2016) 3.4bn 2.4bn 2.7bn 3.2bn OBR says the Welfare Cap (reduced in summer 2015) will be breached every year from to / / / / /21 Inside the welfare cap Outside the welfare cap Welfare Cap

84 billions What new information is there? How does spending compare to 2015/16? Resource AME (Annually Managed Expenditure) (in cash terms): Spending on benefits and pensions / /17 Total forecast pensions and benefits spending forecast to rise by 2.1bn (1.2%). Spending on PIPs rises, with a higher rise forecast than the fall in Disability Living Allowance spending. Spending on carer s allowance is also rising. Spending on incapacity benefits falls, partly due to migration of claimants to Universal Credit Overall spend on other income related and working age benefits continues to fall 0.5m 4.5m Spending on employment programmes continues to fall, from 770m in to 581m in Announced in 2016 Budget: For extra support for low income selfemployed For increased number and costs of PIP Presenting Officers (those who assist Tribunals) 17m For New Youth obligation m Funding transferred to HMRC towards cost of Universal Credit delivery programme State pension spending expected to rise by 2.4bn or 2.7% The state pension rose by 2.9% in April 2016 to per week WORK AND PENSIONS

85 billions WORK AND PENSIONS What new information is there? How does spending compare to 2015/16? Resource and Capital DEL Budgets (Departmental Expenditure Limits) (in cash terms): (continued) Cash limited spending, including costs of running DWP and employment programmes % increase in capital spending in 2016/17 (mainly to deliver technology reforms), However, overall technology spend to fall by 29% by All R&D spending is now classified as capital, under new Eurostat definitions. This moves 3.7m from resource into capital in 2016/ / /17 Resource DWP has said it will reduce Capital administration spending by 22% over the Spending period. Resource includes ring fenced admin budget for ( 0.9bn). Admin budget decreased by 11% compared to 2015/16 (from 1.1bn). There have been big underspends in admin budget in previous years.

86 WORK AND PENSIONS How DWP has saved money so far? Greater incentives to work Reduction in unemployment Tougher eligibility criteria Sources of Savings 1% cap on rises in benefits Big staff savings, releasing temporary staff first Reform of child maintenance Better use of IT Less generous tapers now planned for Universal Credit Household benefits cap introduced Parents expected to return to work earlier Reassessments of circumstances when people are moved to new benefits Housing benefit support restricted (e.g. number of rooms, rental costs)

87 Successive revisions to the universal credit rollout assumption (OBR) WORK AND PENSIONS Percentage of population aged 65+ Universal Credit rollout continues to be delayed. Source: OBR: Economic and fiscal Outlook, November 2015 p. 137 Source: ONS: Ageing of the UK population, 2015 Percentage of children living in poverty Growth in number of pensioners Rising levels of child poverty Introduction of single-tier pension Source: DWP: Households below average income: 1994/1995 to 2013/2014 Managing future reductions in DWP workforce without reducing capability

88 Scotland s Block Grant in 2015/16 and 2016/17 (Main Estimate): (in cash terms) Billions NEW in Main Estimates 2016/17: In addition to 21.6bn Resource DEL, the UK Government will pay over 4.9bn to the Scottish Government, which represents income tax UK Government collects on behalf of Scottish Government, now income tax is devolved. AME is demand-led spending outside spending limits (student loans, NHS pensions, teachers pensions, NHS impairments) SCOTLAND Under the Scotland Act 2012, from April 2016, the existing basic, higher and additional rates of income tax levied by the UK Government will be reduced by 10p in the pound for Scottish taxpayers. The Scottish Parliament will then levy a new Scottish rate of income tax (SRIT). From , Scotland Act 2016 comes into force. Scottish Parliament will then have the complete freedom to set the rates and thresholds of income tax on non-savings and non-dividend income Pay-over of Scottish Rate of Income Tax Budget for Scotland Office (in cash terms) (Figures in millions not billions) : a new 4.3m resource AME provision for VAT liability Election costs agreed in Supplementary Estimate in to cover 2015 election costs. There may be election costs in from EU Referendum that will be given in Supplementary Estimate Block Grant 2015/16 & 2016/17 Scottish Rate of Income Tax Spending vs. Main Estimate Main Estimate vs. Cash Grant Trends Devolution Timeline

89 SCOTLAND The Scottish Rate of Income Tax (SRIT): Came into effect on April 2016 and will operate for one transitional year until the full devolution of the Smith Income Tax powers. In , the devolution reflects only a share of income tax. From onwards, the devolution affects all of income tax in Scotland (apart from tax on savings and dividends). Block grant adjustment: 21.6 How much Scotland s block grant is reduced by because Scotland now receives additional revenue from its own taxes determined by rates of income tax in the rest of UK Block grant reduction for Scottish Rate of income tax ( 4.9bn)* For , block grant adjustment only relates to Scottish Government s limited powers to impose SRIT under 2012 Scotland Act. In , 2016 Scotland Act comes into force. Block grant adjustment mechanism will then be carried out according to Scottish Government s Fiscal Framework. The initial baseline deduction for tax will be equal to the UK government s receipts from Scotland prior to devolution of powers. For following years baseline will be adjusted to achieve the outcome delivered by Indexed per capita method. This option protects the Scottish budget from the risk that its population growth is slower than the UK s. However, the Scottish budget would not benefit from revenue increases that resulted from Scotland's population growth Scottish Government have set the rates to be the same as the rest of the UK in 2016/17 *2016/17 block grant adjustment is based on OBR forecast. = The pay-over of Scottish Rate of income tax to the Scottish Government ( 4.9bn) If Scotland s rate of income tax changes: If Scotland collects MORE income tax than it would have done had it maintained the same rates as the rest of UK: Block grant reduction Block grant reduction Pay-over of Scottish Rate of income tax: Income tax collected by the Treasury on behalf of Scottish Government and then transferred to Scotland determined by rates of income tax in Scotland < Pay-over of SRIT (More cash for Scottish Government) If Scotland collects LESS income tax than it would have done had it maintained the same rates as the rest of UK: > Pay-over of SRIT (Less cash for Scottish Government) Block Grant 2015/16 & 2016/17 Scottish Rate of Income Tax Spending vs. Main Estimate Main Estimate vs. Cash Grant Trends Devolution Timeline

90 Getting from Spending settlement to Main Estimate (block grant): SCOTLAND RESOURCE DEL BUDGET: 600m Stamp duty land tax/landfill tax block grant adjustment. These taxes were devolved in They are collected directly by the Scottish Government unlike SRIT 13m transfers from other 0.6m tampon tax 16.5m 2016 Barnett Consequentials arising from 2016 Budget 27.1bn R&D Scottish Rate SDLT/landfill 30m Spending * settlement CAPITAL DEL BUDGET: 4.9bn of Income Tax (SRIT) block grant adjustment 0.6bn tax block grant adjustment 41.6m resource to capital transfer All R and D spending is now classed as capital, under new Eurostat definitions. This moves 41.6m from resource to capital 21.6bn Scotland s Resource DEL (not including Income Tax) 3,158m 9m 2016 Barnett Consequentials 41.6m R&D resource to capital transfer 5m V&A museum 3,214m Spending settlement *includes depreciation and student loan charge Scotland s Capital DEL Block Grant 2015/16 & 2016/17 Scottish Rate of Income Tax Spending vs. Main Estimate Main Estimate vs. Cash Grant Trends Devolution Timeline

91 Getting from Main Estimate (block grant) to Cash grant (money paid to Scottish Government): Various adjustments are made to DEL ( 24.8bn) and AME ( 3.8bn) to get down to cash grant. Main adjustments are to remove non-cash elements of budget ( 3.8bn) and National Insurance Fund Payments towards Scottish NHS ( 1.7bn). SCOTLAND Total AME in block grant Pay-over of Scottish Rate of Income Tax. This is now paid in addition to cash grant ( 23bn) Total DEL in block grant: 21.6bn resource + 3.2bn capital DEL adjusted downwards from Spending Settlement for block grant adjustment of Scottish Rate of Income Tax ( 4.9bn) Block Grant 2015/16 & 2016/17 Scottish Rate of Income Tax Spending vs. Main Estimate Main Estimate vs. Cash Grant Trends Devolution Timeline

92 SCOTLAND Trends in Scotland s Block Grant in 2010/ /20: (Resource and Capital Departmental Expenditure Limit (DEL) in real terms Projections for to do not yet include block grant adjustments for SRIT and stamp duty/landfill tax Spending settlement mentioned a 5% real-terms reduction in block grant to Scotland from baseline to , although it is set to rise marginally in cash (nominal terms) Block Grant 2015/16 & 2016/17 Scottish Rate of Income Tax Spending vs. Main Estimate Main Estimate vs. Cash Grant Trends Devolution Timeline

93 ADDITIONAL POWERS DEVOLVED: Devolution of Powers: TIMELINE Before 2012 Scotland Act came into force: Scottish Parliament SCOTLAND Local taxes (council tax and business rates) Power to impose a Scottish Variable Rate (SVR) of income tax: that is, amending the basic rate of tax by up to 3p in the. April 2015 April 2016 April 2017 April 2018 April 2019 Stamp Duty tax and Landfill tax 2012 Scotland Act Income Tax (partial devolution) Full devolution of Income Tax Scotland Reserve comes into place/ extension of Scottish borrowing powers 2016 Scotland Act TIMING UNCLEAR: Air Passenger Duty Welfare: implementation timetable to be agreed by Joint Ministerial Working Group on Welfare VAT assignment (The receipts raised in Scotland by the first 10 percentage points of the standard rate of Value Added Tax (VAT) will be assigned to the Scottish Government s budget?? Aggregates levy (tax on sand, gravel and rock that's either been dug from the ground or dredged from the sea) : timetable agreed once legal issues resolved? Block Grant 2015/16 & 2016/17 Scottish Rate of Income Tax Spending vs. Main Estimate Main Estimate vs. Cash Grant Trends Devolution Timeline

94 billions Block Grant 2015/16 & 2016/17 Spending vs. Main Estimate millions Trends Wales Block Grant in 2015/16 and 2016/17 (Main Estimate): (in cash terms) Billions Wales block grant static compared to last year WALES Wales Government Resource Wales Government Capital 2015/ /17 Budget for Wales Office (in cash terms) (Figures in millions not billions) Resource DEL Capital DEL 2015/ /17

95 Block Grant 2015/16 & 2016/17 Spending vs. Main Estimate Trends Getting from Spending settlement to Main Estimate (block grant): WALES RESOURCE DEL BUDGET: 2016 Budget: 9.6m Barnett Consequentials 10m Cardiff City Deal 0.5m Tampon Tax 13.6bn 21.1m 11.7m 41.6m add back in-year savings 13.7bn Spending * settlement Transfers from Home Office: 6m for police funding 5.7m health migrant levy Wales Resource DEL CAPITAL DEL BUDGET: 1,531m 5.2m Barnett Consequentials: Budget m add back in-year savings 1,544m Spending settlement *includes depreciation and student loan charge Wales Capital DEL

96 billions Block Grant 2015/16 & 2016/17 Spending vs. Main Estimate Trends WALES Trends in Wales Block Grant in 2011/ /20: (Resource and Capital Departmental Expenditure Limit (DEL) in real terms Spending settlement mentioned a 5% real-terms reduction in block grant to Wales from baseline to , although it is set to rise marginally in cash (nominal terms) / / / / / / / / /20 Resource budget 2015 SR planned resource Capital budget 2015 SR planned capital

97 billions Block Grant 2015/16 & 2016/17 Spending vs. Main Estimate millions Trends NORTHERN IRELAND Northern Ireland s Block Grant in 2015/16 and 2016/17 (Main Estimate): (in cash terms) Billions % cash reduction in Resource DEL in block grant % cash increase in Capital DEL in block grant 0 NI Government Resource 2015/ /17 NI Government Capital Budget for Northern Ireland Office (in cash terms) (Figures in millions not billions) Resource DEL Capital DEL 2015/ /17