Overall spending reductions in the main 17 departments in 2010-11

2.5 The £6.2 billion of spending reductions announced in May 2010 included some £1.9 billon delegated to the devolved administrations and local government and some £1 billion from specific policy decisions to end programmes, for example, stopping contributions to the Child Trust Fund and ending some elements of employment programmes. The remainder were to be achieved by a range of efficiency and reform measures (Figure 4).

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NOTE

1 Data on charts will be rounded for simplicity.

Source: National Audit Office analysis of 2011 Budget, Public Expenditure Statistical analysis 2010-11, Public Expenditure Outturn White Papers 2009-10 and 2010 -11, Departmental accounts 2010 -11

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2.6 We tested whether departments had delivered spending reductions by examining the real-terms change in departmental spending from 2009‑10 to 2010‑11 disclosed in departmental accounts. The accounts present spending in terms of:

● administrative costs, which can be split into staff-related expenses and other costs (including, for example, accommodation, IT support and other costs that cannot be directly related to delivering a particular service or output); and

● programme costs, which cover grants and other contractual payments to bodies that directly deliver services or programmes, as well as internal staff accommodation and IT costs that are directly attributable to individual services.

2.7 In order to assess changes in the underlying administration cost base we excluded non-cash items, miscellaneous receipts and one‑off early departure costs of £279 million. Administrative spending fell from £16.8 billion in 2009-10 to £15.3 billion in 2010-11 (a reduction of £1.5 billion or 9 per cent in real terms). The reductions in individual departments (Figure 6 overleaf) varied from a 22 per cent reduction by the Treasury, to a small increase in the Foreign and Commonwealth Office.5

2.8 Programme spending covers direct spending on front‑line services including grants to third parties. It includes items covered by controls on Departmental Expenditure Limits and Annually Managed Expenditure (Figure 1). Again, excluding non-cash items, receipts and early departure costs of £367 million, overall programme spending fell by £3.4 billion (1 per cent) in real terms. There are significant variations between individual departments (see Figures 7 on page 21 and Figure 8 on page 22) including:

● real‑terms increases in spending on international aid (£1.1 billion), education (£691 million) and health (£187 million), reflecting the priorities announced by the Government;

● a £2.4 billion increase in welfare payments reflecting the impact of the economic downturn and demographic changes; and

● substantial reductions in grants by the Department for Communities and Local Government, including £2.2 billion to local authorities.

2.9 Some of these changes are movements in Annually Managed Expenditure (Figure 1) and do not contribute to the reduction in Departmental Expenditure Limits discussed in paragraph 2.3 They are shown here for completeness and to maintain consistency with departmental accounts. The fall in programme spend within Departmental Expenditure Limits is approximately £5 billion.6

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5 These changes include changes in the definition of administrative costs which could not always be fully reflected in prior year figures.

6 The remainder of the total £7.9 billion reduction in Departmental Expenditure Limits is accounted for by capital expenditure (paragraphs 2.10 to 2.13), and movements in early departure costs (paragraphs 2.17 to 2.19, and non-cash items and provisions (paragraph 2.3) for which year-by-year comparison is not meaningful.