Spending Review round-up: 15% budget cut for Defra, new model for Royal Parks, boost to affordable housing

UK Chancellor George Osborne, in delivering a five-year Spending Review to Parliament, has confirmed a 15 per cent cut at Defra - smaller than expected - and a host of other budgetary measures.

Defra's day-to-day budget falls by 15 per cent, the chancellor says, but there'll be £2bn to protect 300,000 homes from flooding.

Protection for national parks and forests has also been announced. This means the cuts will have to be elsewhere in Defra, through "efficiencies", which have not been specified, other than cutting administrative budgets by 26 per cent, sharing back office functions and cutting red tape, saving £470m.

About a previous attempt to sell off the Forestry Commission forests, Osborne said: "We're not going to make that mistake again." 

There will be £130 million capital investment in Defra’s science estates and equipment by 2020-21, including funding to enhance national outbreak response capabilities plus a £3 billion investment to safeguard England’s countryside through the Common Agricultural Policy, and protection of £350 million funding for public forests, National Parks and Areas of Outstanding Natural Beauty over the Spending Review period.

Some £18 million is going to the Excellence in Precision Agriculture Innovation Centre, which will be partly headquartered in Shropshire. This will be one of four agri-tech centres, which will develop new engineering technologies to increase the productivity and sustainability of UK agriculture.

The DCMS’s administrative budget will be cut by 20 per cent. The plan includes "a reduction in core DCMS administrative costs and reforms including a new operating model for the Royal Parks to ensure a sustainable financial future.

The Department for Energy and Climate Change's day-to-day spending will fall by 22 per cent.

The Local Government settlement includes reductions to local government grant of £6.1 billion by 2019-20, though given forecast increases to other sources of local government income, overall local government spending will be higher in cash terms by 2019-20 than in 2015-16, Osborne said.

Osborne suggested education will be protected from cuts. The apprenticeship levy is to raise £3bn a year. It will be set at 0.5 per cent of the payroll bill. But there will be a £15,000 allowance, so 98 per cent of employers will not pay. The 0.5 per cent tax will apply to large companies who have payroll costs of over £3m, roughly equivalent to about 100 employees. 

The statement announced a cash terms protection of the current national base rate per student for 16 to 19 year olds in school sixth forms, sixth form colleges and further education colleges in England for the rest of the Parliament.

He has also abolished changes to tax credits.

Osborne said Big Lottery Funding will be protected. 

The Spending Review "delivers what business needs: competitive taxes", said Osborne. Some 600,000 small businesses will gain from a rate-relief scheme for one more year, he added.

He said the Department for Business budget is being cut by 17 per cent. 

The housing budget is to be doubled, to £2bn a year. This will fund 400,000 new affordable homes by the end of the decade.

In the last parliament the budget for science was protected in cash terms. In this parliament it will be protected in real terms, he added.

The government is taking forward the recommendations of Paul Nurse’s independent review and, subject to legislation, will introduce a new body – Research UK – which will work across the seven Research Councils. This will form a strategic approach to science funding. The government will also look to integrate Innovate UK into Research UK in order to strengthen collaboration between the research base and the commercialisation of discoveries in the business community. 

Councils will have new freedoms to realise income generated through sales of property on day-to-day spending. The government will issue new guidance to local authorities to encourage them to rein in excessive salaries.

The Chancellor said growth was better than the rest of G7.

He said £12bn of welfare savings will be delivered "in full" and in a way that "helps families as we make our way to a National Living Wage".

Net Debt as a percentage of GDP will be: 2015/16: 82.5 per cent 2016/17: 81.7 2017/18:79.9 2018/19:77.3 2019/20: 74.3 2020/21:71.3 per cent.

The UK economy is predicted to grow by 2.4 per cent in 2015; 2.5 in 2017 returning to 2.4 in 2018 and 2.3 per cent in 2019-20.

Noel Farrer, president of the Landscape Institute said: "It is laudable that the Government is to make housebuilding a priority but housing quantity cannot be divorced from housing quality. Unfortunately the UK features many low-quality, poorly-designed housing estates which are out of keeping with the character of their local landscape. My fear is that we will repeat the mistakes of the recent past.

"People want to live in desirable housing, not just any housing. Poor design is a barrier to new developments. Existing residents in cities, towns and villages need to believe that new housing will enhance, not diminish, their quality of life and the value of their homes.

"Landscape is the primary consideration in delivering places where people want to be; want to work; want to innovate and therefore guarantee a thriving economy. Delivering housing without creating green infrastructure such as tree-lined streets and parks in keeping with the character of their local landscape will not deliver the liveable towns and cities we need."

NFU chief economic adviser Gail Soutar said: "The Chancellor has announced that the Defra day-to-day operating budget will be cut by 15 per cent and we must wait for more details before understanding the full impact of this on farmers. It is reassuring that the flood defence budget will be ring-fenced and that the Government will prioritise spending on animal and plant disease prevention, for example by continuing to invest in implementing its 25-year strategy to eradicate bovine tuberculosis.

"The Chancellor also said he would invest £12bn in capital infrastructure and a boost to the Government’s digital service. As part of this, he said he was introducing a digital tax account by 2020 to replace tax returns, including new reporting requirements, and a consultation on tax payment dates. We will be following this closely to assess its feasibility for our members.

"We are disappointed that there was no mention of how farmers, many of whom are among the five per cent who struggle with broadband access, will benefit from improved broadband facilities. It is absolutely vital that broadband services in this country are fit for purpose. We need a firm commitment from Government to deliver superfast broadband for all – what we don’t need is an increased divide between urban and rural communities

"We are pleased that the Chancellor said that tax credits would not be cut from next April, as previously planned as this will help many farming families who are experiencing falling incomes.

"It is disappointing that the Government has decided to end the micro employer relaxation of PAYE ‘on or before’ reporting from April 2016. This will impose a significant additional burden on many agricultural businesses engaging seasonal workers at harvest time. Larger employers will, however, be concerned at the rate of the new Apprenticeship Levy of 0.5 per cent of payroll costs from April 2017."

 Nick von Westenholz, chief exeutive of the Crop Protection Association said: "We recognise the pressure on government to find savings and accept that reductions in public spending are inevitable. Whilst we still need to examine the detail, we are pleased that it appears Defra’s budget has not been cut as deeply as anticipated. However, we are concerned at any cuts which diminish government’s policy capacity across agriculture, and in particular on crop protection issues.

"Policy around plant science and the approval and use of pesticides is a complex and sometimes controversial area, and one where the UK government must ensure it is properly resourced. It is especially important that government continues to be able to promote UK farming at the European level and deploy its expertise on crop protection issues in Brussels.

"It is also vital that budgetary reductions do not impact on frontline programmes. In particular, where government funding contributes alongside private investment in supporting crucial environmental schemes such as the Campaign for the Farmed Environment, any reduction in public funds must be balanced carefully against the need to protect and enhance our environment.

"Elsewhere there are a number of research projects which have been joint funded by the government and industry and it would be counterproductive to abandon research where significant investment has already been made. Through the Agri-Tech Strategy the government has demonstrated its commitment to making the UK a world leader in agricultural technology and innovation; we want to see that work continue."

The British Retail Consortium said last July’s Budget is still holding back retail from helping the Government to deliver a more productive economy because of the need to mitigate the ever-increasing costs placed directly onto retailers by this Government – business rates, the national living wage and the apprenticeship levy. The BRC’s analysis shows that these three measures represent approximately £14 billion of potential costs to UK retail businesses over five years.

BRC director general Helen Dickinson said: "It is encouraging that the Government appears to be taking their time to consider their options for fundamental review of the business rates system. We have long said that it would be better to take the time to get the solutions right on the first go and design a system that is fit for purpose. How rates reform will fit into the wider Business Tax Roadmap will be a big question in 2016.

"The chancellor needs to reduce the disproportionate burden of business rates on the industry and keep going with its review because this is the key to delivering the core of the Government’s reform programme. While we eagerly await the detail behind the plans to devolve rates to local authorities over the next few years it is clear that devolution does not address the key problems of the rates system.

"The government is absolutely right to want to increase the number of apprenticeships but in doing so it must make sure the quality is increased too. We welcome the decision to establish a new employer-led body to set the standards and ensure  quality.

"If left untouched the burdens on business will weigh the retail industry down. We are making a huge contribution to increasing wages and providing training and jobs. If retail is to do this successfully and not lose jobs in the future the Government will have to go beyond the devolution of business rates and deliver fundamental reform of the system early next year."

Forum of Private Business managing director Ian Cas said the Forum was pleasantly surprised by the budget: "Overall the Forum asked for a focus on Simplicity, Consistency and Productivity. There have been few nasty surprises and a focus on consistency where changes have been made and in the pace of deficit reduction. There has also been a significant focus on productivity through the increased infrastructure spending and focus on improving skills. 

I would have liked the option of multiple platforms for paying HMRC until all business owners have access to high speed broadband. I am however relieved that the hourly level of the living wage has not been accelerated to avoid tax credit reduction. I am however relieved that the hourly level of the living wage has not been accelerated to avoid tax credit reductions.

However the devil will be in the detail as tax avoidance schemes may lead to increased costs on small businesses and we do not yet know what the 17 per cent of reduction in the budget department of Business Innovation and Skill will mean for Britain's 1.3 million employers.

"Our members are relieved that fuel duty is not being increased as stability is important, the last time fuel duty increased 87 per cent of our members reported that this damaged their business.
"We are pleased to see the introduction of new Enterprise Zones, particularly in rural areas as these have suffered disproportionately over the last few years. Rolling out high speed broadband to such areas is sorely needed but this is a good indication that the Chancellor understands the needs of the rural economy.

"Support for heavy industry and a significant increase in transport capital spend is also welcome to meet the needs of rebalancing the economy. The news on civic devolution to Birmingham and a Northern Powerhouse Investment fund will help, particularly in the North East, where the level of Entrepreneurship fell between 2013 and 2014. 

"The extension of Small Business Rate Relief is very beneficial, particularly to retailers who will struggle to pay the living wage and meet customer demands for low prices.

"Predictions were that the support for the budget for further education was to be reduced did not come to fruition, particularly as increasing numbers of our members report skills gaps within their business. The increased funding for the courses is also needed as employers were expected to put their hands in their pockets for courses which exceeded the government cap.

"Details of the Apprenticeship levy does indicate it may hit our larger members and we will have to see what else is announced as someone has to fund the ambitious targets of improving the skills base"
Business support 

"A 17 per cent reduction to the department of Business, Innovation and Skills will be a concern for some of our members but the cuts appear not to hamper delivery of business support including grants, with Innovate UK funding maintained through use of new financial products. 

See: www.gov.uk/government/uploads/system/uploads/attachment_data/file/479749/52229_Blue_Book_PU1865_Web_Accessible.pdf

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