Public Spending Plans

Transcription

1 Public Spending Plans A pictorial guide to spending trends, plans and challenges facing Government Departments. This guide has been prepared the House of Commons Scrutiny Unit. Note: this document does not take account of changes included in the Estimates published on 7 February 2018 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 Estimates? The Estimates will provide a last chance for government departments to alter in-year budgets in the light of latest forecasts. Changes to forecasts for spending areas that are difficult to predict (e.g., welfare) Claims on the Reserve: New money from Treasury for specific, unforeseen items. Main Reasons for Estimates Underspending: Departments may return money they know they will not spend. Offering it up now means they may be able to draw down the money again next year (known as Budget Exchange ). Machinery of Government changes: establishing new Departments and reallocating funding as responsibilities alter Moving money between Resource and Capital. Transfers of money between departments: e.g., joint projects

3 SPENDING REVIEW October 2015 Spending Review 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 departments get their funding? VOTE ON ACCOUNT March 2017 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 November 2017 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 MAIN ESTIMATES Detail of plans, by spending programme, are published in MAIN ESTIMATES This included 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. An incoming government may choose to withdraw and replace individual Estimates before they are voted upon (i.e. present Revised Estimates ) Committees Scrutiny Unit briefed provides on content briefing of on Main Estimates Estimates for Members, by for Scrutiny information Unit (this (this is is what you are now reading) April 2017 In absence of committees, following General Election, there is little opportunity for scrutiny before Estimates are authorised No ESTIMATES DAY DEBATES because of General Election Main Estimates approved by the June 2017 House July 2017 SUPPLEMENTARY ESTIMATES February 2018 Later in the year Departments publish SUPPLEMENTARY ESTIMATES, showing proposed changes to in- year budgets. These will be voted upon in March 2018

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5 Departments (click on the link to view slides for each department): Business, Energy and Industrial Strategy Cabinet Office Digital, Culture, Media and Sport Education Environment, Food and Rural Affairs Exiting the EU Foreign and Commonwealth Office Health and Social Care Home Office Housing, Communities and Local Government International Development International Trade Ministry of Defence Ministry of Justice Transport Work and Pensions Treasury and HMRC Devolved Administrations: Scotland Wales Northern Ireland Sources

6 Business, Energy and Industrial Strategy

7 millions millions BEIS Resource (Programme and Admin) Budget: Trends Day-to-Day Spending: Resource DEL (Departmental Expenditure Limits) (in nominal terms) BEIS 3,000 2,500 2,000 1,500 1, Previous years Main Estimate Planned future budget (restated for previous and future years to take into account change of departmental functions) Source: BEIS Annual Report and Accounts ,000 10,000 8,000 6,000 4,000 2,000 0 BEIS Capital (investment) Budget: Trends Investment: Capital DEL (Departmental Expenditure Limits) (in nominal terms) (restated for previous and future years to take into account change of departmental functions) Previous years Main Estimate Planned future budget

8 Percentage Ranking BEIS Productivity and R&D Spending: International comparison in Productivity: Constant price GDP per hour worked (2007=100%) 110 In November 2017, the OBR made a significant downward revision to potential productivity growth 105 France Germany UK 100 US G7 Amount of spending on Research and Development by sector, billions Government Public Private Overseas 20 OECD ranking of UK on R&D spending:

9 Nuclear Decommissioning: BEIS Work will take over a hundred years Sites and the percentage of the undiscounted nuclear provision forecast to be spent at each site Source: DECC Annual Reports and Accounts, p. 37 Liability for future decommissioning work at some 17 sites across was estimated as 117bn in cash terms (or 160bn in current day prices) in last year s DECC annual report. The majority of the costs relate to the Sellafield site.

10 Cabinet Office

11 Cabinet Office: 2017/18 Day-to-day spending by area: (Day-to-Day Spending (Resource DEL), cash terms) Elections 4.8m European Parliament 2.8m Arms Length Bodies 2.9m Maintain the integrity of the Union Ensuring the effective running of the department 91.4m 61.9m Total Day-to-day Spending: 361m 46.7m Ensuring the delivery of the Government s programmes and the PM s priorities Improving the efficiency and responsiveness of government 150.6m

12 Cabinet Office are involved in the activities of other departments: This often has a larger financial impact than the Cabinet Office s own budgets would indicate. The Crown Commercial Service in managed 2.5bn of spend directly. A further 12.8bn was spent by the public sector on common goods and services using Crown Commercial Service frameworks in (NAO Crown Commercial Service January 2017) This role has come under recent scrutiny following the collapse of Carillion. CABINET OFFICE The Cabinet Office is responsible for the Shared Services Centre Programme. The Cabinet Office in estimated that the centres would contribute to 484m of savings at a cost of 159 million by The National Audit Office argued in their report in May 2016 that the programme has not achieved the significant anticipated savings and benefits to date. NAO Shared Services Centres May 2016 The Cabinet Office is in the process of establishing the Government Property Agency out of the Government Property Unit. The Agency is envisaged to launch in September 2017 and by 2020 to own and manage 3bn of government offices across the UK. NAO Progress on the Government s Estate Strategy April 2017 The Government Digital Service who run gov.uk and verify.gov.uk which establishes people s identities. GDS also expects to train 3000 civil servants in its digital academy All government departments have to agree their Single Departmental Plans with the Cabinet Office and HM Treasury. Single departmental plans describe each department s objectives and how they will achieve them. The latest versions were published in December 2017.

13 Housing, Communities and Local Government

14 billions billions HCLG (Communities) Spending trends Investment Spending (Capital DEL) 2010 to Capital Budget 2017 additional Most HCLG (Communities) spending is Investment rather than Day-to-Day spending MHCLG CLG The Autumn 2017 Budget set out additional Investment budgets for HCLG (mostly for the Help to Buy equity loan scheme) 0 Day-to-Day Spending (Resource DEL) 2010 to 2020 HCLG spending was reduced significantly following the 2010 Spending Review but since has been increasing Data sources: Core tables DCLG and accounts, HM Treasury Autumn 2017 Budget.

15 In HCLG (Communities) spent over half of its budget on the Fixing our broken housing market priority. HCLG This money is split between a number of programmes. The most significant is Help to Buy equity loan scheme. The second largest area of spend is the New Homes Bonus. HCLG have a target to deliver 300,000 net additional homes a year on average by the mid-2020s Net additional dwellings Note: Income from a Programme is stated in brackets Source: DCLG accounts, NAO short guide to DCLG The number of net additional dwellings (which include conversions) has increased each year since and in stood at 217,350, up 15% on the previous year. Source: DCLG accounts, NAO short guide to DCLG

16 Value of equity loans ( million) Housing: Help to Buy HCLG The Help to Buy Equity Loan Scheme provides buyers a 20% Loan-to-Value 5 year interest free loan (or 40% in London) for a new build property. When loans are issued they are recorded as part of HCLG s Investment Budget. The total value of equity loans issued has increased year-on-year since the scheme began and was 2.6bn in It currently is averaging around 0.7bn a quarter. The increased value reflects both increased number of completions (39,800 in it was up 18% on ) and higher average loans ( 57k in up 21% on ) Help to buy quarterly value of equity loans 1,000 Value of equity loans 4 quarters rolling average The programme is demand led so if it becomes more popular Investment Budgets need to increase The Autumn Budget set out a 1.9bn increase for the scheme in and promised further money in future years due to the popularity of the scheme - Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Source: DCLG Help to Buy quarterly tables update, 11 January 2018

17 billions HCLG HCLG (Local Government) Spending trends Central government funding for local government Resource funding Business rates retention Central government support for local government has reduced significantly. The new business rates retention system has offset some of the reduction but not all Council Tax: 4.5% Average % increases (Band D property) Council tax annual increases Referendums on council tax rises over 2% (introduced by the coalition government) limited the ability of councils to raise council tax. However more flexibility has been provided recently: Up to 4% increase in for councils with social care responsibilities Up to 5% in (Increase of 2% plus Social Care precept of 3%) 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% From the referendum threshold increased to 3%. Potential for total increase of 6% in (including 3% Social Care precept) 0.0%

18 HCLG challenges: Ensure an effective response to the Grenfell Tower fire is one of HCLGs objectives in its Single Departmental Plan. HCLG is monitoring plans of councils to make tower blocks safe but has not provided extra funding Rising levels of homelessness and use of temporary accommodation Increasing demand for adult and children s social care. Around 40% of local authority non-schools spend is on adult social care and 20% on children s social care HCLG HCLG staff numbers have been falling. In they had 3,564 staff a 7% reduction on the prior year.

19 Digital, Culture, Media and Sport

20 millions millions Department for Digital, Culture, Media and Sport: Trends Spending Review 2015 Commitments Arts, national museums and galleries funding now protected in cash terms until Free museums to remain. Completion of superfast broadband programme to make available to 95% of premises by ,000 3,000 Both Day-to-Day and Investment spending have increased since the Spending Review 2015, as DCMS is now responsible for the Office for Civil Society (transferred from Cabinet Office) Day-to-Day Spending (Resource DEL) Olympics Olympics DCMS Investment Spending (Capital DEL) Increased Investment spending is mainly related to the Broadband Delivery UK projects Previous years Main Estimate Planned future budget Investment spending reduced following Olympics as income from the sale of the Olympic Village was netted off 2,000 1, Previous years Main Estimate Planned future budget

21 DCMS spending : DCMS spending on BBC and Lottery grant spending is more significant than the Departmental day-to-day and investment spending This is included in the DCMS accounts as part of its Annually Managed Expenditure DCMS Arms length bodies also generate their own income Source: NAO Short guide to DCMS, p.8

22 Per cent of respondents millions Challenges: Grant commitments and funding available 3,500 3,000 2,500 2,000 1,500 1, Arts Sports Heritage Lottery Fund Big Lottery Fund National Lottery Distribution Fund available There are concerns over the ability of Lottery distributors to continue future funding at the same level as in recent years as the Fund available falls DCMS Engagement with arts, culture and heritage Has engaged with the arts in the last 12 months Has visited a heritage site in the last 12 months Has visited a museum or gallery in the last 12 months Has used a public library service in the last 12 months (Own-time or voluntary) Has visited an archive centre or records office in the last 12 months Levels of engagement with culture have been very stable but will reductions in real spending by DCMS affect this? Will any effects be evenly split across socio-economic groups?

23 Education

24 billions DFE Day-to-Day (Resource DEL) and Investment (Capital DEL) budgets (in cash terms) Capital spending on schools broadly maintained in cash terms, fall in real terms / / / / /20 Resource Capital (restated for previous and future years to take into account change of departmental functions) Government commitments: Protect the overall school budget in real terms Protect per pupil spending in cash terms on: dedicated schools grant (up to 16) pupil premium national base rate for year olds Source: DfE Annual Report and Accounts NAO found that DfE bodies had 172 PFI projects costing 1.1bn in Source: PFI and PF2, NAO, January 2018, Figure 8. Plan to phase out the additional funding schools receive through Education Services Grant, saving 600m

25 Core schools budgets, 2014/ /20: billion Increased to 42.4 Increased to DFE / / / / / /20 Budget Savings from elsewhere in the education budget Sources: to 16-17: DFE Main Estimates memorandum, Annex E to : Secretary of State s statement to the House on 17 July 2017 Per pupil funding maintained in real terms until Spending per pupil will be minimum of 4,800 per secondary school pupil by Average per pupil rate (5-16 year olds) was 4,612 in There will be a 0.5% per pupil per year increase for every school from to Extra money for and schools budgets announced on 17 July 2017 comes from within DFE s overall Resource DEL, i.e. there is no new money from Treasury Savings of at least 200m to come from DFE s central programmes

26 DFE Cumulative cost pressures on schools remain The DfE estimates cumulative cost pressures on schools of 3.4% in , rising to 8.7% by Source: NAO: Financial Sustainability of Schools, p. 15

27 Primary Schools: Overall effectiveness judgments, DFE 80% 60% 40% 20% 0% Secondary Schools: 29% 19% 16% 14% 9% 2% 2% 2% 1% 1% Outstanding Good Requires improvement Inadequate Performance of both primary and secondary schools has been improving 60% 40% 20% 0% 30% 24% 23% 21% 16% 3% 5% 6% 5% 5% Outstanding Good Requires improvement Inadequate Percentages in the charts are rounded and may not add to 100

28 Growing number of pupils: State-Funded Primary Schools 4.69 million 3.22 million State-Funded Secondary Schools There were 110,000 more pupils in the school system in June 2017 than in January 2016 Independent Schools Special Schools 0.58 million 0.11 million

29 Average spending per pupil, : 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Early years budget 5-16 budget Pupil premium free school meals primary National Funding Formula: Pupil premium free school meals secondary There are large differences between the amounts that different schools receive per pupil. These are largely historic, based on needs many years ago. National Funding is updated for increased numbers of school pupils, but otherwise on a cost plus basis. Local authorities have their own local formulae for distributing the money they receive (inc. for academies) The government consulted on a new national funding formula. This was planned to be implemented starting (at local authority level) and for at school level. (For further information, read the HoC Library Note) Note these are average funding only - there is big variation between different schools and areas Pupil premium service children Pupil premium local authority care children budget 16/17: N/A /17 The Government originally said that no school would lose more than 1.5% per pupil in any one year, or more than 3% across the years. Increases would also be capped. (3% per pupil and 2.5% per pupil in 19-20), in cash terms. In July 2017 the Government went further and promised Per pupil funding would be maintained in real terms until Spending per pupil would be minimum of 4,800 per secondary school pupil by There would be a 0.5% per pupil per year increase for every school from to Implementation of new formula at schools level deferred until DFE

30 Environment, Food and Rural Affairs

31 millions millions DEFRA Day-to-Day (Resource DEL) budget in cash terms 2,500 2,000 1,500 1, Spending Review settlement required a reduction in Day-to-Day spending of 100m, a 15% real terms reduction. DEFRA implemented a wide-ranging Transformation Programme, which has struggled to achieve these targets Previous years Main Estimate Planned future budget Spending Review 2015 settlement: 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 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 Investment (Capital DEL) budget in cash terms Previous years Main Estimate Planned future budget

32 DEFRA Flooding: planned spending Expenditure on Flood and Coastal Erosion Risk Management, Day-to-Day (Resource) and Investment (Capital) in real terms Defra provides funding for flood-related projects, predominantly through the Environment Agency. Prior to 2016 all funding was allocated on an annual basis only. Resource Capital Future Resource budgets only currently contain agreed flood defence maintenance funding. Further increases in Resource budgets will be confirmed annually partly reflecting the approach of topping-up after unpredictable flood events Additional funding planned since the 2015 Spending Review: 200m additional capital investment following 2015/16 winter floods 700m ( 140m for maintenance) for flood defence and resilience, in the March 2016 Budget Sources: Challenges to protection from flooding identified by the NAO: Coordination of the disparate bodies involved; The need for partnership funding; The risks that DEFRA cuts put its own readiness for future floods at risk.

33 Exiting the EU DEFRA L e g i s l a t i o n : Approximately 80% of Defra s areas of responsibility are framed by EU legislation. 25% of all EU laws apply to sectors for which Defra is responsible. To convert existing EU law to UK law will require primary legislation of agriculture and fisheries, and an estimated 95 statutory instruments on average Defra is responsible for 77 a year. I m p l e m e n t a t i o n : Defra has identified 43 workstreams necessary for EU Exit. 20 of these have a substantial IT element. Defra estimates it will require an additional 1,200 full-time staff members to implement EU Exit. So far it has filled 650. Defra has adapted its governance structure as its understanding of the task has developed, and tried to integrate this with business as usual work. As a result of this work, Defra has de-prioritised some areas of work. F u n d i n g : In the 2015 Spending Review Defra was asked to make 15% savings in day-to-day spending by Other budgetary pressures mean Defra now needs to make further savings exceeding this budget reduction. Defra has estimated the costs related to Brexit of 94m this year and 178m next year. The extent of Treasury funding has not yet been agreed. In addition, Defra receives income of around 3.3bn from the EU, mostly for payments to farmers under the Common Agricultural Policy. Defra will have to take on more responsibility for future funding in a range of policy areas

34 Exiting the EU

35 millions DEXEU DExEU: planned spending Day-to-day Spending: Resource DEL (Departmental Expenditure Limits) (in nominal terms) /17 23m expenditure (Department was set up in July) / / / /20 Planned Budget Actual Spend NOTE: 2017 Autumn Budget awarded an additional 3billion to departments for BREXIT. However it will not all be allocated to DExEU.

36 DExEU supports the Prime Minister to deliver the Government s objective of exiting the EU, including: the negotiation of the UK s future relationship with the EU Working very closely with the UK s devolved administrations, Parliament, and a wide range of other interested parties on what the approach to those negotiations should be Key Responsibilities Leading and co-ordinating cross-government work to seize the opportunities and ensure a smooth process of exit on the best possible terms Main Priorities of DExEU: Ensuring the government is able to take initial decisions on UK s withdrawal on the basis of the best possible advice Strengthening capability across government in preparation for the work ahead Reaching out to stakeholders in order to understand and capture their views Establishing the department and setting it up to succeed DEXEU The policy work to support the UK s negotiations to leave the EU and to establish the future relationship between the EU and the UK Conducting the negotiations in support of the Prime Minister including supporting bilateral discussions on EU exit with other European countries

37 Foreign and Commonwealth Office

38 millions millions Spending trends: FCO Day-to-day spending (Resource DEL), cash terms: 2,500 2,000 1, % increase in real terms from to ,953 2,058 2,138 Spending Review 2015 noted that the FCO budget would be protected in real terms 1, Investment (Capital DEL), cash terms: / / /18 Actual Actual Planned / / /18 Actual Actual Planned Net spending reduced by higher level of income from capital assets (e.g., buildings)

39 Conflict, Stability and Security Fund (CSSF) FCO MOD Conflict, Stability and Security Fund Governed by the National Security Council Initially held in DFID s budget. Throughout the financial year, the CSSF funds are transferred to other departments (though DFID will retain some funds for itself) FCO Other departments e.g. DEFRA etc. The CSSF came into being on 1 April 2015 and replaced the Conflict Pool. It brought together existing conflict resources (the Conflict Pool and the Peacekeeping Budget) along with defence, diplomatic, development, security and intelligence capabilities. Scope: Conflict reduction Development assistance Tackling threats to UK interests. Funding the UK s contributions to multilateral peacekeeping budgets and related commitments. National Crime Agency HMRC Home Office

40 Health and Social Care

41 billion DHSC Health: Spending trends Day-to-day (Resource) and Investment (Capital) spending (in nominal/cash terms) Spending Plans (November 2017 Budget) Annual increase in total cash spending on health 4.3% % % % % % % Health spending is increasing in cash terms. However, future annual increases are forecast to be lower in % terms Resource (excluding depreciation) Capital Source: PESA 2017, Autumn Budget 2017

42 billion Spending pressures: Switch from Investment to Day-to-Day Budget DHSC The Department continues to transfer budget allocated for investment (Capital) to pay for day to day spending (Resource). In both and it transferred over 1bn. As budgets are being diverted from investment in buildings and equipment the reported maintenance backlog is increasing. Estimated cost of backlog maintenance in Health estate High risk Significant risk Moderate risk Low risk Estimated cost of total maintenance backlog in stood at 5.5bn a 0.5bn increase (11%) on the prior year The proportion of the maintenance backlog deemed high and significant risk is increasing and now, at 2.7bn, comprises 49% of the total Source: Estates Returns Information Collection (ERIC) Publication Report and , Scrutiny Unit analysis

43 Ageing population: Over the next 20 years: Pressures Rise in long-term conditions: Estimated increase in the number of people with long-term conditions: DHSC 39% increase in 65+ population 15m 18m % increase in 85+ population Source: Health Select Committee Managing the care of people with long term conditions p. 3 Workforce pressures: Demands on Hospitals: Increase in ambulance calls and NHS 111 transfers: 7.9m 10.7m 2009/ /16 Source: King s Fund Demography No corresponding budget rise for ambulance trusts Source: NAO report on NHS Ambulance Services 2015: 10% paramedic vacancy rate 2017: 19% decrease in applications to nursing and midwifery courses Staff shortages: 2016 NHS staff survey: 46% of staff think that there is not enough staff at this organisation for me to do my job properly In 87 trusts, more than 50% of staff think there is not enough staff. South East Coast Ambulance Service NHS Foundation Trust: 82% of staff think there is not enough staff. BREXIT 11% of NHS doctors received their primary medical qualification in EEA countries 17% of specialists received their primary medical qualification in an EEA countries

44 DHSC Social care In January 2018 the Department was renamed to explicitly include Social Care in its title. However no changes to funding streams have been announced - the majority of funding for adult social care still comes from local authorities. Change in spending on adult social care in England (real terms), 2009/10 to 2016/17 Spending on adult social care has fallen by around 5% in real terms since 2009/10 Problems with social care provision has a knock on effect to the NHS. The most common reason for social care delayed days was the patient waiting for a care package in their own home. Delayed transfers of care due to social care, by days delayed, 2010 to 2017 The Spring 2017 Budget provided additional funding of 2.4bn for social care over three years 2017/ / /20 Additional funding in Spring 2017 Budget 1.2bn 0.8bn 0.4bn Source for charts: Institute for government, Performance tracker, October 2017

45 Home Office

46 millions millions HOME OFFICE Home Office Spending Trends Day-to-Day Spending (Resource DEL) in cash terms 12,000 10,000 8,000 6,000 4,000 2, Previous years Main Estimate Planned future budget Other Spending Review 2015 Commitments: National Crime Agency s funding protected ( 200m of capital investment). 500m extra for counter terrorism budget. 1bn for next generation 4G communications network for emergency services Overall police funding protected in real terms over Spending Review. 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 Day-to-day budget increases by around 300m, and then stays flat Investment Spending (Capital DEL) in cash terms Previous years Main Estimate Planned future budget

47 Challenges: Policing Spending on the police decreased by nearly 18% from to HOME OFFICE Leading to a continued reduction in number of Police Officers of nearly 15%. (as of March 31 of each year) Source of figures: Institute For Government Performance Tracker The number of offences recorded by the police increases The changing nature of crime requires different responses from government There are worries that the police have to pick up the slack due to cuts in other services

48 Other challenges HOME OFFICE The Home Office is responsible for delivering the government ambition to reduce migration to the tens of thousands. Long-term net migration has decreased substantially since the EU referendum, but is still significantly above this target. L e a v i n g t h e E U The terms of the UK exit are likely to have implications for the Home Office. These include: Devising a new immigration system, and a system to accommodate a rise in requests for residency from resident EU citizens. Border Force is responsible for controlling the movement of goods and people, including performing customs duties and managing new immigration arrangements. Cooperating with EU partners on crime and counterterrorism

49 International Development

50 millions DFID DFID: trends in spending The International (Official Development Assistance Target) Act 2015 enshrines in law UK s commitment to spend 0.7% of GNI on ODA annually. In 2015 Spending Review a greater proportion of ODA spend will be carried out by departments other than DFID In 2014, DFID contributed 86% of ODA In 2016 it contributed 74% of ODA

51 The International (Official Development Assistance Target) Act 2015 enshrines in law UK s commitment to spend 0.7% of GNI on ODA annually. DfID and UN TARGET of 0.7% Spend of GNI (Gross National Income) on ODA DFID 2013: UK meets this target Treasury s requirement: To only just MEET the Target Increased risk of Treasury tinkering with the Department s budget as output growth forecasts changes. OECD total DfID s share of ODA spending fell from 89.5% in 2011 to 80.5% in 2015 CHALLENGE for DfID: Adjusting spending in year according to forecasts of output growth and other departments ODA spending to ensure that UK meets the target. Meeting the 0.7% has meant, that in recent years DFID has gone through "various contortions, with spending being speeded up or slowed down to fit the target in question. This disrupts programmes and diverts management attention away from more useful activity. Predecessor International Development Committee

52 Conflict, Stability and Security Fund (CSSF) DFID MOD National Crime Agency Conflict, Stability and Security Fund Governed by the National Security Council Initially held in DFID s budget. Throughout the financial year, the CSSF funds are transferred to other departments (though DFID will retain some funds for itself) FCO HMRC Home Office Other departments e.g. DEFRA etc. The CSSF came into being on 1 April 2015 and replaced the Conflict Pool. It brought together existing conflict resources (the Conflict Pool and the Peacekeeping Budget) along with defence, diplomatic, development, security and intelligence capabilities. Scope: Conflict reduction Development assistance (In 2016 it contributed 4.5% of UK ODA (3 rd largest government contributor to ODA after DFID and BEIS) Tackling threats to UK interests. Funding the UK s contributions to multilateral peacekeeping budgets and related commitments.

53 International Trade

54 millions DIT: planned spending INTERNATIONAL TRADE Day-to-day and Investment Spending: Resource and Capital DEL (Departmental Expenditure Limits) (in cash terms) Day-to-day Spending Investment Spending

55 Export performance Annual value of UK exports, billions 1,200 1, Number of firms exporting, 1000s HMG previous 2020 TARGET: 1000 OBR Forecast HMG previous 2020 TARGET: INTERNATIONAL TRADE The value of UK exports has increased since 2010 and is forecast to increase further in the coming years. However the government are not forecast to meet their previous target: the ambition of 1 trillion exports and 100,000 more exporters by The most recent single departmental plan for DIT (December 2017) does not include any reference to this target.

56 ONS: UK trade by country, 2015 Imports, billions Germany Netherlands France Spain Italy Ireland Belgium Poland Sweden Czech Republic Denmark Rest of Europe EU Norway Switzerland EFTA (includes Iceland) USA China Japan India Turkey Hong Kong Canada Russia Australia Singapore Saudi Arabia South Korea Rest of the world Total World Excluding EU EU Non-EU Exports, billions INTERNATIONAL TRADE Germany Netherlands France Spain Italy Ireland Belgium Poland Sweden Czech Republic Denmark Rest of Europe EU Norway Switzerland EFTA (includes Iceland) USA China Japan India Turkey Hong Kong Canada Russia Australia Singapore Saudi Arabia South Korea Rest of the world Total World Excluding EU EU Non-EU

57 Defence

58 billions billions MOD Ministry of Defence: Spending Trends Day-to-Day (Resource DEL) budget in cash terms Previous years Main Estimate Planned future budget The government committed to increasing the MoD budget in the 2015 Spending Review. The Strategic Defence and Security Review undertaken at the same time also identified 9.2bn of savings by the end of Last year, the MoD Estimate was higher than the Spending Review agreement, indicating pressure on the MoD budget. Investment (Capital DEL) budget in cash terms 10,000 8,000 6,000 4,000 2, Previous years Main Estimate Planned future budget

59 Conflict, Stability and Security Fund (CSSF) MOD MOD Conflict, Stability and Security Fund Governed by the National Security Council Initially held in DFID s budget. Throughout the financial year, the CSSF funds are transferred to other departments (though DFID will retain some funds for itself) FCO Other departments e.g. DEFRA etc. The CSSF came into being on 1 April 2015 and replaced the Conflict Pool. It brought together existing conflict resources (the Conflict Pool and the Peacekeeping Budget) along with defence, diplomatic, development, security and intelligence capabilities. Scope: Conflict reduction Development assistance Tackling threats to UK interests. Funding the UK s contributions to multilateral peacekeeping budgets and related commitments. National Crime Agency HMRC Home Office

60 Per cent of GDP MoD Challenges: Spending MOD The Equipment Plan The MoD has a plan for equipment and support procurement that runs for the next 10 years. The NAO has identified concerns over the affordability of the plan, with the MoD expecting to spend an increasing proportion of its budget on the plan over the next 5 years, and a potential 21bn shortfall over the next 10 years UK military spend as a percentage of GDP SIPRI measure NATO measure Target UK Military spend as proportion of GDP has reduced over time, and continues to move closer to the NATO (minimum) commitment to spend 2% of GDP on Defence. But the measure is sensitive to the items included: the NATO measure includes items such as pensions for retired civilians are now counted (see Defence Committee Report Shifting the Goalposts)

61 MoD Challenges Manpower requirement for Armed Forces 250, ,000 The MoD has historically been below its manpower requirement: 6,400 shortfall in 2017; over 5,000 below the target for 2020 MOD 150, ,000 T h e M o D E s t a t e 50, Deficit Trained requirement Trained strength L e a v i n g t h e E U The MoD has identified the largest impact of exiting the EU as the impact on defence procurement The MoD has set out a new Estate Strategy designed to reduce the built estate by a quarter by The NAO has criticised the MoD for making poor value for money decisions, including a sale and leaseback deal which may have cost 4bn. The MoD also had a contract with a Carillion joint venture to repair and maintain service family accommodation and some military sites. Around 21bn of the Equipment Plan is in foreign currencies, agreed before the referendum. If current exchange rates persist, the cost of the Plan could increase by 5bn.

62 Justice

63 millions millions Ministry of Justice: Trends Day-to-Day budget (Resource DEL) in cash terms 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1, Previous years Main Estimate Planned future budget The Ministry s Day-today spend has been on a downward trend since the 2015 Spending Review, partly driven by reductions in total spending on staff of 25%. MOJ The Autumn Statement 2016 committed an additional 500m across future years for recruitment of extra prison guards Investment spending increases significantly in future years due to reprofiling of investment in prison and courts reform. But further delays in this investment may reduce planned savings in day-to-day expenditure Spending Review 2015 commitments: Day-to-Day spending: Efficiency savings possible because of capital investment in prisons and courts Administration budget to be cut by 50%, 20% more than any other Department Investment Spending: 1,300m to building nine new prisons 700m to digitise the courts system Investment (Capital DEL) budget in cash terms Previous years Main Estimate Planned future budget

64 Challenges: Prisons MOJ Spending on prisons decreased in real terms by over 20% between and While the prison population remained relatively static over the past 7 years Source of captions and figures: Institute For Government Performance Tracker

65 Challenges: Prisons MOJ As a result, There are now a quarter fewer prison officers than in 2010, responsible for similar numbers of prisoners And violence in prisons is rising sharply assaults on staff have increased by around 120% since C o n d i t i o n s i n p r i s o n s Recent reports by HM Inspectorate of Prisons have highlighted the appalling, squalid and unsafe conditions in prisons such as Nottingham and Liverpool. Poor conditions have been identified as a catalyst for the increase in violent episodes. Maintenance contracts for prisons in the west and south of England were previously held by Carillion, but have subsequently been taken in house by MoJ. (See HoC Library briefing) Source of captions and figures: Institute For Government Performance Tracker

66 Transport

67 billions billions DFT Around 80% of DfT total spending is for Investment (Capital). Investment (Capital DEL) budgets and Network Rail (Capital AME) Capital DEL Network Rail net capital 11.3 DfT overall Investment spend is due to increase significantly. However, Investment spending on Network Rail is forecast to fall slightly Day-to-Day (Resource DEL) (in cash terms) Day-to-Day spending (Resource) spending is net of income from Passenger Rail services, which varies from year to year Note: all Resource spend excludes depreciation Data sources: Core tables DfT accounts.

68 billions DFT Investment spending by area: 8 Total Investment spending is dominated by the railways with Network Rail making up around half of the investment in Over the five year period to Highways England, Funding of other ALB s, and HS2 are forecast to increase investment. 4 3 Capital grants to local authorities are forecast to fall in real terms Network Rail Local Authority Highways England (net) GLA and Crossrail HS2 Funding of other ALBs (net) Other Data sources: Core tables DfT accounts.

69 Work and Pensions

70 billions DWP: Trends in spending on Benefits and Pensions Annually Managed Expenditure (in cash terms) Forecast Spending (OBR) Spending on pensions forecast to continue rising 106 Many admin functions were reclassified as programme DWP Day-to-Day Spending (Resource DEL) and Investment (Capital DEL) in cash terms / / / / / / / / / /20 Working age and other People with disabilities and illness Pensions and pension credit Source: DfE Annual Report and Accounts DWP will reflect latest OBR revision to forecasts in its supplementary estimate Big savings required in admin of DWP of 22%, including 34% on technology and 20% in size of DWP Estate

71 Changes in benefits: Universal Credit Universal Credit continues to be rolled out UC replaces six previous benefits: Income support Job Seeker s allowance (income related) Employment and support allowance (income related) Housing benefit Working tax credit (previously paid by HMRC) Child tax credit (previously paid by HMRC) New claimants of Universal Credit may get less than they would have done under the previous tax credit arrangements /CBP-8162.pdf 2018 benefits uprating : House of Commons DWP Benefits caps frozen at 23,000 (London) and 20,000 (elsewhere) Government has announced the rollout schedule of UC until September Full rollout not now expected until 2022, five years later than originally planned. Upratings for Most benefits frozen for four years ( is year 3), including: Child Benefit Jobseekers Allowance Employment and Support Allowance Income Support Housing Benefit under women s state pension age Local Housing Allowance rates Child Tax Credit Working Tax Credit Universal Credit Up by 3% (CPI inflation index at September 2017): Attendance Allowance Personal Independence Payment Disability Living Allowance Carer s Allowance Bereavement Allowance Maternity Allowance Statutory Maternity/Paternity etc Pay Statutory Sick Pay Up by 2.3% (linked to earnings, May to July 2017): Pension credit Up by 3.0% (triple lock: earnings, price inflation or 2.5% whichever is greater): State pension

72 Ageing population: DWP: CHALLENGES DWP Over the next 20 years: 39% increase in 65+ population Growth in number of pensioners Rising levels of child poverty 106% increase in 85+ population Percentage of children below low income (relative measure of income, before housing costs) Source: King s Fund Demography Managing future reductions in DWP workforce without reducing capability Source: DWP: Households Below Average Income: An analysis of the UK income distribution: 1994/ /16

73 Treasury and HMRC

74 millions HMT AND HMRC HM Treasury has significant assets and liabilities in its accounts. Movements in the value of assets, such as those bought by the Bank of England through Quantitative Easing have a large impact on total spending figures. HM Treasury Group s administration costs have been falling and are forecast to fall further over the next two years HM Treasury Group - Administration costs Cash admin spend is falling by 5% each year on average.

75 billions billions HMRC: Trends in spending, 2012/ /20. Benefits and tax credits (Resource AME) The majority of HMRC spending is on child benefit and tax credits HMT AND HMRC HMRC currently spends over 40bn a year on benefits and tax credits. It is forecast to remain broadly flat in cash terms over the next two years Personal tax credit Social benefits and grants Other Resource AME Day-to-Day spending (Resource DEL) and Investment (Capital DEL) HMRC running costs (e.g. staff, IT) are about 4bn a year and forecast to reduce by 16% between and Resource DEL (excluding depreciation) Capital DEL Source: HMRC Annual report and accounts , Statistical tables

76 HMRC: Activity and performance information HMRC collected 575bn in in tax revenue. (7% increase compared to ). HMT AND HMRC HMRC reported that they met all of their customer service targets in HMRC employee engagement is some way below the civil service benchmark. Scores are particular low for pay and benefits and leadership and managing change Source: NAO short guide to HMRC, 2017

77 Scotland

78 billions billions Trends in Scotland s Block Grant in 2010/ /20 ( bn) Day-to-Day Spending (Resource Departmental Expenditure Limit (DEL) in real terms) is first year of full devolution of income tax under Scotland Act In there was only partial devolution of income tax related to Scotland Act Therefore, payover of SRIT was smaller. SCOTLAND / / / / / /18 Resource budget Scottish Rate of Income Tax transfer Investment Spending (Resource Departmental Expenditure Limit (DEL) in real terms) 4 3 NOTE: Policy decisions in 2017 Autumn Budget will increase block grant by 223m (approx. 0.2bn) (resource and capital) to be approved in supplementary estimate (not material) / / / / / /18 Source: PESA Tables, 2017

79 ADDITIONAL POWERS DEVOLVED: Devolution of Powers: TIMELINE SCOTLAND Holyrood 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 Welfare: Scottish Government to be given legislative powers over a series benefits in 2017/18, but not over delivery of some of them until April 2020 Air Passenger Duty 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 2016 Scotland Act

80 SCOTLAND The Barnett Formula Change (rise or fall) in Resource DEL budget determined by UK government Share of change related to functions RESERVED TO UK GOVERNMENT (e.g., defence) Share of change related to DEVOLVED FUNCTIONS (e.g., health) Population share (compared to England or England and Wales) Scotland s population compared to England s: 2010 Spending Review: 10.03% 2015 Spending Review: 9.85% This reduction in population share will mean slightly smaller increases and decreases in funding for Scotland from the Barnett Formula than would have resulted if the share had remained as before. Extra funding available to the governments of Scotland, Wales and Northern Ireland (may also be a spending cut) These funds can be spent on ANY DEVOLVED FUNCTION NO CHANGE TO THE BLOCK GRANT provided to Scotland, Wales and Northern Ireland Example: Increase of 100m in UK Departments Resource DEL budget. 75% relates to functions which are 9.85% (Scotland s population compared to England) Extra 7.388m to Scottish government devolved; 25% are UK reserved functions. Block grant adjustments: in addition block grant adjustments can be made: reductions where taxes are devolved or additions where welfare is devolved.

81 Wales

82 billions WALES Trends in Wales Block Grant in 2011/ /20: Day-to-Day spending (Resource) and Investment (Capital) Departmental Expenditure Limit (DEL) in real terms Spending Review forecast a slight reduction in real terms in Wales Resource budget between 2015/16 and 2019/20. There is now an increase in real terms mainly due to increased allocations for UK government departments awarded in Autumn Statements and budgets leading to greater allocation to Wales through the Barnett formula / / / / / / / / /20 Resource budget 2015 SR planned resource Capital budget 2015 SR planned capital Note: Figures prior to 2015/16 are not strictly comparable because various functions were devolved to Wales over the time period. NOTE: Policy decisions in 2017 Autumn Budget will increase block grant by 129m (approx. 0.1bn) (resource and capital) to be approved in supplementary estimate (not material)

83 ADDITIONAL POWERS DEVOLVED: Devolution of Powers: TIMELINE WALES 2018/ /20 Stamp Duty land tax and Landfill tax 2017 Wales Act A new needs-based factor will be included in the Barnett Formula to determine changes to Welsh Government block grant funding. A transitional factor of 105% will be set for the moment, increasing to 115% in the future. Welsh Rates of Income Tax 2017 Wales Act Increase in borrowing powers: The Welsh Government s overall capital borrowing cap will be increased to 1bn

84 The Barnett Formula Change (rise or fall) in Resource DEL budget determined by UK government WALES : a new needs-based factor will be included in the Barnett Formula to determine changes to Welsh Government block grant funding. A transitional factor of 105% will be set for the moment, increasing to 115% in the future. Share of change related to functions RESERVED TO UK GOVERNMENT (e.g., defence) Share of change related to DEVOLVED FUNCTIONS (e.g., health) Population share (compared to England) Wales compared to England: 2010 Spending Review: 5.79% 2015 Spending Review: 5.69% This reduction in population share will mean slightly smaller increases and decreases in funding for Wales from the Barnett Formula than would have resulted if the share had remained as before. Extra funding available to the governments of Scotland, Wales and Northern Ireland (may also be a spending cut) These funds can be spent on ANY DEVOLVED FUNCTION NO CHANGE TO THE BLOCK GRANT provided to Scotland, Wales and Northern Ireland Example: CHANGE EXAMPLE Increase of 100m in UK Departments Resource DEL budget. 75% relates to functions which are devolved; 25% are UK reserved functions. 5.69% (Wales s population compared to England) Extra 4.268m to Welsh government

85 Northern Ireland

86 billions NORTHERN IRELAND Trends in Northern Ireland s Block Grant in 2010/ /20: Day-to-Day spending (Resource) and Investment (Capital) Departmental Expenditure Limit (DEL) in real terms Additional funding from the agreement between the Conservative Party and DUP in June 2017 will be added to these totals in the due course / / / / / / / /20 Resource budget 2015 SR planned resource Capital budget 2015 SR planned capital NOTE: Policy decisions in 2017 Autumn Budget will increase block grant by 75m (approx. 0.1bn) (resource and capital) to be approved in supplementary estimate (not material)

87 What will the 1bn of future additional funds support? (Additional funding agreed between the Conservative party and the DUP) ( 50m for 2 years) Pressures in health and education ( 200m for 2 years) Infrastructure development NORTHERN IRELAND NOTE: Additional 1bn Funds going to Northern Ireland as part of the agreement between the Conservative Party and DUP in June 2017 are not part of the Main Estimate, and will not lead to any additional funds to Wales or Scotland through Barnett Consequentials ( 10m for 5 years) ( 75m for 2 years) ( 100m for 2 years) Support for mental health Broadband development Health Service Transformation ( 20m for 5 years) Target pockets of severe deprivation NOTE: Not yet drawn down. It is possible that it could be drawn down in the Estimate.

88 NORTHERN IRELAND The Barnett Formula Change (rise or fall) in Resource DEL budget determined by UK government Share of change related to functions RESERVED TO UK GOVERNMENT (e.g., defence) Share of change related to DEVOLVED FUNCTIONS (e.g., health) Population share (compared to England or England and Wales or Great Britain) Northern Ireland compared to England: 2010 Spending Review: 3.45% 2015 Spending Review: 3.39% This reduction in population share will mean slightly smaller increases and decreases in funding for Northern Ireland from the Barnett Formula than would have resulted if the share had remained as before. Extra funding available to the governments of Scotland, Wales and Northern Ireland (may also be a spending cut) These funds can be spent on ANY DEVOLVED FUNCTION NO CHANGE TO THE BLOCK GRANT provided to Scotland, Wales and Northern Ireland Example: Increase of 100m in UK Departments Resource DEL budget. 75% relates to functions which are devolved; 25% are UK reserved functions. 3.39% (Northern Ireland s population compared to England) Extra 2.543m to Northern Irish government