George Osborne agrees 24% spending cuts with ministers

George Osborne In Thought

George Osborne has reached provisional agreement with a series of cabinet ministers, including Iain Duncan Smith, that will see a cumulative cut in day-to-day government spending by an average of 24% by 2019-20.

The cuts, which will be formally announced in the autumn statement on 25 November, are lower than the 40% reduction in spending that had been demanded by the chancellor in the summer. In his opening negotiation with cabinet ministers in July, Osborne had asked cabinet ministers to model two scenarios of cuts in their day-to-day spending of 25% and 40%.

The Treasury announced it had reached agreement with a further seven Whitehall departments, including the Department for Work and Pensions, plus nine small government bodies.

The agreement with Duncan Smith will be seen as significant because the chancellor is involved in tense negotiations with the work and pensions secretary on how to soften the impact of his planned £4.4bn in cuts to tax credits. But the deal announced on Tuesday morning covers day-to-day resource spending, known as resource departmental expenditure limit (RDEL). Tax credits come from the larger annually managed expenditure (AME) budget.

The overnight agreements with departments, which also include the Department for Energy and Climate Change and the Cabinet Office, will deliver cumulative cuts in day-to-day spending of 21% by 2019-20. This works out at 6% a year and will deliver cuts of £2.5bn by 2019-20. The cuts will be achieved through further efficiencies and, in the case of Her Majesty’s Revenue and Customs, through moving the digital transformation of the tax system.

The chancellor announced recently he had reached provisional agreement with four government departments, including the transport and communities departments. This means Osborne has so far reached agreement with 11 out of 20 of the main Whitehall departments on their day-to-day spending. This will deliver cumulative cuts of 24% by 2019-20 that will deliver more than £4bn in savings.

Cabinet ministers are usually given a seat on the cabinet committee overseeing the spending review when they reach agreement with the Treasury chief secretary, Greg Hands. This raises the prospect that Duncan Smith will be given a seat on the committee while he continues to negotiate with the chancellor on how to soften his proposed tax credit cuts.

Powered by Guardian.co.ukThis article was written by Nicholas Watt Chief political correspondent, for theguardian.com on Tuesday 17th November 2015 08.19 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010