Chief secretary to the Treasury David Laws has today ordered that all spending approvals since 1 January this year be reviewed and resubmitted to the Treasury.
Contractors said programmes such as the £285M Managed Motorways programme and the £100M investment to tackle potholes - both announced in the last Budget in March - looked particularly vulnerable.
The move is part of the new coalition government’s stated intention to make £6bn of spending cuts this year.
Laws said that detailed work has already been undertaken on where the cuts will fall and how they will be delivered. Over the next week he will meet with secretaries of state to agree how their departments will contribute. The detail will be set out next Monday.
Laws has also ordered secretaries of state to re-examine all spending approvals since 1 January this year and all pilot schemes under development. Proposals that required Treasury approvals will have to be resubmitted to the Treasury.
Where projects are good value for money and consistent with the Government’s priorities, they will go ahead, he said. Where they are not, it would be irresponsible to waste money on them. There is no point in continuing pilot schemes where they are too costly to implement, he added.
“The chancellor George Osborne and I are united in our resolve to deal urgently and decisively with the unacceptable state of our public finances,” he said. “It is both possible and necessary to start taking action this year.
“By making an early downpayment we are not only helping to reduce the deficit faster, we’re sending a clear and strong message that we intend to do what’s needed to repair our public finances and get our economy moving again. We can make these cuts while protecting the quality of key frontline services.”
Laws said the Government is satisfied the £6bn savings can be taken out of budgets this year without affecting the quality of priority frontline services to the public. There will be savings from cutting back on lower priority programmes, but beyond these, secretaries of state will guarantee that savings are implemented in a way that does not affect the quality of public services.
Wales, Scotland and Northern Ireland will be given the option of deferring their fair contributions to this year’s savings until next year, in recognition of the fact that the devolved legislatures have already approved spending plans for the current year. But these savings will still be made.
The Civil Engineering Contractors Association said there were no surprises in the announcement, but stressed the need to balance short-term spending cuts to address the deficit with the long-term need to ensure investment in infrastructure.
“Given the manifesto commitments made by the Conservative Party and the subsequent coalition agreement, cuts should come as no surprise. We are pleased the Government is taking seriously our call to provide the country with early direction on our economic future. However, there is a need to balance the need to reduce the deficit with the need to invest in infrastructure, which will play a key role in the delivery of a sustainable, low carbon economic recovery,” said CECA national director Rosemary Beales.
Chancellor George Osborne has also announced that Sir Alan Budd will chair a new Office for Budget Responsibility (OBR), established on an interim basis today, to assess the state of the public finances. Budd is a prominent economist who was a founding member of the Bank of England’s Monetary Policy Committee in 1997.
The OBR will make an independent assessment of the public finances and the economy for the emergency Budget, to be announced on 22 June. For the first time, the forecasts will not be determined by the chancellor’s judgements; the chancellor will accept the forecasts from the OBR for the Budget and Pre-Budget report. The independence of the OBR’s judgements will ensure that policy is made on an unbiased view of future prospects, improving confidence in the fiscal forecasts.
The OBR has also been instructed to assess the cost of outstanding PFI contracts.