So-called ‘unprotected' Whitehall departments face further budget tightening despite a pledge in the Autumn Statement to increase public sector productivity.
The Office for Budget Responsibility's fiscal outlook published today says ‘it is mainly due to the Chancellor's decision to leave departmental spending broadly unchanged' that borrowing is reduced by £27bn in 2027/28 compared to its March forecast.
The OBR estimates that day-to-day spending in departments which are not protected like health and care, education, defence and international development would need to fall by 2.3% a year in real terms from 2025/6 after the end of the current Spending Review to meet current forecasts. The OBR says this would ‘present challenges' and mentions the 11 s114 notices issued by councils as an example of ‘signs of strain.'
It adds that use by councils of current reserves for current spending increased by £2.3bn in 2022/23 for the first time since 2019-20 and predicts that ‘there will be further drawdowns during the current Spending Review period, of £1.5bn in 2023/24 and £0.8bn in 2024/25 ‘compared to an assumption of no drawdown in both years in our March forecast.'
The OBR says that ‘delivering these spending plans while maintaining or improving public services would require significant improvements in public sector productivity.'
The Autumn Statement says that ‘the government has therefore driven even greater efficiencies than those assumed at Spending Review 2021 to manage down these pressures and ensure departments can live within their settlements and deliver the service outcomes the public expect.'
Cllr Sir Stephen Houghton, Chair of the Special Interest Group of Municipal Authorities (SIGOMA) said: ‘With a 1% rise in spending on public services set for the coming years, unprotected departments like local government will face another round of damaging austerity, following the decade of cuts since 2010.'
