One week to go, and hard work still remains for the Chancellor

The Department for Energy and Climate Change has a Conservative Secretary of State for the first time in its history. Amber Rudd, formerly George Osborne’s PPS, has used the timing of the Spending Review to reorient the department: an “energy reset” speech, due tomorrow, is timed to turn today’s settlement into a new, post-Coalition energy policy. Rudd has created the mood music by a series of announcements over the summer designed to reduce subsidies to renewable electricity generators, though because these are funded through a levy on consumer bills (rather than taxation) they are not implicated in the Spending Review. The department has pushed ahead with headcount reductions, with the Permanent Secretary telling MPs that plans had already been made to remove 200 of the 1600-strong workforce. The Department for Work and Pensions has a large resource budget, as it employs almost 83,000 staff, with a pay bill of £2.7bn. These numbers will fall, with offices closing across Great Britain (Northern Ireland manages its own welfare system), and more interactions being provided digitally rather than face to face or on the phone. HM Revenue and Customs is going through a similar process, with its 59,000 staff, and a pay bill of £2.2bn, moving from 170 offices into 13 regional hubs across the UK.  Another main driver of HMRC spending – information technology – is also being reorganised, with the large contract with Capgemini being brought partly in-house, and partly transferred to a new HMRC-owned company that will provide IT services. The Cabinet Office is small, and much of its work like Cabinet Committees is connected to No10, or favoured by No10, such as the National Citizen Service. Within the Cabinet Office, the Government Digital Service saw significant growth under the last government – rising from 20 staff in 2010 to 500 in 2015 – and looked like a prime target for the Chancellor. It is important to maintain momentum in this area, given that savings in departments such as DWP and HMRC, depend upon digitalisation. The remaining three departments – the Scotland, Wales and Northern Ireland Offices all have small resource budgets. The action here on 25 November will be in the settlements for the devolved governments of Scotland, Wales and Northern Ireland. In Scotland a new fiscal framework is being negotiated to address issues such how the block grant will interact with new tax and welfare powers. In the Summer Budget the Chancellor announced “an additional £1.5 billion a year by the end of the Parliament to fund increased spending on the military and intelligence agencies by an average of 1% a year in real terms.” Today he gave some details: a £165 million Defence and Cyber Innovation Fund, “to support innovative procurement across both defence and cyber security” would be established, and the National Offensive Cyber Programme would be reinforced.  According to the Government, the £1.5bn falls within NATO’s definition of military expenditure, and therefore contributes to the 2% of GDP spending commitment. We’ve yet to see settlements at two departments where there were new Secretaries of State after the election, who are looking for radical changes:  Sajid Javid at the Department for Business, Innovation & Skills, and Michael Gove at the Ministry of Justice.  And the politically charged matters of welfare and police spending at the Home Office are still to be settled.  So, as I noted last week, the hard work remains to be done.