So, the speculation is over. The Chancellor has spelled out what budget cuts of £11.5bn will actually mean. For public sector workers, it will mean losing their automatic annual pay increases. For those on welfare, it could mean yet more uncertainty as the Government puts a cap on that part of public spending. Housing benefit, disability benefit, tax credits and some pensioner benefits – though not the state pension – will all be subject to the cap. Winter fuel payments for expatriate pensioners now living in hot countries will go from 2015.
The unemployed will see a change to their regime as well. They will have to visit a job centre once a week instead of fortnightly. Mr Osborne wants them to spend more time with advisors helping them to find jobs. They will also have to wait for seven days before they can claim benefits. But he warned that “those first few days should be spent looking for work, not looking to sign on. We’re doing these things because we know they help people stay off benefits and help those on benefits get back into work faster.”
But the implications for Scotland and the other devolved administrations may be less far reaching than those in England. The most important aspect of this, one the Scottish Government has been asking for, is a major increase in capital expenditure. Its allocation will rise by just short of £300m in 2015-16. As Mr Osborne explained to the Commons, “Being part of the UK means Scotland will see its capital spending power increase by almost 13% in real terms in 2015-16. And rightly it’s for the Scottish Parliament to decide how best to use it. Devolution, within a United Kingdom, delivering for Scotland.”
He went to explain other aspects of the money coming North of the Border under the so-called Barnett Formula. This works out how much money can be spent in Scotland, based on the levels of expenditure in England. So the total Scottish resource budget will be cut by less than 2% with a value of £25.7bn. He explained that “because we have prioritised health and schools in England, this feeds through the Barnett formula to require resource savings of around just 2% in Scotland, Wales and Northern Ireland.”
The first reaction to the Chancellor’s statement in Scotland have, perhaps, been predictable. Grahame Smith, General Secretary of the STUC, described that announcement about capital spending as “smoke and mirrors”, suggesting that there was no new money for capital investment in 2015. He insisted that there had been few surprises but argued that “the further significant cut in resource spend for Scotland will constrain economic recovery and necessarily lead to significant additional hardship.
He then went on to criticise the proposed changes in the rule faced by the unemployed. “Forcing people to wait seven days before signing on,” he said, “is a gratuitously spiteful measure that serves no useful purpose and it is difficult to accept that additional job search assistance will be properly funded as DWP resources continue to diminish. Funding of active labour market policies in the UK is already lower than any developed nation.”
One of the public sector unions, the GMB, warned that the cuts could mean another round of jobs cuts in local government. Brian Strutton, its National Secretary for Public Services, said that the Chancellor’s “sideswipe at public sector workers by questioning their pay progression also reveals a lack of understanding about pay systems. If anything, public sector workers are actually underpaid for too long and should accelerate much more quickly to the rate for the job. This is just another unpleasant dig at public sector workers who have already been made scapegoats for problems they had nothing to do with.”