For all those who haven't been glued to Parliament's live feed
for the past two hours, here's a round-up of the proposed cuts and
the implications for UK businesses in George Osborne's
Comprehensive Spending Review (CSR).
This was the moment we've all been waiting for, the moment when
George Osborne outlined the public sector cuts and reallocation of
spending that would bring UK plc back from the brink of bankruptcy.
And Osborne, Cameron, Clegg et al weren't pulling any punches.
"Today is the day when Britain steps back from the brink," began
Osborne. "The day we confront the bills from a decade of debt. I
will outline a four-year plan to put our public services on a
"It is a hard road but it leads to a better future. It will
bring years of ever-rising borrowing to an end. It will ensure what
we buy only what we can afford and that we do not saddle our
children with the cost of the interest on the interest on the
interest that we were not prepared to pay ourselves."
It's rabble-rousing stuff and, indeed, the rabble was frequently
roused. The Speaker of the House was forced to chastise the
over-excited politicians at several points during Osborne's
The 2010 Spending Review attempts to fulfil a number of
objectives: to reduce the deficit; minimise public spending,
especially on internal administration; protect the NHS, "the
embodiment of fair society"; and foster economic growth -
especially in the areas of science, technology, green industry, and
education and skills.
"We have largest structural budget deficit in world," said
Osborne. "We're currently paying £120m a day, that's over £40bn a
year in debt interest. This money would better serve our citizens
than the foreign creditors we borrowed from."
"The Comprehensive Spending Review has given us the first clear
idea of just how bad the structural deficit is," says Beatrice
Bartley, managing director of staffing and recruitment agency 2B
Interface. "It is staggering that we are now paying over £44bn a
year in debt interest alone. However, if the Coalition is serious
about its spending plans then the good news is that the structural
deficit itself will be eliminated by 2015. This is ambitious but it
will keep the UK on a firm financial footing, gain the confidence
of the international financial community and ensure that we are not
confronted by a Greek-style nightmare."
To achieve the aim of clearing the structural deficit, Osborne
has announced savings of £6bn by slashing resources in government
departments: £3bn more than originally proposed. "We are squeezing
every last penny out of waste and administration costs," says
Osborne. "Administrative costs for every government department will
be cut by a third."
Osborne is also aiming to reduce headcount in the public sector
by 490,000 jobs over the next four years. QUANGOs across the board
have been scrapped and every government department will have to
present a business plan next month to highlight future savings.
Jonathan Elliott, MD of business price comparison service Make
It Cheaper, has mixed feelings about the sweeping cuts. "On the
plus side, protection for community Post Offices is good news for
rural businesses," he says. "But on the minus side, the QUANGOs to
be abolished include Consumer Focus and Consumer Direct which is
bad news for SMEs when it comes to getting a fair deal on utilities
such as gas and electricity."
Alastair Luff, managing director at ABM, a specialist provider
of intelligence, investigation and criminal justice software
solutions, says: "Significant budget cuts across the public sector
will result in a very different landscape to that we have enjoyed
previously and will no doubt have an effect on the private
sector. There will undoubtedly be tough negotiations between
these two sectors on grounds of cost and service levels."
And Osborne's ambitious plans stretch beyond our shores. The
Chancellor has pledged to help UK businesses up their export game,
and means to "attract significant overseas investment, in
partnership with the UKTI". In order to make Britain a great place
to do business, several projects are going ahead: Crossrail is
alive and kicking, as are plans to further upgrade the tube network
"The positive news in the CSR is the continued commitment to
major capital investment projects," says 2B Interface's Bartley.
"And this is not just about Crossrail, it is about a host of new
schemes throughout the UK costing some £30 billion. For our
global competitive position infrastructure projects such as those
outlined by the Chancellor will be critical in maintaining our
global position and prepare us for the eventual upturn."
Next, Osborne moved onto the issue of the banks, drawing boos
and catcalls from the crowd. "I understand the public anger that
the banks, which were appallingly regulated over past years, and
caused so much damage to the economy, are now contemplating huge
bonuses," he said.
"Our objective in taxing banks is clear. We don't want to let
them off too easily or drive them abroad. Our aim will be to
extract the maximum sustainable tax revenues from financial
This proposal involves a permanent levy on the banks, to be
decided by the BoE. A press release from the British Bankers
Association illustrated the industry's reaction to the levy: "Banks
fully understand they have a role to play in the UK's economic
recovery. The permanent levy on banks was previously announced and
was, therefore, not unexpected. We clearly need to see the full
detail of today's announcements to be able to assess their impact
on the UK banking sector and our attractiveness as a global
"Decisions taken today will have an effect on the whole industry
and to remain competitive UK policies need to be in step with those
elsewhere. Financial services currently contribute around £24bn in
taxes every year so we are pleased the Chancellor said he wishes to
balance taxation with the attractiveness of the UK as a global
financial centre and the need to retain jobs. "
In addition to making sure the banks pay their dues, Osborne is
going after much smaller prey. The government will be investing
some £900m on chasing tax evaders. "This will recoup £7bn in lost
revenues," says Osborne. "We will also step up the fight to catch
benefit cheats: £ 5bn a year is lost through benefit fraud."
There will also be significant cuts to the welfare budget.
Osborne has announced £7bn will be generated by implementing a cap
on benefits and a single child benefit scheme. "It takes 16 working
family's tax bills to fund one out of work family," he said. "From
now on, no family that doesn't work will receive more in benefits
that those families who do work."
Osborne also announced plans for a green investment bank. The
government will kick-start the initiative with a £1bn cash
injection but the Chancellor hopes that private investment will
help the fund to grow.
But, for Helen Holland, founder and CEO of the London-based
Reptile Group, there was a conspicuous lack of information from
Osborne on how existing banks were to be encouraged to help small
businesses: "What we are seeing is a painful but necessary
re-adjustment to the realities of our economy after 13 years of
Labour mismanagement and out-of-control borrowing and spending,"
she says. "The key issue now is to grow the private sector to
re-balance the economy but this won't happen unless the banks start
lending to small businesses which it is very, very clear they
are not. The government should take steps to ensure that they
One item in Osborne's speech will be music to the ears of SMEs,
however: renewed support for the national apprenticeship scheme.
The government wants to create 75,000 more apprentices a year
through investing in training and skills.
Simon Lawrence, CEO and founder of Information Arts, says wryly:
"I welcome the increased focus on apprenticeships - that will be
needed as some school leavers won't now be going to university
because of the increase in fees."
Lawrence also supports the increase in retirement age:
"Personally I think we are losing a great deal of experience
unnecessarily by having a retirement age of 65 - particularly where
individuals want to continue to work."
Osborne finished his lengthy speech with a short but pithy
statement: "The decisions we have taken today bring sanity to our
public finances." The chancellor was clearly running out of breath
but finished on a high, saving one nugget for last. "Instead of the
planned 25 per cent cuts to government departments, we are only
asking for 19 per cent." The house erupted in applause. It was a
savvy final hurrah for the Chancellor, who capitalised on the
House's goodwill to add: "I look forward to your votes."
This brought Osborne's 2010 Comprehensive Spending Review to an
end. But the devil's in the detail. Whether these cuts will truly
deliver results, without damaging UK plc, remains to be seen.