Comprehensive Spending Review - the key points for your business

George Osborne today announced the findings of the long-awaited Comprehensive Spending Review (CSR). The announcement set out the bare bones of the government’s plans to cut public spending.

The government now looks set to make some of the most significant public sector cuts in two generations. Although the details of those cuts will be explained in individual departmental announcements, the Chancellor today gave a broad indication of what we can expect.

Deficit reduction

The Chancellor has pledged that the country’s structural deficit will be completely removed by 2015. It is worth remembering that this is not the same as the budget deficit: the budget deficit represents the difference between public spending and tax intake, while the structural deficit represents the difference that would remain once the economy has recovered.

Public sector jobs

According to the government, the best-case scenario is for around 490,000 public sector jobs to be lost by 2015. We knew this yesterday, when Danny Alexander made the classic mistake of being photographed with a copy of the Review on his lap. The Chancellor said today that most of this would be accounted for by natural wastage, but this is far from guaranteed.

Construction sector

The construction sector is likely to be particularly badly hit by today’s announcement. The social housing budget has been cut dramatically, although the Chancellor predicts 150,000 new affordable homes will be built in the next four years. Perhaps more significantly, the Chancellor announced that social housing rents will start at 80 per cent of market rates for new tenants. This is a major change that could reduce social housing uptake.


It was already pretty clear that the retirement age would be increasing, from 65 to 66. The Chancellor announced, however, that it would rise more quickly than previously announced. The government now plans to phase in the rise by 2020.

Infrastructure projects

Some major infrastructure projects will get the go-ahead. Crucially for Londoners, the Crossrail project has got the green light. The Tyne and Wear Metro will also continue. In total, the government has pledged some £30 billion in capital spending for transport infrastructure projects.

Rising train fares

Commuters will be very unhappy to hear that rail fares are set to rise significantly. Regulated fares will rise by 3 per cent above RPI from 2012. According to some estimates this is likely to result in hikes of around 25 per cent within three years.

Tax evasion

HM Revenue and Customs will get more money (and, presumably, new powers) to tackle tax evasion. The government has promised that £900 million will be set aside for this purpose. HMRC has already begun chasing late payment more aggressively, and has begun actively closing down some of the most frequently used avoidance schemes.

Bank levy

The controversial tax levy on banks will be made permanent. Legislation designed to achieve this will be published tomorrow. While this will be widely welcomed, there is concern that banks will simply pass the cost of the levy onto customers through higher charges.

Business, Innovation and Skills

The total BIS budget will be cut by some £400 million. This will mean the abolition of schemes like Train to Gain.

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