Public spending

2.5 Spending assumption for next Spending Review - The Government will set plans for public spending in 2015-16 and 2016-17 in line with the spending reductions over the Spending Review 2010 period. Total Managed Expenditure (TME) will fall by 0.9 per cent a year in real terms, the same rate as set in Spending Review 2010, with a baseline excluding the one-off investments in infrastructure announced in the Autumn Statement. As a result, spending will be £15 billion lower in 2016-17 than it would be if it increased in line with inflation from 2014-15.

Table 2.2: Total Managed Expenditure

2.6  Reserve reprofiling - The Reserve will be reduced by £930 million over the next three years, reflecting anticipated receipts and underspends. (32)

2.7  Public sector pay restraint - Public sector pay awards will average one per cent for each of the two years following the end of the pay freeze. Departmental budgets will be adjusted in line with this policy, with the exception of health and schools budgets. The Home Secretary will take into account the Government's overall pay policy when considering the Police Negotiating Board recommendations. The Government does not control pay awards within local government or the devolved authorities; budgets will be adjusted on the assumption of comparable action being taken and in line with devolved funding principles. (23)

2.8  Official Development Assistance - The Government will adjust the allocation of Official Development Assistance (ODA) in line with the OBR's revised growth forecast, so that the UK spends 0.56 per cent of Gross National Income on ODA in 2012, and 0.7 per cent in 2013 and thereafter. (24)

2.9  Youth Contract - From 2012-13, the Government will deliver a package of measures worth almost £1 billion to support young people into employment and training. These measures are set out in Chapter 1 of this document. (25)

2.10  Extension of early years childcare - In line with the approach to child poverty set out in The Child Poverty Strategy, the Government will take action to tackle the causes of child poverty rather than simply funding extra welfare payments. The Government will invest a further £380 million a year by 2014-15 to extend its new offer of 15 hours of free education and care a week for disadvantaged two year olds, to cover an extra 130,000 children. The devolved administrations will receive additional funding in line with this increase based on the Barnett formula. (26)

2.11  Transport for London and regulated rail fares - The Government will limit the increase to regulated rail and Transport for London fares in January 2012 to the Retail Prices Index plus one per cent. (27)

2.12  Compensation for indirect carbon price floor costs - The Government will provide up to £100 million over the Spending Review period, to mitigate from April 2013 the impacts of the carbon price floor on electricity costs to businesses that are electricity intensive and operate in internationally competitive markets. It will consult on the precise thresholds for eligibility to ensure the most at risk industries are captured. This compensation is subject to relevant state aid rules. (28)

2.13  Science - In December 2011, the Prime Minister will set out the Government's strategy to ensure that the UK is the best location for undertaking translational research in life science. (29)

2.14  Infrastructure spending - Table 2.3 sets out £6.3 billion of additional infrastructure spending over the Spending Review period, of which £1.3 billion was announced earlier in the autumn. In addition, there will be £1 billion of new private sector investment in regulated industries supported by government guarantee. More detail on these measures can be found in Annex A. (31)

2.11  Table 2.3: Autumn Statement infrastructure spending