Paris terror gives cost-cutting George Osborne a security headache Read more

Home Office



Home secretary Theresa May controls a £10.6bn annual budget, which has already been cut by 25% since 2010. Funding for the police has fallen during that period by £2.3bn. Some 17,000 frontline police officers have been axed, according to the Police Federation.

May has previously said that cuts to police funding have not damaged the service, pointing out that crime has fallen. But the home secretary and her ministers, say sources, regard plans for a further 22,000 police job losses as excessive. The chancellor said last week that he would boost staffing in all three UK intelligence agencies which investigate and try to disrupt terrorist cells. With this extra cost, if Osborne were to back away from savage police cuts, he would have to try to find other Home Office savings. But from where? They are unlikely to come from reducing immigration, the Passport Office or border controls.

Welfare

Cutting welfare by £12bn was in the Conservatives’ manifesto, but after the Lords – and Tory backbenchers in the Commons – rejected the £4.4bn cut in tax credits, Osborne has had to go back to the drawing board. Exempting existing claimants, which is one option, would slash savings to only £1.4bn by the end of the parliament, leaving him to find £3bn a year. Or he could squeeze other parts of the welfare system – though pensions and child benefit are protected and other cuts would prove equally controversial. Forcing tenants on housing benefit to pay 10% of their housing costs would lead to losses of around £500 a year for many families, says the Institute for Public Policy Research, and would cause another outcry. Or Osborne could look outside the social security budget, but that could threaten his self-imposed ceiling on welfare spending, due to be capped at £115bn by 2016-17. The Institute for Fiscal Studies says his task is to “avoid the obstacles he constructed for himself”.

The NHS

The government is committed to increase the NHS budget in real terms year-on-year. But rising demand, the increase in numbers of elderly patients, the availability of more types of treatments and more expensive drugs all mean ever greater financial demands. The Tories have promised to provide an extra £8bn a year by 2020 to the NHS. But with hospital trusts having piled up £1.6bn in deficits in the first half of 2015-16, they need extra money now, not later in the decade.

To “frontload” that cash would blow another hole in Osborne’s figures. Simon Stevens, the head of NHS England, wants a minimum £4bn as soon as possible. The King’s Fund says the full £8bn must be delivered in 2016-17 as part of a spending and reform plan. “Anything less than this and the government must be honest with the public about the consequences – an accelerating decline in standards of care,” it says.

A growing elderly population is just one of the serious pressures on health provision. Photograph: Gary Calton/The Guardian

Defence

The government will announce its strategic defence review on Monday and the chancellor will provide more figures on Wednesday. The annual defence budget, now £35bn a year, has been cut by 12.8% since 2010. But under pressure from Tory MPs, Osborne tied his hands in the summer by committing to spend 2% of GDP on defence every year, the Nato target. With airstrikes being considered on Islamic State in Syria and a heightened threat of international terrorism, a new round of cuts to frontline services would be politically impossible.

David Cameron said last week that the UK had “the second-best funded armed forces in all of Nato – and, together with France, the most capable and globally deployable in Europe.” Savings could be made and money raised, however, by other means, including the selling of high-value, underused Ministry of Defence land.

Local government

The Department for Communities and Local Government has suffered cuts to its budget of more than 50% since 2010. Direct grants to local authorities have been slashed and many councils have seen funding reduced by more than 40% over the past five years.

Local authorities now fear a further round of cuts, which will mean more closures of local services, including libraries, leisure centres and social services.

The most acute pressure is on social care services that have to be provided by local authorities. Many private companies are pulling out of council contracts because the councils do not have enough money to allow them to run what would be considered decent services.

Osborne will act on Wednesday, allowing local authorities to raise council tax by up to 2% to ease the crisis, but there is unlikely to be more central government cash.