Chancellor George Osborne has laid out the government’s latest austerity plans which will raise £4.5 billion and include the sell off the government’s remaining £1.5 billion share of Royal Mail. A further £3 billion will be saved through cuts to all government department budgets except the NHS, schools and aid.
Whitehall departments most affected by the cuts are the Ministry of Defence, the Department for Education and Business (non schools) and Innovation and Skills.
£500 million will be saved at the Ministry of Defence, a controversial move because the government is unlikely to be able to commit to Nato’s target – that the UK spends 2 per cent of its national income on defence.
The budget for schools has been ring fenced so cuts could hit sixth form colleges and children’s services. However, a spokeswoman for the Department for Education said that savings would be made through ‘efficiencies and under spends in demand led budgets.’
The NHS budget is also safeguarded and so will not be directly affected by the government’s austerity measures. However, the Department of Health will have £200 million less for public health grants to local authorities.
The announcement that the government is also to sell its final share in Royal Mail of 30 per cent has also drawn criticism, following the previous sale of Royal Mail shares in 2013 which were undervalued, possibly by as much as £1 billion. Shares fell by 3.3 per cent immediately after the latest announcement, causing the value of the government’s stake in Royal Mail to drop by £50 million.
This time the coming sale of Royal Mail shares is likely to be aimed at companies rather than the public. None of the shares will be reserved for Royal Mail staff, unlike in 2013, when a block of 10 per cent was set aside for employees.
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