tag:theconversation.com,2011:/uk/topics/spending-review-2015-22888/articlesSpending Review 2015 – The Conversation2019-01-18T14:31:56Ztag:theconversation.com,2011:article/1091552019-01-18T14:31:56Z2019-01-18T14:31:56ZHow Britain’s Ministry of Defence is playing for time (and money) in a dangerous world<figure><img src="https://images.theconversation.com/files/253254/original/file-20190110-43544-195pcl9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">shutterstock</span> </figcaption></figure><p>In December 2018, just before policymakers and pundits escaped their besieged bunkers for Christmas, the UK government published the long-awaited <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/765879/ModernisingDefenceProgramme_report_2018_FINAL.pdf">final report</a> on its Modernising Defence Programme. This programme was meant to update the military commitments made in the last full-blown <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/555607/2015_Strategic_Defence_and_Security_Review.pdf">Strategic Defence and Security Review</a> of 2015. </p>
<p>How far it has succeeded in that task is debatable, however. The report’s brevity and lack of detail <a href="https://researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-8469#fullreport%20(%20L.Brooke-Holland,%20The%20Modernising%20Defence%20Programme,%20House%20of%20Commons%20Library%20Briefing%20Paper%2008469,%2021%20December%202018)">left many lamenting</a> a missed opportunity. </p>
<p>Revising 2015’s review became necessary thanks to a marked change in circumstances. Partly, those changes are strategic. Relations with Russia have deteriorated even further since 2015, Islamic State (IS) is much diminished, and new military technologies and tactics are advancing. </p>
<p>Mainly, however, those changes are economic. The <a href="https://www.ft.com/content/cf51e840-7147-11e7-93ff-99f383b09ff9">lower growth trajectory induced by Brexit</a> has reduced the resources available to the Ministry of Defence (MOD). (The UK Defence Budget is set at 2% of GDP, which means that if GDP is smaller than it might have been, so too is the budget available to the military.) </p>
<p>The pound’s depreciation since the Brexit vote in 2016 has also raised the real costs of buying defence equipment from abroad, such as the US-sourced <a href="https://www.bbc.co.uk/news/uk-44368823">F-35 combat jet</a>. A broader rise in inflation has further added to cost pressures on a 2015 review that was already seen as financially optimistic. </p>
<p>Taken together, these pressures have stretched the disconnect between intended military expenditures and available resources beyond the point that could reasonably be ignored. A political consequence of this has been the MOD – currently led by Gavin Williamson MP, a Defence Secretary unusually willing to provoke budgetary confrontations within Whitehall – demanding more government money to ensure that neither current nor planned military capabilities receive further cuts. </p>
<p>The Treasury, for its part, recognises that Britain’s security environment has deteriorated to a worse condition than at any point since the Cold War. Yet it is still attempting to avoid major new spending commitments until the full fiscal shock of Brexit becomes clear. It has also long been sceptical of the MOD’s budgetary requests, viewing the department as a perennial financial black hole. </p>
<h2>Political turmoil, strategic change</h2>
<p>With a full cross-government spending review now scheduled for post-Brexit 2019, this Modernising Defence Programme report represents multiple levels of compromise. It has provided the government with a “good news” item, in the form of modest amounts of new funding to important areas such as high-technology research and “net assessment” of threats. </p>
<p>It also recognises growing pressures in defence, such as the need to increase the usability of existing equipment if Britain is to pose a credible conventional deterrent against Russia (for example, by ensuring adequate numbers and varieties of munitions for ships and aircraft). </p>
<p>But the report has also dodged some of the hardest choices. For if more money is <em>not</em> eventually forthcoming from the Treasury to pay for equipment – and the people and infrastructure who turn such equipment from mere “stuff” into effective fighting capability – how will it be paid for or what will need to be cut?</p>
<p>These “micro” politics are all occurring against a backdrop of “macro” change in Britain’s <a href="https://academic.oup.com/ia/article/91/2/333/2199819">strategic environment</a>. The post-Cold War era of unrivalled American (and therefore Western) power is arguably coming to an end, with the rise of China and partial resurgence of Russia. </p>
<p>All of Britain’s closest alliances are simultaneously in flux. With the major European powers, this is due to Brexit. With the US, it is thanks to a combination of President Trump’s mercurial temperament and a longer standing requirement to pivot towards containment of China. </p>
<p>Yet even as Washington wants to focus on Beijing, European states face a hostile power in their own region, in the form of a Russia that sees good reasons to weaken and ideally break NATO. </p>
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<img alt="" src="https://images.theconversation.com/files/254363/original/file-20190117-32825-2num9m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/254363/original/file-20190117-32825-2num9m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/254363/original/file-20190117-32825-2num9m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/254363/original/file-20190117-32825-2num9m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/254363/original/file-20190117-32825-2num9m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/254363/original/file-20190117-32825-2num9m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/254363/original/file-20190117-32825-2num9m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">F-35s are getting more expensive.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/raf-fairford-gloucestershire-uk-july-102016-693892570?src=1lHj1MgJ5XoYrM52b5bsbw-1-5">Shutterstock</a></span>
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<p>Besides the Russia situation, political demands for UK military commitments in other regions also still remain – in the Middle East, Mediterranean, South Atlantic, and increasingly in East Asia too. This difficulty of juggling pressing regional defence needs with a desire for expansive global involvement reflects two competing sets of <a href="https://academic.oup.com/fpa/advance-article/doi/10.1093/fpa/ory011/5212276">long-standing pressures</a> in British strategy: the aspiration to play an influential role in the world versus the need to safeguard national security. </p>
<p>A combination of strained alliances and ever-expanding political demands explains the MOD’s determination to secure funds to rebuild UK military capability. After 20 years of preoccupation with counter-terrorism and humanitarian intervention, the current Defence Equipment Programme is <a href="https://www.tandfonline.com/doi/abs/10.1080/03071840903532932">now more focused</a> on the heavier “state-on-state” capabilities required to deter a hostile major power in the North Atlantic region (warships, combat aircraft, mechanised ground forces, and so forth). And all of this must take place while still having enough left over to do a bit of all the other things that are asked of the armed forces. </p>
<h2>Ready for battle?</h2>
<p>Without the budget to fulfil recent ambitions, the MOD will not be confident that it can meet Britain’s defence needs. So rather than accept cuts today, this latest report plays for time. The hope is that the tougher security environment of tomorrow will ultimately persuade the Treasury to release more resources for defence, especially once Brexit has been and gone. </p>
<p>To that extent, December’s report achieved its aims. A bit more funding for advanced technology research and net assessment is no bad thing. A recognition that Britain needs more robust stockpiles of fuel, spares, munitions, and expertise was long overdue. And the MOD has managed to delay its day of reckoning with the Treasury until after the initial fiscal shock of Brexit. </p>
<p>A delay is not a victory, however. There is no sign yet of the substantial uplift in funding or the cuts to planned capabilities necessary to place the armed forces on a sound budgetary footing. That hard day of financial reckoning could therefore still be to come.</p><img src="https://counter.theconversation.com/content/109155/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Blagden is Lecturer in International Security and Strategy at the University of Exeter. He is also an officer in the Royal Naval Reserve, but stresses that this is work completed in his civilian academic capacity; it does not reflect the official views of - and has not received input from - the Royal Navy or the Ministry of Defence. The University of Exeter, for its part, is a member of the 'Global Strategic Partnership' consortium that provides research consultancy to the Ministry of Defence via its Development, Concepts, and Doctrine Centre, but this article is not associated with that contract. </span></em></p>The battle for military power intensifies as Britain faces mounting threats alongside economic uncertainty.David Blagden, Lecturer in International Security and Strategy, University of ExeterLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/516222015-12-07T12:28:04Z2015-12-07T12:28:04ZHow cuts to local councils will affect you<figure><img src="https://images.theconversation.com/files/104133/original/image-20151202-22461-ejccdq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Cuts to councils continue where they left off from the last parliament.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/occupymcr/8503018157/in/photolist-dXoc4k-dXtSdd-dXtSvU-dXtScs-dXoc3n-dXobH2-dXocrT-dXoc1v-dXtRHj-dXobQx-dXtS5m-dXtRAu-dXtSsh-dXocaR-dXtRSm-dXtSbs-dXobKD-dXobv4-dXobVk-dXocuH-dXoc9k-dXtSAN-dXobEP-dXtSiq-dXocpK-dXtSoG-dXockM-dXoczi-dXtSAC-dXtRwu-dXtRA5-9hEz4Y-9hBsVv-9hBnwt-9hEsEo-9hEqTN-rgfre9-zsfCUs-6R681F-6R5nKK-6R5xvk-9hBrkF-9hEuQU-9hEwq7-9hEvZE-9hBsBe-9hBjZx-9hBqyK-9hBmsn-9hEyKo">OccupyMCR/flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span></figcaption></figure><p>If shrinking and reshaping the state is one of George Osborne’s <a href="http://www.economist.com/news/leaders/21657393-george-osbornes-political-vision-brave-boldand-many-counts-wrong-new-conservatism">big ideas</a> then local authorities are right in the firing line. The chancellor’s recent spending review and autumn statement has local councils <a href="http://www.theguardian.com/society/2015/nov/25/local-government-councils-funding-gap-critical-budget-cuts-social-care-spending-review">bearing the brunt</a> of billions of further budget cuts.</p>
<p>As a former local authority chief executive, the announcements left me with the uncomfortable, but depressingly familiar impression of “smoke and mirrors”. While the cuts to local authorities were largely buried in the excitement of an apparent u-turn on tax credits, essential public services face serious cutbacks over the next four years with some of the biggest now backloaded <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/479749/52229_Blue_Book_PU1865_Web_Accessible.pdf">into the fourth year</a>, often as unidentified efficiency savings.</p>
<p>Local authorities are the traditional safety net for regional issues that can find no other advocate. When local communities or individuals have a problem – such as insurance issues after flood damage or the loss of a local post office or pub – and can find no designated agency willing to help, they invariably default to their local councillor and council. </p>
<p>But with resources already reduced by more than a third <a href="https://www.nao.org.uk/wp-content/uploads/2014/11/Impact-of-funding-reductions-on-local-authorities.pdf">over the course of the last parliament</a>, local authorities are rapidly losing their ability to react to changing circumstance or to meet the public’s needs. This is what that looks like in practice.</p>
<h2>Education</h2>
<p>Until recently, spending on schools and education was the biggest part of a local council’s responsibilities and budget. Previously councils were responsible for nurseries, schools and colleges, education infrastructure and support services such as <a href="https://www.gov.uk/children-with-special-educational-needs/overview">special educational needs</a>. </p>
<p>Committed to abolishing the role of local authorities in the schools system, however, the latest spending review will see the rise of more academies, as sixth-form colleges can now become academies. This flies in the face of <a href="http://www.theguardian.com/teacher-network/teacher-blog/2013/jan/24/academy-school-system-heading-rocks">numerous criticisms</a> of academies’ admissions policies, wasting resources by creating excess school places, variable standards and privatisation to entrepreneurs with no experience of or expertise in education.</p>
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<img alt="" src="https://images.theconversation.com/files/104130/original/image-20151202-22439-16lamky.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/104130/original/image-20151202-22439-16lamky.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/104130/original/image-20151202-22439-16lamky.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/104130/original/image-20151202-22439-16lamky.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/104130/original/image-20151202-22439-16lamky.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/104130/original/image-20151202-22439-16lamky.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/104130/original/image-20151202-22439-16lamky.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Cuts are a threat to unprofitable local services like libraries.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/megantrace/6247294485/in/photolist-8PqZBE-5Hr9hY-5xuJuw-97M3xA-9fR4Aj-9bGwuR-9fMXev-9fMWnp-9fMX4x-9fMXLr-9fMYPK-9fMWRa-9fMYG2-9fMWBM-9fR3Sh-9fMY3F-9fR4QL-9jqybv-97M3R1-97M4Gm-97M2Zd-97M4bj-5Hr8zN-aw41ZT-8XN2k2-8XQfkf-abqwrT-bVmaTU-dQqG2S-iZdW55-brk8wJ-q5KfiF-fmZrwZ-kaqrJX-qftQ7W-99TsbP-dWWYs7-dWRjiM-dWWYnN-dbJ5kL-6zae4X-e8446q-e8443E-4Q8ytY-4Q4knB">Megan Trace/flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span>
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<h2>Social services and welfare</h2>
<p>The biggest expenditure by local councils is now on a combination of social services, public health and welfare benefits. Despite the u-turn on tax credits, welfare spending overall <a href="http://www.bbc.co.uk/news/uk-politics-34915218">will be cut by £12 billion by 2020</a>, with specific cuts from a cap on housing benefit confirmed in the autumn statement. </p>
<p>Adult social care is one of the areas that will be most affected by these cuts. Councils have been given the option of increasing the portion of council tax <a href="http://www.publicfinance.co.uk/news/2015/11/spending-review-council-tax-hikes-shore-social-care-funding">dedicated to social care by 2%</a> to meet this need. But this revenue will not be enough to rescue adult social care and in particular care homes who are faced with ever increasing demand and unit costs driven by minimum wage increases. </p>
<p>With <a href="https://www.gov.uk/government/policies/health-and-social-care-integration">Health and Social Care integration</a> looking more and more essential by 2020, it is likely that social services and public health will have been subsumed by what remains of the already strained NHS.</p>
<h2>Planning and transport</h2>
<p>Planning is already becoming a token fig leaf at the local level, and investment in transport is becoming centralised. The Department of Transport was one of four departments that agreed cuts in their budgets over four years before the Autumn Statement, with spending <a href="https://www.gov.uk/government/news/department-for-transports-settlement-at-the-spending-review-2015">set to fall by 37%</a>. While capital spending is set to rise, local planning, delivery and maintenance of transport services and transport infrastructure is likely to suffer. Potholes, congestion and longer journey times are almost assured.</p>
<h2>Recreation and culture</h2>
<p>Councils also take care of sport, recreation and cultural facilities. At a personal level, local authorities register our births, marriages and deaths, they organise our elections and they provide funeral services. These are the sort of unprotected services which are under the greatest threat. </p>
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<img alt="" src="https://images.theconversation.com/files/104128/original/image-20151202-22467-44yc9s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/104128/original/image-20151202-22467-44yc9s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/104128/original/image-20151202-22467-44yc9s.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/104128/original/image-20151202-22467-44yc9s.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/104128/original/image-20151202-22467-44yc9s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/104128/original/image-20151202-22467-44yc9s.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/104128/original/image-20151202-22467-44yc9s.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Local parks could be at risk.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/48716693@N06/8668319022/in/photolist-dGw5Kn-dGBuVy-dGBvHb-dGw6RH-dGBw3J-dGwbHg-dGw94P-dGByoG-dGw8p2-dGw8Ct-dGBxUm-dGwcez-dGw8bv-dGw7YR-dGBz79-dGByFN-dGw9Jr-dGBzRL-dGBxDo-dGBAm7-dGBxam-dtty64-dttygp-dtty2V-dhuNk2-dhu6wD-dhusfV-dhvdxL-dhv6Si-dhubon-dhu2qA-dhuAhJ-dhutWe-dhuxCX-dhuDwR-dht4B5-dhtu1e-dhtzLY-dhtCd4-dhtkvX-dhtoMk-dhtdoX-qWpGan-dUnKMd-dhvfRF-dhtxmD-dhthk1-cGthNN-ecZpff-ArxkY">ncbeeny</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
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<p>Local authorities will be reduced to being “commissioners” of services to be provided by others who will only do so for profit. Any service that cannot be run at a profit, will not exist. Nobody runs swimming pools, public parks, or museums at a profit – they require a public subsidy if they are to survive.</p>
<h2>Cloak and dagger</h2>
<p>Osborne and his acolytes have devolved responsibility while keeping a tight hold of the purse strings. By using the rhetoric of devolution and localism, Osborne is distancing himself from future direct responsibility for the damage to come. Relying on the private sector to pick up the slack will result in the most vulnerable sections of society, who don’t have the money to help themselves, suffering. </p>
<p>This approach to local government is a surrender to the market and the post code lottery. It will result in the entrenchment and extension of inequality between people and places. </p>
<p>Osborne’s obsession with the small state has a strong resonance with the administrations of <a href="http://www.press.uchicago.edu/ucp/books/book/chicago/P/bo3684102.html">Warren Harding and Calvin Coolidge</a>. Two of the worst presidents in American history, they too believed in cutting back the state. Indolent and ignorant, but politically hugely popular in their time, their policies in the 1920s laid the foundations for the great crash and the depression of the thirties. While Osborne may have inherited the great recession, his policies will elongate its impact.</p><img src="https://counter.theconversation.com/content/51622/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Murphy receives funding from research councils. He is advisor to Centre for Public Scrutiny. </span></em></p>Britain’s shrinking state means local services are increasingly being put into private hands.Peter Murphy, Principal Lecturer in Public Service Management, Programme Director, Nottingham Trent UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/513442015-11-26T16:39:21Z2015-11-26T16:39:21ZScience and innovation: out of the frying pan and into the fire<figure><img src="https://images.theconversation.com/files/103353/original/image-20151126-28263-v6rdpt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Funding squeeze over – for now.</span> <span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-219643969/stock-photo-attractive-young-female-scientist-and-her-male-supervisor-pipetting-and-microscoping-in-the-life.html?src=jN-VKT29XH0Oo14H3Tf9Cg-5-86">foto infot</a></span></figcaption></figure><p>Scientists in the UK breathed a sigh of relief when chancellor George Osborne announced that the science budget – which had been threatened with cuts – will in fact <a href="https://theconversation.com/spending-review-2015-the-experts-respond-51063">be protected</a> in real terms over the next four years. </p>
<p>He also announced that the innovation budget will be frozen, but only in cash terms, which should nevertheless give confidence to research-intensive businesses as it signals to the rest of the world that the UK is still in the innovation business. That’s the good news. But as the details unfold, there are some worrying signs and down right scary prospects on the horizon – including the EU referendum. </p>
<h2>Devil in the detail</h2>
<p>The UK science budget has been declining by inflation for the past four years, which has seen it drop below the <a href="http://www.oecd-ilibrary.org/sites/factbook-2013-en/08/01/01/gerd_g1.html?itemId=/content/chapter/factbook-2013-60-en&_csp_=05468405e2c4e04d6c1de15d76545eb3">OECD and EU average</a> for research intensity. While the funding is now to be maintained in real terms, the budget is still very low. This means we are still threatened by other nations, including emerging markets like China that are investing strongly in R&D.</p>
<p>Then there is the <a href="https://www.gov.uk/government/publications/spending-review-and-autumn-statement-2015-documents">actual detail</a> of what is being proposed. For example, a big chunk of the science budget, £1.5 billion, will come from a new Global Challenges Fund. This looks like double counting money from overseas aid, meaning that a portion of UK research may be eschewed towards the funding priorities of the Department for International Development. Worthy goals, no doubt, but does this support the needs of the domestic economy?</p>
<p>There’s also the question of how Britain’s genuinely strong tradition of scientific discoveries gets translated into products and services. <a href="https://www.gov.uk/government/organisations/innovate-uk">Innovate UK</a> – the body in charge of commercialisation – has come out of the review as the slightly poorer cousin of the research councils with both cuts in real-terms and greater costs coming out of the Catapult centre programme. Combine this with a shift towards loan-funding from grants (a tricky proposition for income poor start-ups) and it is clear that Innovate UK will face considerable upheaval. </p>
<p>The chancellor also announced that he would implement the recommendations of a <a href="https://www.gov.uk/government/collections/nurse-review-of-research-councils">recent review of the UK research councils</a>, including bringing together the seven existing councils with Innovate UK agency into <a href="https://theconversation.com/research-funding-big-changes-on-the-horizon-leave-scientists-nervous-51057">one collective body</a>. This could make R&D in the UK more responsive, versatile and better integrated.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/103358/original/image-20151126-28263-15mwjql.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/103358/original/image-20151126-28263-15mwjql.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/103358/original/image-20151126-28263-15mwjql.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/103358/original/image-20151126-28263-15mwjql.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/103358/original/image-20151126-28263-15mwjql.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/103358/original/image-20151126-28263-15mwjql.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/103358/original/image-20151126-28263-15mwjql.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">George Osborne has said science is a personal priority. But is a tiny increase enough?</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/altogetherfool/3542341781">altogetherfool</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
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<p>However, it is unclear exactly how politically neutral this body, Research UK, will actually be. The <a href="https://www.gov.uk/government/collections/nurse-review-of-research-councils">Nurse review</a> was keen to stress that funding priorities should be set by experts and not by politicians and argued that by bringing all the funding agencies together there is scope to share budgets, influence government research and reduce reporting costs. Great in theory, but with the proposal of having a board appointed by the government and reporting to a ministerial committee, it is certainly possible to imagine political influence flowing the other way.</p>
<p>Some level of such influence has <a href="https://theconversation.com/scientists-anxious-about-the-future-of-research-funding-42957">already been spotted</a> in the decision to fund the <a href="http://www.graphene.manchester.ac.uk/explore/graphene-city/sir-henry-royce-institute/">Royce Institute in Manchester</a>, following apparent considerations about the desirability of the place from a clustering and economic development perspective, over a purely scientific assessment.</p>
<h2>Brexit threat</h2>
<p>Yet these issues are perhaps nothing compared to the prospect following the fast-approaching referendum on whether the UK should leave the EU.</p>
<p>But is this really a threat to science? Look at Switzerland, it is a successful research nation and isn’t part of the EU. While it is hard to predict the outcomes of the negotiations following a Brexit, the example of Switzerland is not a promising one. After a recent vote on migration fell foul of EU free-movement legislation, Switzerland’s access to the research area was <a href="http://www.theguardian.com/politics/2015/nov/11/whatever-you-do-dont-become-switzerland-swiss-academics-tell-uk">swiftly downgraded</a>. This crisis since been partially patched up, but not before the Swiss government had to reach into its pocket to fund the gap. The UK is in a similar position, like Switzerland we receive more than we put in.</p>
<p>Participation in EU research programmes, with all their bureaucracy, are arguably not the most efficient model for getting research done. But as <a href="http://www.intrasme.eu/">research</a> led by Coventry University and Innovation Bridge Consulting found, this isn’t what matters most to businesses. In a survey of businesses in emerging technologies, the key benefit of using European funding was not the actual research outputs, but the networks, contacts, exchange of expertise and relationships that follow from working together. Europe actually provides a massive low-risk testing ground for new alliances. </p>
<p>This is hugely important. With limited domestic funds for investment the UK needs to use all the levers it has to compete and one area where Britain excels is attracting international <a href="http://www.keepeek.com/Digital-Asset-Management/oecd/science-and-technology/oecd-science-technology-and-industry-scoreboard-2015_sti_scoreboard-2015-en#page136">R&D business investment</a>. Yet should the UK’s relationship with the EU falter then it is not merely EU countries which may think twice about investing in UK science, but also decision-makers in San Francisco or Shanghai that benefit from the access to a broader market of talent. </p>
<p>The chancellor has come out of the Spend Review riding high, benefiting from some slight-of-hand, but also from some genuinely farsighted decisions. However as the European negotiations reach their moment of truth in December, he may find that the challenge of turning the UK into an innovation dynamo has only just begun.</p><img src="https://counter.theconversation.com/content/51344/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard Brooks does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Science and innovation in the UK may seem out of the woods following the spending review. But the EU referendum and changes to how funding is organised are potential threats.Richard Brooks, Research Associate - Centre for Business in Society, Coventry UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/512722015-11-26T11:30:51Z2015-11-26T11:30:51ZWinners and losers in George Osborne’s spending review<p>George Osborne always plays the role of the smiling conjurer who pulls the rabbit out of the hat and steals the scene with aplomb. In his 2015 <a href="https://www.gov.uk/government/publications/spending-review-2015-a-country-that-lives-within-its-means">spending review and autumn statement</a>, the surprise announcement was that cuts to tax credit will not be as stringent as expected – although housing benefit claimers are the losers. Concealed within the chancellor’s hat are cuts of more than 50% in grants to local government and tense optimism about the growth, employment and pay forecasts on which everything depends. </p>
<p>The chart below gives the main winners and losers in the spending review over the period up to 2019-20. Cuts are legion. The winners are the big players – the NHS and pensions – both accounting for about a fifth of total spending – which receive real increases of 3 to 4%. </p>
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<p>Pensioners will <a href="https://theconversation.com/spending-review-2015-the-experts-respond-51063">benefit</a> from the transition to the new flat-rate pension from next April onwards, increasing spending in this area by some 4%. </p>
<p>International development has a 21% increase, although some of the new money will be spent to aid security objectives and <a href="https://theconversation.com/if-aid-budgets-are-used-to-help-refugees-at-home-is-it-still-foreign-aid-47331">some in the UK on Syrian refugees</a>. The new Single Intelligence Account for the security services also got a 17% increase and the Cabinet Office a 4% increase, but all are small players, together accounting for a little over 3% of total spending. </p>
<p>The middle-sized defence budget (about 5% of total spending) gains 2.3% – <a href="https://theconversation.com/britain-boosts-military-spending-heres-what-it-will-be-buying-51009">which reverses the downward trajectory</a> of recent years.</p>
<p>Low-waged earners – including those on the government’s new “living” wage to be introduced next year – can take some relief from the fact that the <a href="https://theconversation.com/explainer-what-are-tax-credits-49904">widely-trailed cuts to tax credit</a> will not be introduced. Under the plans, Osborne’s “welfare cap” – a limit on the amount to be spent on welfare – will <a href="http://blogs.new.spectator.co.uk/2015/11/george-osborne-falls-into-his-own-welfare-cap-trap/">be breached</a> for the next three years, although spending will fall to the cap level by 2019-20, when it will be some 5% lower than it is currently. </p>
<p>In addition, housing benefit faces further cuts, which reduce the amount paid to renters in <a href="https://theconversation.com/spending-review-2015-the-experts-respond-51063">social housing</a>, so that benefits will in many cases not cover rent. </p>
<p>Everyone else is a clear loser, and the Treasury demonstrated that “we are all in this together” with a 24% cut. The other big losers are the small departments of environment (15%) HM Revenues and Customs (18%), the local government communities budget (29%), transport (37%) and the Department for Business, Innovation and Skills at 17%. The devolved administrations in Wales, Scotland and Northern Ireland received cuts of 4 to 5%.</p>
<h2>Massive inequalities for local government</h2>
<p>Local government is unfortunately omitted from the <a href="https://www.gov.uk/government/news/spending-review-and-autumn-statement-2015-key-announcements">Treasury’s summary</a> of key announcements, which is confined to central government departments. But local government accounts for nearly 10% of spending and is credited with an increase of 22% in locally raised revenues. In return for this, they received by what is far and away the largest cut of all, of 56% in central government support to local government.</p>
<p>The settlement is at the limits of what can be achieved.</p>
<p>The overall local government spending cut is presented as 6.7%, on the assumption that councils will make up the shortfall locally. The means offered are: the retention of the proceeds of the sale of assets (mainly of land and housing) and the powers to vary the business rate and to increase council tax by 2% to fund social care. There is also some extra funding for local care and house-building programmes, and efficiency savings through devolution of responsibilities to elected authorities.</p>
<p>Central government support for councils totals some 28% of spending, but the amounts gained by individual councils vary from nearly half to about 10% of their expenditure. In general, councils with larger central support tend to be those in deprived areas and with a larger proportion of older people. These are the councils which face the heaviest demand and they will find it hardest to raise revenue locally because the money is simply not there.</p>
<p>The Local Government Association points out that councils have already experienced <a href="http://www.local.gov.uk/c/document_library/get_file?uuid=b9880109-a1bc-4c9b-84d4-0ec5426ccd26&groupId=10180">a cut of nearly 30%</a> since 2010. In the areas most harshly affected some may well fail to meet statutory responsibilities in providing care for vulnerable children and adults.</p>
<h2>Will the gains be sustained?</h2>
<p>In relation to the NHS, the increase over the period just reaches the minimum expert assessment of what is needed and <a href="http://home.bt.com/news/uk-news/george-osborne-agrees-multi-billion-nhs-spending-boost-11364021014003">assumes some £22 billion in efficiency savings</a>. The NHS has made huge savings in recent years and it is very unclear whether this pressure can be sustained indefinitely.</p>
<p>It is also unclear how the expected gains of at least £5bn of extra tax revenue will be achieved as HMRC experiences further cuts of 18% and already <a href="http://economia.icaew.com/news/march-2015/fifth-of-hmrc-staff-want-to-leave">faces problems in retaining highly paid staff</a>. </p>
<p>The predictions for growth, employment, wage levels and short-term benefit levels which underlie the whole plan may prove to be optimistic. The <a href="http://budgetresponsibility.org.uk/category/topics/economic-forecasts/">Office of Budget Responsibility (OBR) predicts</a> government accounts will return to surplus by 2019-20. This is what makes it possible to mitigate the cuts to tax credit claimants and still achieve spending targets. </p>
<p>But the future is always uncertain and OBR’s growth estimates exceed the <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/478521/PU797_Forecasts_for_UK_economy_343_Nov_2015.pdf">average of independent forecasters</a> from 2017 onwards. The chancellor may be pushing his luck.</p><img src="https://counter.theconversation.com/content/51272/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Taylor-Gooby receives funding from Norface and has received funding from ESRC both of which may be affected by the Autumn Statement and Spending Review. He is a member of the Labour Party. </span></em></p>Defence wins, NHS survives and local government faces massive regional inequalities.Peter Taylor-Gooby, Professor of Social Policy, University of KentLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/513342015-11-26T11:26:40Z2015-11-26T11:26:40ZBehind the headlines: what the autumn statement says about the UK economy<p>The centrepiece of the autumn statement – at least as far as the media were concerned – was the reversal of George Osborne’s attempt to cut in-work <a href="http://www.bbc.co.uk/news/uk-politics-34915218">tax credits</a>. </p>
<p>Osborne was lucky to receive fiscal cover from the Office for Budget Responsibility (OBR) who now forecast that the public finances will be £27 billion better in 2020-21 than had previously been thought, due to higher expected tax receipts. This turns out to be mainly due to revisions in the way the OBR <a href="http://www.bbc.co.uk/news/business-34922394">predicts</a> VAT receipts and National Insurance Contributions rather than any improvements in underlying economic growth, as the following graph makes clear. </p>
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<p>What really killed the tax credit changes was the <a href="https://theconversation.com/tax-credits-showdown-for-once-public-opinion-may-be-with-the-house-of-lords-49774">rebellion in the House of Lords</a>. This brought home the fact that the move to take away money from the poorest working families was both economically and politically toxic. Even under the heroically incorrect assumption that an enormous hike in the minimum wage would have little effect on jobs, the new Living Wage would not go <a href="http://www.ifs.org.uk/publications/7975">anywhere near compensating the losers</a>. What’s more, the reduction of cash top-ups for employment would <a href="http://www.resolutionfoundation.org/media/blog/assessing-the-proposal-to-cut-5-billion-from-child-tax-credit/">erode the incentives</a> to move off welfare into work.</p>
<p>Given the <a href="http://www.resolutionfoundation.org/wp-content/uploads/2014/08/Creditworthy.pdf">absence of evidence</a> that tax credits depress wages, can we thankfully wave “goodbye and good riddance” to this sorry episode? Maybe. But remember that tax credits are due to be replaced by Universal Credit from 2018. It is unclear what this will mean in practice – it’s entirely possible that if funding remains low, the same issue will rear its ugly head further down the road.</p>
<h2>The bigger picture</h2>
<p>The <a href="https://www.gov.uk/government/publications/spending-review-and-autumn-statement-2015-documents">autumn statement</a> outlines where public spending changes are going to take place over the next four years. There are going to be swingeing cuts in some departments. For example, real-price spending in Transport is down 37%, Business down by 17%, Energy down by 22% and Culture down by 22%. This comes on top of big cuts to these ministries in the last parliament; the Ministry of Justice, for example, has already had its day-to-day budget cut <a href="http://www.ifs.org.uk/publications/8063">by a third</a> since 2010-11.</p>
<p>Overall public spending is meant to fall to 36.5% of national income in 2019-20 – down from 39.6% in 2015-16 and 45% in 2009-10, the lowest since 2000-01. It has touched this level only four times since the World War II. This is a shrinking of the state on a spectacular level.</p>
<p>Two big decisions set by the pre-election budget frame these changes. First, the government <a href="https://theconversation.com/manifesto-check-conservatives-convince-on-cutting-the-deficit-but-the-price-may-be-growth-40255">pledged</a> – and has now <a href="https://theconversation.com/osborne-introduces-his-budget-surplus-law-but-he-may-have-a-hard-time-sticking-to-it-43090">legislated</a> – to have a surplus on total public expenditure by 2019-20. This pledge makes little sense. </p>
<p>There is no good economic rationale to insist on a total budget surplus. The old fiscal mandate was more sensible – balancing the current structural budget over five years. The new <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/442821/Charter_for_Budget_Responsibility_-_Summer_Budget_2015.pdf">Charter for Budget Responsibility law</a> treats borrowing to invest in infrastructure in the same way as borrowing to raise the prime minister’s salary. The graph below shows how little has changed in the overall fiscal stance since the July Budget – the chancellor is still aiming for a surplus of around £10 billion by 2019-20.</p>
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<p>The second pledge was that the deficit would be bridged by spending cuts rather than tax rises. This is over-hyped though. Osborne has quietly introduced a large number of “<a href="http://www.ft.com/cms/s/0/d6ddd676-936f-11e5-b190-291e94b77c8f.html#axzz3sVy1BymF">stealth taxes</a>”. The biggest is the apprenticeship levy (a whopping £3 billion a year), followed by stamp duty on buy-to-let homes (about £1 billion a year), a social care levy that could bring in another £2 billion and an end to the freeze on fuel duty levy (£2.3 billion). Altogether the OBR points out that this amounts to a net <a href="http://budgetresponsibility.org.uk/wordpress/docs/EFO-briefing-slides_November-2015.pdf">tax increase</a> of £6.5 billion a year by 2020-21. Increases of similar magnitudes were announced in the July budget.</p>
<p>These tax increases, coupled with the OBR’s more optimistic revenue projections, have given the chancellor greater room to slow the planned public spending cuts. The chart below shows how the public service cuts over the next four years have mellowed from the March to July budgets and now to the autumn statement.</p>
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<h2>Protecting what is ours?</h2>
<p>Although these pledges set the parameters for the overall fiscal envelope, together they only imply that public spending shrinks as a fraction of national income – real spending will still rise slightly. Welfare spending is actually pencilled in to have a considerable rise, driven by the government’s largesse to the Tory bloc vote – commonly known as pensioners. Factoring this in means only something like a 3% real cut across departmental spending over four years.</p>
<p>It is further choices that drive the scale of the cuts to specific departments. First, large parts of government expenditure are “protected” in real terms – the NHS, schools, overseas aid and now police and defence. Second, since public investment is due to increase by 11%, “day-to-day” spending must pick up the biggest falls. These choices explain why some departments are looking at such eye-watering cuts.</p>
<h2>More pragmatism, please</h2>
<p>The government won the general election on the back of the economy. It blamed the worst recovery in a century on Labour’s fiscal incontinence in the 2000s, despite the fact that the financial crisis was a global shock that had nothing to do with the small fiscal deficits <a href="https://theconversation.com/fact-check-did-labour-overspend-and-leave-a-deficit-that-was-out-of-control-41118">before the crisis</a>. Moreover, the chancellor argued that his unbending economic plan was working despite the fact that the deficit was not eliminated as promised in 2010, but remained at <a href="https://next.ft.com/content/9f242cd2-e337-11e4-aa97-00144feab7de">5% of national income</a>. And far from being inflexible, fiscal consolidation slackened considerably after the damaging consequences of austerity in the first half of the parliament.</p>
<p>The reversal of some of the public investment cuts and the recent announcement of an <a href="https://www.gov.uk/government/organisations/national-infrastructure-commission">Infrastructure Commission</a> are welcome developments. This kind of pragmatism is a good sign. I sincerely hope – and expect – that other unwise commitments are also jettisoned as economic reality intervenes over the next four years.</p><img src="https://counter.theconversation.com/content/51334/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Van Reenen receives funding from ESRC and is a member of the Labour Party.</span></em></p>Don’t let the u-turn on tax credits fool you, swingeing cuts remain the order of the day in Osborne’s bid to achieve a budget surplus.John Van Reenen, Director, Centre for Economic Performance, London School of Economics and Political ScienceLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/510632015-11-25T13:38:39Z2015-11-25T13:38:39ZSpending Review 2015: the experts respond<p>Chancellor George Osborne has set out government spending plans up to 2020. These involve big cuts to Whitehall and welfare, but also promises including a new phase of house building. Our experts from across the sectors give their thoughts on how the axe has fallen. For further updates on Twitter, follow <a href="https://twitter.com/ConversationUK?lang=en-gb">@ConversationUK</a>.</p>
<hr>
<h2>The Economy</h2>
<p><strong>Michael Kitson, lecturer in global macroeconomics, Cambridge Judge Business School</strong></p>
<p>The Autumn Statement was infused with the predictable disingenuous rhetoric masquerading as responsible economics supported by a selective and obfuscating ragbag of numbers. George Osborne preaches about “economic security” and the need for a “strong economy." But the economy is weaker and less secure because of his policies. </p>
<p>As the <a href="http://www.theguardian.com/business/2012/oct/13/imf-george-osborne-austerity-76bn">IMF has shown</a>, cuts in government spending weakens economies. The lesson from all competitive modern countries is that a strong economy requires a strong public sector: to produce the skills, the ideas and the infrastructure that fuel long-term prosperity.</p>
<p>Osborne talks about "rebuilding Britain” and says that the economy is “motoring ahead”, but he ignores that we have had the slowest economic recovery <a href="http://www.niesr.ac.uk/sites/default/files/gdp0514.pdf">since the industrial revolution</a>. The economy would have been more prosperous if he had buried his head in the sand and done absolutely nothing since being appointed in 2010.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"669500962357276672"}"></div></p>
<p>Yes a country has to “live within its means”. But that is not reflected in the budget deficit, but in the the balance of payments deficit, which shows whether the country spends more than it earns. And the UK does spend more than it earns. </p>
<p>The balance of payments deficit (on current account) widened to £92.9 billion in 2014 (5.1% of GDP) and the largest annual deficit <a href="http://www.ons.gov.uk/ons/dcp171776_420406.pdf">since records began in 1948</a>. So the deficit that matters has been ignored. </p>
<p>There is no plan to ensure that the country will live within its means: no plan for exports; no plan for productivity; no “march of the makers”. </p>
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<p><strong>Gareth Downing, senior lecturer in economics, strategy and marketing, University of Huddersfield</strong> </p>
<p>Osborne’s estimates are based on maintaining growth in the 2-2.5% region and tax revenues increasing accordingly. While <a href="http://www.bbc.co.uk/news/business-34922394">the latest figures</a> from the Office for Budget Responsibility (OBR) raise tax receipt forecasts, recent growth figures have taught us to be wary. Meeting the proposed debt and deficit targets will also require continuing with large and as yet unspecified cuts. </p>
<p>The sluggish global economy, suffering from a lack of demand, is not helping. Plus, monetary policy, despite years of zero interest rates as well as unconventional measures such as quantitative easing, is unable to generate a strong recovery. In this environment, government cuts merely compound the demand problem. </p>
<p>The only way out of this nightmare is to aim for robust economic growth that raises incomes sufficiently to increase tax revenues. Even if this means accepting higher debts in the near term.</p>
<p><strong>Alan Shipman, lecturer in economics, The Open University</strong></p>
<p>The chancellor’s ability to scrap the £4.4 billion tax credit cut, add another £18.7 billion to public net borrowing from 2016-17 to 2020-21 and still deliver a £10.1 billion surplus in 2019-20, is entirely due to the “£27 billion improvement in the underlying forecast” <a href="http://www.bbc.co.uk/news/business-34922394">provided by the OBR</a>. </p>
<p>So, as well as the still-large departmental and social service cuts to come, more attention will turn in the next few years to how the OBR is conducting its forecasts, and particularly why it has raised its revenue forecasts <a href="http://www.bbc.co.uk/news/business-34646496">when growth is slowing</a> and the <a href="http://blogs.ft.com/gavyndavies/2015/10/11/when-is-a-global-recession-not-a-recession/">chances of an outright recession are rising</a>. An unspecified boost comes from <a href="http://cdn.budgetresponsibility.independent.gov.uk/EFO_November__2015.pdf">“modelling changes to our NIC and VAT deductions forecasts”</a>.
If the OBR gets its forecasts seriously wrong, in a way that unduly favours the Treasury (and brings nasty surprises later), its credibility as an independent assessor will be seriously affected. The art and science of macroeconomic forecasting are now as much on trial as the chancellor’s political skills. </p>
<hr>
<h2>Housing</h2>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/103172/original/image-20151125-23825-32dvv9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/103172/original/image-20151125-23825-32dvv9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/103172/original/image-20151125-23825-32dvv9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/103172/original/image-20151125-23825-32dvv9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/103172/original/image-20151125-23825-32dvv9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/103172/original/image-20151125-23825-32dvv9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/103172/original/image-20151125-23825-32dvv9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Newbuild.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/762_photo/14471717462/in/photolist-o3Pkq3-oatbVY-nrhK6w-nryTNc-nDj4dq-6UN26J-nwdvgS-p4CcBa-rSm7FB-nVHbkL-nwdJho-nMXqu7-qVr2Xm-yugTPh-ocGcwP-oaQwfL-oaJM4Z-o3PkzG-o3Pkub-o3PkgL-o3PkgW-nYYR1G-kfbadM-wZgohg-o8uxm4-pvuq25-oUPV3H-pjdTSf-hW9cGy-jJrAk1-pvw8E6-nYYQTs-nTiEgc-nwdJvu-nwdxjk-nvvRT7-nMQxEG-nN1muD-o8MRMc-nRjjL6-o3Pkmq-nSMviv-oa96f7-nSMzQA-nSNd4B-6UMSC3-6UHy6p-pe1UAi-dVdYsy-dCPo5m">Captain Roger Fenton</a></span>
</figcaption>
</figure>
<p><strong>Vikki McCall, lecturer in social policy and housing, University of Stirling</strong> </p>
<p>The spending review <a href="http://www.bbc.co.uk/news/uk-politics-34915218">promises</a> to unveil “the biggest affordable housebuilding programme since the 1970s with a particular focus on the creation of 400,000 "affordable homes” by 2020. As a useful comparison, research in Scotland indicates the need for a minimum <a href="http://scotland.shelter.org.uk/professional_resources/policy_library/policy_library_folder/affordable_housing_need_-_final_report_september_2015">of 12,000 of these</a> over the next five years. </p>
<p>But there <a href="http://blog.shelter.org.uk/2015/08/what-is-affordable-housing/">is a question mark</a> around what “affordable” actually means and if this will be of any use to those with the greatest housing need. Affordable housing in the <a href="http://scotland.shelter.org.uk/professional_resources/policy_library/policy_library_folder/affordable_housing_need_-_final_report_september_2015">Scottish report</a>, for example, was categorised as:</p>
<blockquote>
<p>A broader category of housing tenures that includes social housing, but also a plethora of low-cost homeownership and mid-market rent schemes. </p>
</blockquote>
<p>The focus of the spending review, however, is very much on home ownership. For example, the housing budget is being doubled to £2 billion, the <a href="http://www.helptobuy.gov.uk/other-housing-options/shared-ownership">Help to Buy</a> shared ownership scheme is <a href="http://www.theguardian.com/politics/live/2015/nov/25/spending-review-george-osborne-autumn-statement-">being extended</a> and tenants of five housing associations will be able to exercise their right to buy. </p>
<p>A focus on low-cost homeownership has been shown to be <a href="http://extra.shu.ac.uk/ppp-online/promoting-homeownership-at-the-margins-the-experience-of-low-cost-homeownership-purchasers-in-regeneration-areas/">problematic</a>. And neglecting to invest in much needed social housing and changing how housing benefit is calculated by capping it at LHA rates will contribute to further pressure being put on existing, insufficient stock and tenants. This will, in turn, lead to further inequality throughout the UK.</p>
<hr>
<h2>Health</h2>
<p><strong>Karen Bloor, professor of health economics and policy, University of York</strong></p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/103219/original/image-20151125-23833-16kung9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/103219/original/image-20151125-23833-16kung9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=885&fit=crop&dpr=1 600w, https://images.theconversation.com/files/103219/original/image-20151125-23833-16kung9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=885&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/103219/original/image-20151125-23833-16kung9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=885&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/103219/original/image-20151125-23833-16kung9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1112&fit=crop&dpr=1 754w, https://images.theconversation.com/files/103219/original/image-20151125-23833-16kung9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1112&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/103219/original/image-20151125-23833-16kung9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1112&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">More money for clinical care.</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-234401896/stock-photo-pile-of-uk-pound-coins.html?src=tBMC3HsmxiSihalKhD8OlA-1-50">Pounds by Shutterstock</a></span>
</figcaption>
</figure>
<p>This year’s NHS funding settlement was more hotly anticipated than ever. The bottom line increase for NHS England – £3.8 billion above inflation for 2016-17 – sounds generous compared with other areas of government. Ring-fencing clinical care and “front-loading” a <a href="https://www.england.nhs.uk/wp-content/uploads/2014/10/5yfv-web.pdf">promised £8 billion</a> might just keep the NHS on the rails.</p>
<p>Or maybe not. Hospitals anticipate <a href="http://www.ntda.nhs.uk/blog/2015/11/20/challenging-environment-for-nhs-providers/">£2.2 billion</a> in deficits this year. And a seven-day NHS <a href="http://onlinelibrary.wiley.com/doi/10.1002/hec.3207/abstract">will cost hospitals</a> £1 billion-£1.5 billion a year, plus the same again <a href="http://www.pharmatimes.com/Article/15-09-11/7-day_GP_services_could_cost_government_billions.aspx">for primary care</a>. Together, these costs could soak up the new funds. </p>
<p><a href="https://theconversation.com/why-cutting-spending-on-public-health-is-a-false-economy-51159">Public health</a> and social care budgets are not protected, limiting capacity to prevent illness and care for vulnerable people outside hospitals. And 2% increases in council tax for social care will not make up for annual reductions of <a href="http://www.kingsfund.org.uk/blog/2015/11/social-care-future">2.2% since 2009</a>, which <a href="http://www.ifs.org.uk/uploads/publications/bns/BN166.pdf">hit deprived areas</a> hardest. Partly as a consequence, delayed discharges from NHS hospitals are <a href="http://qmr.kingsfund.org.uk/2015/17/">at their highest levels</a> since 2007.</p>
<p>Since 2010, the NHS has faced unprecedented spending constraints – an average annual budget increase of <a href="http://www.kingsfund.org.uk/blog/2015/10/nhs-spending-squeezed-never">just 0.84%</a>: a quarter of the overall average since the 1950s. Even with this settlement, the NHS must continue to increase productivity at a higher rate than it has managed <a href="http://www.kingsfund.org.uk/publications/nhs-productivity-challenge">throughout its history</a>.</p>
<iframe src="https://datawrapper.dwcdn.net/W7g8s/1/" frameborder="0" allowtransparency="true" allowfullscreen="allowfullscreen" webkitallowfullscreen="webkitallowfullscreen" mozallowfullscreen="mozallowfullscreen" oallowfullscreen="oallowfullscreen" msallowfullscreen="msallowfullscreen" width="100%" height="412"></iframe>
<hr>
<h2>Welfare</h2>
<p><strong>Susan Harkness, reader in social policy, University of Bath</strong></p>
<p>The reversal of the decision to cut tax credits provides welcome relief to the 3.3m families <a href="http://researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-7300">who would have been £1,300 a year worse off</a> next April. Yet, while the announcement is to be welcomed, the longer term outlook for low and middle income families remains worrying. </p>
<p>The reversal does not extend to the new system of Universal Credit (UC), which by 2018 will have replaced tax credits for most. And cuts to UC have not attracted the same level of opposition. As Patrick Wintour tweeted, these cuts were approved last week with just 12 MPs present. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"669499435479601152"}"></div></p>
<p>Other measures will, supposedly, compensate for these losses. The living wage and tax cuts will, it is claimed, help families as the UK moves from what the chancellor describes as a low wage, high welfare economy to one where all earn a decent wage. The living wage, <a href="http://www.social-policy.org.uk/lincoln/Bennett_Lister.pdf">as Ruth Lister has highlighted</a>, cannot take account of family responsibilities, however. Only the tax and benefit system can do this. </p>
<p>Yet the current government sees children as being the responsibility of parents – and from next year those who have a third child will not be entitled to additional benefits for that child. The state is increasingly withdrawing from supporting and taking responsibility for families with children. Today’s measures stall this process, but the longer term trajectory for low and middle income working families remains unchanged. </p>
<hr>
<h2>Education</h2>
<p><strong>Roger King, visiting professor, University of Bath</strong></p>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/103221/original/image-20151125-23861-7djjeb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/103221/original/image-20151125-23861-7djjeb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/103221/original/image-20151125-23861-7djjeb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/103221/original/image-20151125-23861-7djjeb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/103221/original/image-20151125-23861-7djjeb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/103221/original/image-20151125-23861-7djjeb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/103221/original/image-20151125-23861-7djjeb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Works for graduates.</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-290310605/stock-photo-graduates-stutents-throwing-graduation-hats-in-the-air.html?src=OpYCTPHIu7UJB5rGtF-m5w-1-5">Degrees by Shutterstock</a></span>
</figcaption>
</figure>
<p>With the 17% cut to the Department for Business, Innovation and Skills budget lower than feared thanks to a more optimistic economic outlook, higher education does not appear to have been badly treated in the spending review. </p>
<p>Science spending will continue to be protected – but this time in real, and <a href="http://www.theguardian.com/science/2010/oct/19/spending-review-science-budget-spared">not simply cash terms</a>, as it was under the coalition. Partly in return, there are likely to be savings made by reorganising the research councils under one body – Research UK – with Osborne indicating he will accept <a href="https://theconversation.com/research-funding-big-changes-on-the-horizon-leave-scientists-nervous-51057">the recommendations made</a> in the recent review by Paul Nurse, president of the Royal Society. </p>
<p>The second development concerns student finance and the inexorable rise of <a href="https://theconversation.com/scrapping-maintenance-grants-would-be-final-nail-in-coffin-of-publicly-funded-higher-education-43440">loans rather than grants</a> for students of all kinds. Student nurses will now be funded by loans rather than grants, so allowing a considerable increase in the numbers being trained and available for the NHS. Most welcome is the announcement that virtually all postgraduates will be eligible for the new student loan scheme, rather than just those under aged 30 as <a href="http://www.bbc.co.uk/news/education-30293964">was initially proposed</a>. </p>
<p>Perhaps most significant of all is that part-time students will also be eligible for maintenance loans. Part-time numbers have been <a href="https://theconversation.com/enrolments-slide-further-for-forgotten-part-time-undergraduates-36325">in desperate decline</a> recently despite access to tuition fee loan funding – this should help to reverse trends.</p>
<p>In <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/479749/52229_Blue_Book_PU1865_Web_Accessible.pdf">the small print</a>, the government also announced it would press ahead with the sale of the pre-2012 student loan book with a first sale expected in 2016-17.</p>
<p><strong>Anna Vignoles, professor of education, University of Cambridge</strong></p>
<p>It could have been worse for schools. The government has committed to protect school funding in real terms and to maintain the rate of <a href="https://www.gov.uk/guidance/pupil-premium-information-for-schools-and-alternative-provision-settings">the pupil premium</a> for disadvantaged students. And these commitments come with some protection of funding for 16 to 19-year-olds too. </p>
<p>As part of the government’s goal of abolishing the role of local authorities in the school system, <a href="https://www.gov.uk/government/news/department-for-business-innovation-and-skills-settlement-at-the-spending-review-2015">sixth-form colleges can now</a> also become academies and get a financial incentive to do so (they won’t have to pay VAT). </p>
<p>All this perhaps offers some financial reassurance to the sector. But, and this is a big but, there is still hardship ahead for schools. The most significant change in the long run is to <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/332652/Fairer_schools_funding_arrangements_for_2015_to_2016.pdf">the way schools are funded</a>, with the development of a new national school funding formula.</p>
<p>The aim of the new formula is to reduce differences in funding across schools. This will certainly cause big pain for some schools as their budgets are adjusted from 2017. The speed of adjustment to the national formula will determine how bad that pain will be, though clearly it would have been far worse if the overall schools budget had also been cut.</p>
<hr>
<h2>Policing</h2>
<p><strong>Sharon Gander, lecturer in policing, Nottingham Trent University</strong></p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/103222/original/image-20151125-23861-1dm1y9u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/103222/original/image-20151125-23861-1dm1y9u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/103222/original/image-20151125-23861-1dm1y9u.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/103222/original/image-20151125-23861-1dm1y9u.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/103222/original/image-20151125-23861-1dm1y9u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/103222/original/image-20151125-23861-1dm1y9u.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/103222/original/image-20151125-23861-1dm1y9u.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A red line that wasn’t crossed?</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/diversey/2498847226/in/photolist-4NPfdS-ehC6bi-2EUCVj-3JGBpw-7etQMJ-gxr1wi-kU2sPZ-5vV3fw-bknyWR-aZoGFi-aaAAsh-83fXyp-omtih2-7evTqS-3JGASU-a9BTfA-5XJ9E2-6peFH5-4pzUyZ-c7N9Lq-6Ju8rQ-cdnofq-8SwrwX-6JtVTp-nZa1oC-aDVhuK-pgTcE-5PvfbA-ph6NoJ-F3crz-914jCq-e4ydF-7cYGeq-adK5r5-92peGK-PG7Bd-uWLzE4-7L9epn-5H64X2-nE9ef1-9iKN9R-9heXJf-bhT99Z-5K8b5S-nfLraF-mPVDh-6o9NiC-c2VaCu-9rCepR-5QSAVa">Tony Webster</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>Police forces around the country will be sighing in relief, after the surprise announcement that there will be no real-term cuts to police budgets in England and Wales. In fact, spending is set to rise <a href="http://www.bbc.co.uk/news/uk-34922126">by £900m by 2020</a>.</p>
<p>Police forces will, of course, be expected to make efficiency savings by sharing resources, something that has been shown to work effectively in the past. For example, earlier this year Warwickshire and West Mercia Police <a href="https://westmercia.police.uk/article/6804/Strategic-alliance-agreed-by-Warwickshire-Police-and-West-Mercia-Police">began sharing</a> IT and training resources – and even responding to calls in each other’s localities – with great success.</p>
<p>Osborne has said that revisions to OBR forecasts have allowed him to spare some of the departments which seemed set for vigorous cuts. But the <a href="https://theconversation.com/paris-terror-attacks-france-now-faces-fight-against-fear-and-exclusion-50703">recent events in Paris</a>, and <a href="http://www.bbc.co.uk/news/uk-politics-34875077">stark warnings</a> from senior police officers may well have been playing on his mind.</p>
<hr>
<h2>Pensions</h2>
<p><strong>Jonquil Lowe, lecturer in personal finance, The Open University</strong></p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/103229/original/image-20151125-23816-1ynqx4x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/103229/original/image-20151125-23816-1ynqx4x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=900&fit=crop&dpr=1 600w, https://images.theconversation.com/files/103229/original/image-20151125-23816-1ynqx4x.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=900&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/103229/original/image-20151125-23816-1ynqx4x.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=900&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/103229/original/image-20151125-23816-1ynqx4x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1130&fit=crop&dpr=1 754w, https://images.theconversation.com/files/103229/original/image-20151125-23816-1ynqx4x.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1130&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/103229/original/image-20151125-23816-1ynqx4x.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1130&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A bit better off.</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-180853535/stock-photo-elderly-seniors-couple-in-love-man-hands-over-a-rose.html?src=XY5m5i9dnBCKyW7SspPq5w-1-93">Older age by Shutterstock</a></span>
</figcaption>
</figure>
<p>Pensioners in Osborne’s plans with a £3.35 a week increase in the basic state pension to £119.30 from next April. This is a 2.9% rise in line with average earnings, which have risen by more than price inflation or the 2.5% minimum promised under the <a href="http://citywire.co.uk/money/qanda-what-is-the-state-pension-triple-lock-guarantee/a686253">“triple lock”</a>. The new flat-rate state pension from April 2016 has been set at £155.65 a week. So pensions is one of the few (and largest) sections of the welfare budget to be protected.</p>
<p>The government is also set to promote a secondary annuity market which will allow people already drawing a pension to sell their income in exchange for a cash lump sum. Although this freedom may appeal to some, it is <a href="https://theconversation.com/osbornes-reforms-may-not-give-pensioners-the-freedom-they-seek-38861">fraught with problems</a> such as the risk of running out of money later in retirement. We’ll have to wait until December for further details.</p>
<p>As expected, the government has deferred any announcement on reforms to the way tax relief on pension savings is given until the March 2016 budget.</p>
<hr>
<h2>Scotland</h2>
<p><strong>David Bell, professor of economics, University of Stirling</strong></p>
<p>The Scottish government now knows what is will be able to spend up to 2020. Its budget will increase from £25.9 billion now to £26.5 billion in 2019-20. This small increase in money terms translates into a 5% real cut, resulting from the application of the much reviled <a href="http://www.bbc.co.uk/news/uk-29477233">Barnett formula</a>. The formula partly protects the Scottish budget, because a large proportion of Scotland’s spending is on health. In England, health spending will grow by 3.3% over this parliament and Scotland’s budget benefits from the “Barnet consequentials” of this increase. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/103239/original/image-20151125-23833-w8j37s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/103239/original/image-20151125-23833-w8j37s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=439&fit=crop&dpr=1 600w, https://images.theconversation.com/files/103239/original/image-20151125-23833-w8j37s.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=439&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/103239/original/image-20151125-23833-w8j37s.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=439&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/103239/original/image-20151125-23833-w8j37s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=552&fit=crop&dpr=1 754w, https://images.theconversation.com/files/103239/original/image-20151125-23833-w8j37s.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=552&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/103239/original/image-20151125-23833-w8j37s.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=552&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Scottish Parliament.</span>
<span class="attribution"><a class="source" href="https://en.wikipedia.org/wiki/Scottish_Parliament#/media/File:Debating_chamber,_Scottish_Parliament_(31-05-2006).jpg">Pschemp</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
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</figure>
<p>On the other hand, since Scotland also spends a considerable amount on transport, the overall cut of 37% to the English transport budget will tend to pull Scotland’s budget down. Overall, the 5% cut in spending in Scotland is in line with that in Northern Ireland and slightly above the 4.5% reduction in Wales.</p>
<p>This spending review will challenge the Scottish government to make good the loss in real terms government spending. It could do this by increasing the Scottish rate of income tax. Scottish finance secretary John Swinney will announce this rate when he sets the Scottish budget for 2016-17 next month. His decision will be awaited with interest.</p>
<hr>
<h2>Business</h2>
<p><strong>Nigel Driffield, professor in strategy and international business, University of Warwick</strong> </p>
<p>Osborne has confirmed that the uniform business rate is to be abolished, and that local councils across England and Wales will have the right to set their own rates. In effect, it will be up to councils to determine their own optimum tax rates. This will involve a trade off between the number of businesses attracted by lower rates, and the reduced revenues that lower rates will yield.</p>
<p>This will inevitably create a degree of competition between councils. But in practice, this will mean that better off councils – or those that can move the burden of lower business rates onto households or cut services – will <a href="https://theconversation.com/what-will-the-george-osborne-devolution-revolution-mean-for-local-councils-48689">attract businesses away</a> from less well off ones.</p>
<p>A levy on apprenticeships has also been introduced, leaving the UK’s biggest businesses with a <a href="http://www.bbc.co.uk/news/business-34923235">£3m wage bill</a>. While the headlines will focus on this cost to larger businesses, this is, in effect, asking them to contribute to training in the more vulnerable parts of their supply chains, which will be good for the economy in the long run.</p>
<hr>
<h2>Environment and energy</h2>
<p><strong>Steffen Böhm, professor in management and sustainability, University of Essex</strong></p>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/103238/original/image-20151125-23847-2hxc7o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/103238/original/image-20151125-23847-2hxc7o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/103238/original/image-20151125-23847-2hxc7o.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/103238/original/image-20151125-23847-2hxc7o.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/103238/original/image-20151125-23847-2hxc7o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/103238/original/image-20151125-23847-2hxc7o.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/103238/original/image-20151125-23847-2hxc7o.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Renewables under threat.</span>
<span class="attribution"><a class="source" href="http://www.geograph.org.uk/photo/3753339">Richard Humphrey</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
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<p>Today’s spending review has hit the Department of Energy & Climate Change (DECC) hard. It’s budget will fall by 22%, probably resulting in <a href="http://www.independent.co.uk/news/uk/politics/department-of-energy-and-climate-change-to-lose-200-jobs-a6734736.html">job cuts</a>, rumoured since the summer.</p>
<p>Support has <a href="http://www.theguardian.com/environment/2015/jul/24/the-9-green-policies-killed-off-by-tory-government">already been cut</a> for a range of green policies, including onshore wind, solar power and green homes. Now, we’re told that the <a href="https://www.ofgem.gov.uk/environmental-programmes/domestic-renewable-heat-incentive-domestic-rhi/about-domestic-rhi">Renewable Heat Incentive</a> will go the same way – watered down “to save £700m”. </p>
<p>Support for home energy efficiency will also be <a href="https://theconversation.com/the-government-hates-renewables-and-energy-consumers-will-pay-the-price-51076">significantly scaled back</a>. Although Osborne claims that this “will save an average of £30 a year from the energy bills of 24 million households”, the vast potential for further energy efficiency measures will be left unrealised. In fact, he’s removing the incentive for energy intensive industries to become more energy and carbon efficient, by exempting steel and chemicals from the cost of environmental tariffs. </p>
<p>DECC never had much room for manoeuvre. The vast majority of its budget is eaten up by the nation’s dirty nuclear and coal legacies, leaving little money for transforming the UK’s energy system. And guarantees Osborne has given to Chinese and French energy firms for expensive nuclear and gas energy were conveniently omitted from the spending review. </p>
<p>In the lead up to next week’s climate change summit in Paris, Osborne’s policies will make it extremely hard for the UK to stick to its carbon reduction and renewable energy commitments.</p><img src="https://counter.theconversation.com/content/51063/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Vikki McCall is affiliated with the Scottish Federation of Housing Associations and Parkhead Housing Association</span></em></p><p class="fine-print"><em><span>Anna Vignoles receives funding from a variety of government departments, including the Department for Education and BIS. She also receives funding from the ESRC and sits on the ESRC research committee, and is a trustee for the Nuffield Foundation</span></em></p><p class="fine-print"><em><span>Gareth Downing has received ESRC funding</span></em></p><p class="fine-print"><em><span>Karen Bloor receives research funding from the Department of Health Policy Research Programme</span></em></p><p class="fine-print"><em><span>Michael Kitson receives funding from the ESRC, EPSRC and AHRC</span></em></p><p class="fine-print"><em><span>Nigel Driffield receives funding from ESRC, Leverhulme Trust, OECD, UNCTAD, European Commission DG Regio. He is an inactive member of the labour party and a member of the UCU</span></em></p><p class="fine-print"><em><span>Roger King is affiliated with the Higher Education Commission and was co-chair of its inquiry, Regulating the new landscape of higher education. He is also chair of the board of governors at UK College of Business and Computing (UKCBC), an alternative provider</span></em></p><p class="fine-print"><em><span>Steffen Böhm has received funding from the British Academy, East of England Co-operative Society, Green Light Trust, Swedish Energy Agency and the ESRC
</span></em></p><p class="fine-print"><em><span>SH receives funding from the ESRC and the Nuffield Foundation </span></em></p><p class="fine-print"><em><span>Alan Shipman, David Bell, Jonquil Lowe, and Sharon Gander do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Chancellor George Osborne has laid out his plans for UK spending for the next five years.Vikki McCall, Lecturer in Social Policy and Housing, University of StirlingAlan Shipman, Lecturer in Economics, The Open UniversityAnna Vignoles, Professor of Education, Jesus College, University of CambridgeDavid Bell, Professor of Economics, University of StirlingGareth Downing, Senior Lecturer in Economics, Strategy, Marketing and Economics, University of HuddersfieldJonquil Lowe, Lecturer in Personal Finance, The Open UniversityKaren Bloor, Professor of Health Economics and Policy, University of YorkMichael Kitson, University Lecturer in Global Macroeconomics at Cambridge Judge Business School, University of CambridgeNigel Driffield, Professor of international business, Warwick Business School, University of WarwickRoger King, Visiting Professor, School of Management, University of BathSharon Gander, Lecturer in Policing, Nottingham Trent UniversitySteffen Böhm, Professor in Organisation & Sustainability, University of ExeterSusan Harkness, Reader in Social Policy, University of BathLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/511592015-11-25T13:29:06Z2015-11-25T13:29:06ZWhy cutting spending on public health is a false economy<figure><img src="https://images.theconversation.com/files/103068/original/image-20151124-18246-lld6de.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">George Osborne</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/altogetherfool/3542341781/in/photolist-6p2qNi-awAzW8-7aBTrs-6p2qB8-6p6z25-CCRWd-nXYQbh-6p6xWm-79M7Gi-dmmKFW-7ay54T-hiuEa6-mTYY8B-6p6vos-CCQPm-8SjXbE-7aBTos-79M7PF-7Ydrm1-7Ydrj7-7ay5en-8KHuzh-osm3X4-8RRo5b-xCH7ae-7QHnVV-edu6sX-7RRBfe-6p6wPC-oqvdfP-nX7sC6-dev7GZ-pt3Tzi-5BkMTc-pJnZP6-7QHnGi-xmddHn-bLvHgx-8SgQa5-bxB1Zs-suLv2Z-79APv9-deyvp5-aAU5wB-bCTJAT-79QXUq-dXe6Wo-79APuY-xm6DR3-xmdg1t">altogetherfool/flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>Public health spending is <a href="https://www.gov.uk/government/topical-events/autumn-statement-and-spending-review-2015">under threat</a>. This despite the fact that increasing investment in prevention is the foundation of a sustainable NHS. Cutting these budgets is alarmingly short-termist and indicates a fundamental failure of the government to understand the changing nature of health and disease in the UK.</p>
<p>Responding to calls from health leaders, Chancellor George Osborne announced a <a href="http://www.bbc.co.uk/news/health-34905801">£3.8 billion</a> cash injection for the NHS. Well, it’s not really for the NHS, just the parts that deal with sick patients, like the <a href="https://theconversation.com/uk/topics/aande-crisis">squeezed A&E departments</a> that face a grim winter. </p>
<p>On the face of it this may make sense. Spiralling demand for drugs, appointments and operations seems much more pressing than funding vaccinations, sexual health services, screening and health visits. However, attention to the latter is the only way to deal definitively with the former.</p>
<h2>What’s driving the funding gap?</h2>
<p>Keeping Britain healthy is becoming more expensive. In his <a href="https://www.england.nhs.uk/wp-content/uploads/2014/10/5yfv-web.pdf">2014 manifesto</a> for the future health service, NHS chief executive Simon Stevens noted the increasing prevalence of long-term conditions such as diabetes, heart disease, cancer and dementia. These chronic diseases can’t be cured with a one-off prescription and need expensive, often life-long treatment. </p>
<p>Rising <a href="http://www.nhs.uk/livewell/loseweight/pages/statistics-and-causes-of-the-obesity-epidemic-in-the-uk.aspx">rates of obesity</a>, an unhealthy national relationship with <a href="https://www.alcoholconcern.org.uk/help-and-advice/statistics-on-alcohol/">alcohol</a> and <a href="http://news.bbc.co.uk/1/hi/health/2707143.stm">fast food</a>, and <a href="http://opus.bath.ac.uk/33179/">obstinate pockets</a> of tobacco use are combining with rising life expectancy to exert huge pressures on existing health services. And the constant development of expensive new drugs and medical technologies exacerbates the financial burden facing the NHS. </p>
<p>Our population is ageing, sedentary, boozy, increasingly obese and guaranteed access to free healthcare. English NHS trusts have racked up an unprecedented deficit of <a href="http://www.bbc.co.uk/news/health-34353408">£930m</a> in the first quarter and Stevens identified an annual funding gap of £30 billion by 2020.</p>
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<img alt="" src="https://images.theconversation.com/files/103067/original/image-20151124-18246-1qm37jo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/103067/original/image-20151124-18246-1qm37jo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/103067/original/image-20151124-18246-1qm37jo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/103067/original/image-20151124-18246-1qm37jo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/103067/original/image-20151124-18246-1qm37jo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/103067/original/image-20151124-18246-1qm37jo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/103067/original/image-20151124-18246-1qm37jo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Don’t worry. The NHS will patch you up.</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/cat.mhtml?lang=en&language=en&ref_site=photo&search_source=search_form&version=llv1&anyorall=all&safesearch=1&use_local_boost=1&autocomplete_id=&search_tracking_id=dUPLrXoSQF1XJqhLFzjQCA&searchterm=obese&show_color_wheel=1&orient=&commercial_ok=&media_type=images&search_cat=&searchtermx=&photographer_name=&people_gender=&people_age=&people_ethnicity=&people_number=&color=&page=1&inline=268307699">www.shutterstock.com</a></span>
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<h2>It wasn’t always like this</h2>
<p>When Aneurin Bevan founded the NHS in 1948, spending amounted to 3.5% of GDP. Bevan believed the bill would fall as the population became healthier. However, a rising demand for health services and the increasing scope of modern medicine led to a <a href="http://www.nhshistory.net/parlymoney.pdf">tenfold increase</a> in real terms by 2010-11. Despite the meteoric rise of healthcare spending, especially during Tony Blair’s term in office, the UK still spends less than the <a href="http://www.kingsfund.org.uk/projects/nhs-in-a-nutshell/health-care-spending-compared">OECD average</a> on health. </p>
<p>While other countries may envy our impressive <a href="http://www.commonwealthfund.org/%7E/media/files/publications/fund-report/2014/jun/1755_davis_mirror_mirror_2014.pdf">bang-for-buck</a>, the NHS performance is <a href="http://www.keepeek.com/Digital-Asset-Management/oecd/social-issues-migration-health/health-at-a-glance-2015_health_glance-2015-en#page4">mediocre</a> and <a href="http://www.economist.com/news/britain/21678827-government-under-fire-not-just-junior-doctors-health-economists">economists argue</a> that we do not spend enough on health. </p>
<p>Since 2010 the budget has grown by a paltry 0.8% a year, and the amount we spend on health is <a href="http://www.nuffieldtrust.org.uk/blog/are-wheels-finally-coming-nhs-finances">actually falling</a> as a proportion of GDP making the UK an anomaly in the developed world.</p>
<h2>Redrawing the boundaries</h2>
<p>In <a href="https://www.england.nhs.uk/wp-content/uploads/2014/10/5yfv-web.pdf">his report</a> Stevens claimed that the NHS could achieve efficiency savings of £22 billion per year and asked the government to make up the annual £8 billion shortfall. The chancellor has promised to ring-fence NHS spending as well as meeting this ambitious target. Then there was the announcement of the £3.8bn cash injection for next year’s NHS budget. So far so good. </p>
<p>The money does have to come from somewhere, though, and Osborne is redrawing the boundaries of the NHS - excluding public health and other areas like staff training. Controlling the unwieldy NHS budget is a priority for the chancellor who is hoping to lead the Tories to victory in 2020 based on his delivery of an overall £10 billion surplus. </p>
<h2>A penny of prevention</h2>
<p>However, amid these competing economic and political priorities the Treasury is considering <a href="http://www.bbc.co.uk/news/health-34878350">additional cuts</a> to public health funding. This would save money now but massively increase the NHS bill further down the line.</p>
<p>Prevention is better than cure, and much much cheaper. Immunisations that cost pounds prevent diseases that can lead to hospital admissions costing tens of thousands. <a href="http://www.ncsct.co.uk/usr/pub/the-effectiveness-of-nhs-smoking-cessation-service-systematic-review.pdf">Smoking cessation services</a> help to prevent cancers, <a href="http://www.fph.org.uk/uploads/ps_alcohol.pdf">alcohol services</a> reduce antisocial behaviour and a wide range of <a href="http://www.who.int/mediacentre/factsheets/fs349/en/">health conditions</a> and promoting breastfeeding reduces <a href="http://www.who.int/elena/titles/bbc/breastfeeding_childhood_obesity/en/">obesity rates</a> and <a href="http://www.cancerresearchuk.org/about-cancer/type/breast-cancer/about/risks/breast-cancer-protective-factors">cancer</a>. Free condoms prevent teenage pregnancies and <a href="http://www.cdc.gov/hiv/prevention/programs/condoms/">HIV</a>. Health promotion raises levels of <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/366113/Evidence_layout_23_Oct.pdf">physical activity</a> and <a href="http://www.who.int/healthpromotion/conferences/previous/ottawa/en/">stops people becoming ill in the first place</a>. The list goes on. </p>
<p>Each penny spent on prevention reduces demand for expensive services in the future and saves the NHS considerable sums of money. The current NHS model relies on treating people when they are ill. Our ageing population, susceptibility to chronic diseases and plethora of expensive treatments make this approach unsustainable. </p>
<p>A significant move towards prevention, already boosted by Stevens and colleagues, is the only way that the NHS can continue to function given our current funding constraints. It should come as no surprise that £200m of cuts to local public health budgets earlier this year were met with incredulity from <a href="http://www.fph.org.uk/leading_organisations_call_on_chancellor_to_reverse_public_health_cuts_to_public_health_budget">royal colleges</a>, <a href="http://www.kingsfund.org.uk/blog/2015/08/cuts-public-health-spending-falsest-false-economies">thinktanks</a> and <a href="http://www.theguardian.com/society/2015/sep/02/public-health-cut-osborne-nhs">NHS executives</a>. This relatively minor cutback was estimated to cost the NHS £1 billion in the long run. </p>
<h2>Don’t chop out what we need</h2>
<p>Public health benefits are difficult to quantify because they often occur many years into the future and there are often no identifiable beneficiaries. The result of an effective immunisation campaign is the lack of disease in a population. It is impossible to tell who would have developed diphtheria or meningitis if they hadn’t been vaccinated. </p>
<p>Investing in public health is also hard for governments because the benefits accrue to their successors and there is little to show for spending at the end of the five-year election cycle.</p>
<p>Politicians may struggle with these intangible future benefits but such investment is absolutely fundamental to the sustainability of our health service. With <a href="http://www.kingsfund.org.uk/blog/2015/08/cuts-public-health-spending-falsest-false-economies">The Kings Fund</a>, the <a href="http://www.nuffieldtrust.org.uk/blog/%C2%A3200m-cuts-public-health-situation-getting-serious">Nuffield Trust</a>, the <a href="http://www.local.gov.uk/documents/10180/11493/Money+well+spent+-+Assessing+the+cost+effectiveness+and+return+on+investment+of+public+service+interventions/25c68e94-ff2c-4938-a41c-32853b4d4a9d">Local Government Association</a>, Stevens and even health secretary <a href="http://www.kingsfund.org.uk/audio-video/jeremy-hunt-supporting-nhs-make-continuous-improvement">Jeremy Hunt</a> all aligned behind the necessity of increasing the proportion of health spending in this area, it is hard to believe that the government is completely unaware of the impact of postulated further cuts.</p>
<p>The Conservatives have emphasised their commitment not just to funding the NHS through hard times, but to the ideal of running a world-class healthcare system. Short-termism does not belong here. Cutting public health funding would be an act of self-mutilation. If controlling spiralling demand is the priority, for goodness sake don’t cut public health.</p><img src="https://counter.theconversation.com/content/51159/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Luke Allen is affiliated with the Young Professionals Chronic Disease Network, intermittently works for the WHO and is currently employed by a public health oriented research unit.</span></em></p>Treating the sick is not sustainable. We need to stop them getting sick in the first place. So why is the government cutting public health budgets?Luke Allen, Researcher, Global Health Policy, University of OxfordLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/511542015-11-24T10:56:50Z2015-11-24T10:56:50ZWhat you need to know ahead of the spending review<p>The third major economic statement of the year will be surprisingly tough for a government now boasting a growing economy and a Commons majority. Chancellor of the exchequer George Osborne will deliver the details of the Autumn Statement and spending review on Wednesday November 25. A five-year view of the government’s spending plans, it will outline how £4 trillion of taxes will be spent across different departments.</p>
<p>The <a href="http://www.digitallook.com/news/news-and-announcements--/chancellor-says-no-public-service-will-be-ruled-out-of-spending-review--938335.html">pledge</a> to increase counter-terrorism spending by 30% in the aftermath of the Paris attacks highlights the contradictory strains on the chancellor. Health, education, defence and overseas aid are ring-fenced. But everything else is “unprotected” and vulnerable to cuts. This includes police budgets, which <a href="http://www.theguardian.com/uk-news/2015/nov/22/muslim-group-warns-police-cuts-will-harm-trust-with-communities">could be reduced by 25%</a>. </p>
<p>The Chancellor’s strategy for reining in the UK’s fiscal deficit, prioritising public spending cuts over tax increases, reflects a conservative view that governments should have less to do as societies get richer. But the reality has been less exchequer-friendly. </p>
<p>While higher GDP per capita should in principle leave people better able to buy what they need, a stubbornly large minority still needs (or expects) public help to pay for basic services. This is because the cost of services – from <a href="http://www.theguardian.com/money/2015/jul/22/pwc-report-generation-rent-to-grow-over-next-decade">housing</a> to <a href="http://orr.gov.uk/__data/assets/pdf_file/0006/17880/rail-fares-index-jan-2015.pdf">transport</a>, <a href="http://www.nuffieldtrust.org.uk/media-centre/press-releases/rising-costs-and-flat-economic-growth-set-prolong-nhs-financial-squeeze-">healthcare</a> and <a href="http://www.theguardian.com/higher-education-network/2015/jul/08/maintenance-grants-scrapped-and-tuition-fees-to-increase-your-reaction-budget-2015">higher education</a> – has kept pace with average incomes, or even exceeded them.</p>
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<img alt="" src="https://images.theconversation.com/files/102895/original/image-20151123-18261-13rb4i2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/102895/original/image-20151123-18261-13rb4i2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/102895/original/image-20151123-18261-13rb4i2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/102895/original/image-20151123-18261-13rb4i2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/102895/original/image-20151123-18261-13rb4i2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/102895/original/image-20151123-18261-13rb4i2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/102895/original/image-20151123-18261-13rb4i2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The cost of housing has been going up and up.</span>
<span class="attribution"><span class="source">shutterstock.com</span></span>
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</figure>
<p>Plus the uneven spread of GDP has left a substantial proportion of households still <a href="https://www.moneyadviceservice.org.uk/en/corporate/indebted-lives-the-complexities-of-life-in-debt-press-office">in need of a public safety-net</a>. Without it, even small rises in living costs or interruptions to income <a href="https://www.moneyadviceservice.org.uk/en/corporate/indebted-lives-the-complexities-of-life-in-debt-press-office">could push them over a financial cliff</a>. </p>
<p>The difficulty in getting the state to pay less explains why Osborne has achieved only a modest decrease in public spending, <a href="http://www.tradingeconomics.com/united-kingdom/government-spending-to-gdp">from 48% to 44% of GDP</a> since 2010 – returning to levels before the <a href="http://www.policyexchange.org.uk/images/publications/controlling%20public%20spending%20-%20jun%2009.pdf">2008-9 financial crisis interventions</a>, despite the much-flagged austerity measures of 2010-15. </p>
<p>The pain it would bring many low-income households was forcing a re-think of this year’s cuts to tax credits even before the motion was <a href="http://www.bbc.co.uk/news/uk-politics-34631156">defeated in the House of Lords</a>. And escalating housing costs are one reason why Osborne will struggle to save much from the <a href="http://www.independent.co.uk/news/uk/politics/generalelection/housing-benefit-bill-rose-by-24-billion-under-coalition-as-labour-claim-new-homes-needed-10108977.html">equally costly housing benefit bill</a>. </p>
<p>The <a href="http://www.bbc.co.uk/news/uk-34897076">jump</a> in national security costs is another reminder that some services are inescapably public – and expensive. Ironically, an opposition party <a href="http://www.newstatesman.com/politics/2015/05/guys-who-crashed-car-why-labour-still-mess-over-spending">criticised for spending too much</a> in the years before 2010 is now <a href="http://www.dailymail.co.uk/news/article-3221543/Tories-throw-Labour-leadership-election-bid-wipe-party-says-leadership-hopeful-Liz-Kendall-final-TV-debate.html">pilloried</a> for being less than keen to splash more cash on defence. </p>
<h2>Out of balance</h2>
<p>There’s a second major reason why the fiscal deficit has been hard to reduce. The public sector will inevitably be in deficit at times when the country is importing more than it can export (running a current account deficit) and when the private sector is <a href="http://www.concertedaction.com/2012/07/19/martin-wolf-on-wynne-godleys-sectoral-financial-balances-approach/">investing less than it saves</a>. </p>
<p>Over the past five years the UK has continued to run its <a href="http://www.economist.com/news/britain/21674792-how-worrying-britains-large-current-account-deficit-other-deficit">traditional current account deficit</a>, and private investment has only belatedly started to recover <a href="http://www.ons.gov.uk/ons/dcp171778_418010.pdf">from its post-crisis slump</a>. Meanwhile, the amount that companies are stockpiling on their balance sheets <a href="http://www.ft.com/cms/s/0/385c0e8a-cd6f-11e4-9144-00144feab7de.html#axzz3sJutbb2i">is on the up</a>. So unless investors or exporters pick up their game in the next four years, the deficit is unlikely to close even if Osborne finds another source for the £4.6 billion annual savings he sought from tax credits. </p>
<p>Many of the Chancellor’s recent moves are designed to shift these adverse sector balances, particularly by lifting investment back above saving – getting the private sector to run deficits so that the government doesn’t have to. Expect more lines on Wednesday to be taken from the <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/34648/12-1213-no-stone-unturned-in-pursuit-of-growth.pdf">2012 Heseltine Report</a>, which demanded “decisive government leadership for major infrastructure projects” and “effective public sector procurement” to support industry and innovation, gently informing the Chancellor that corporation tax cuts were not enough. </p>
<p>Expect, too, some appeals to “abnormal times” to stave off Osborne’s own fiscal charter, which would <a href="http://www.niesr.ac.uk/blog/george-osborne-committing-wrong-target#.VlMMdnbhDIU">restrict public borrowing</a> to fund investment. The government has also been keen to pursue the “pensions revolution” launched by its former coalition partners – not least because longer-lived pensioners are now <a href="http://www.expressandstar.com/business/uk-money/2015/11/03/pension-freedoms-retirees-could-run-out-of-funds-in-10-years/">likely to spend the money more quickly</a>.</p>
<p>Pensioners have long been the social group most likely to force chancellors into early retirement. The state pension, which takes up 42% of the benefits bill, remains carefully protected, while the Treasury looks for savings from working households whose tax credits absorb <a href="http://election2015.ifs.org.uk/benefits">less than 14%</a>. </p>
<p>The government has been painfully aware for some time that the ability of richer households (working and retired) and profitable businesses <a href="http://www.centreforwelfarereform.org/library/by-az/who-really-benefits-from-welfare.html">to garner additional state support</a> is one reason the welfare bill keeps rising. But tougher means-testing risks squeezing many households <a href="http://www.dailymail.co.uk/news/article-3098430/2-5million-middle-class-families-face-losing-child-benefit.html">that don’t consider themselves affluent</a>. And such tests are hard to devise without restoring poverty traps that deter additional paid work – a problem already threatening incentives under the <a href="https://www.jrf.org.uk/press/universal-credit-could-trap-people-poverty-new-jrf-report-finds">new Universal Credit</a> system of welfare provision. </p>
<p>Chancellors battling these pressures used to find an improved growth forecast or better tax projection to rescue their arithmetic. After October’s borrowing requirement <a href="http://uk.reuters.com/article/2015/11/20/uk-britain-borrowing-idUKKCN0T90Z920151120">reached a six-year high</a>, the Office for Budget Responsibility may find it harder to oblige this time.</p><img src="https://counter.theconversation.com/content/51154/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alan Shipman does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>As the UK government delivers its spending plans for the next five years, here’s why a number of controversial cuts are on the cards.Alan Shipman, Lecturer in Economics, The Open UniversityLicensed as Creative Commons – attribution, no derivatives.