Osborne orders review of govt spending

The new Chancellor of the Exchequer, George Osborne, has announced a review of all government spending commitments since New Year’s Day.

Announcing a package of measures to “enhance fiscal credibility”, Osborne said that the Treasury had written to every secretary of state in Whitehall ordering them to “re-examine all spending approvals since 1 January this year and all pilot programmes.”

Schemes that require Treasury approval will have to be resubmitted to the Treasury. Schemes that are not deemed to be affordable, to offer good value for money, or to be in line with government priorities will be stopped.

The move would seem to put BT’s new deal as local service provider for London up for review.

Although the deal was the outcome of a contract renegotiation, rather than a new spending commitment, a Treasury spokesman said that all commitments that had required Treasury or secretary of state approval would be re-examined, to ensure "due dilligence."

NHS Connecting for Health was unable to clarify the position, with the Treasury saying that the detail of the review has yet to be worked out and may not be clear for some weeks.

Osborne also announced a new Office of Budget Responsibility, chaired by Sir Alan Budd, to “assess the state of public finances” and “take the politics out of forecasting” ahead of an emergency Budget on 22 June.

He made it clear that the new Conservative-Liberal Democrat government is looking to move quickly on savings to address Britain’s budget deficit.

Osborne announced that the further £6 billion of public sector savings that the coalition wants this year would be announced as early as next Monday, with government IT projects in the firing line.

The Treasury says it wants the £6 billion savings to include “doubling the current delivery plans for savings in IT spending.”

In his last Budget, then-Chancellor Alistair Darling pencilled in £5 billion of government IT savings over a period of years, with £600m coming from the National Programme for IT in the NHS.

Of that, £100m was to come off the BT contract, which commits the company to deliver Cerner Millennium to fewer hospitals, formally ends its commitment to deliver GP systems and scraps plans for a capital-wide health record.

Around £300m is due to come from the LSP deal with CSC that was not signed after University Hospitals of Morecambe Bay NHS Trust failed to go-live with Lorenzo at the end of March.

It does not follow that NPfIT will be asked to double its savings, since other government IT projects could be trimmed. However, the CSC deal is likely to be closely scrutinised. Morecambe Bay is now likely to go-live at the end of May.

Other targets for government savings include travel, recruitment, consultancy and “waste.” Despite the current uncertainty, the Treasury says that “where there are implications for projects already underway, decisions will be fast-tracked.”

The government has also appointed the final members of the Department of Health's ministerial team. Anne Milton, a former nurse and RCN official, has become junior health mnister. Earl Howe, a Conservative peer who has shadowed health in the Lords since 1997, will handle health issues in the Upper House.

Link: Treasury press release