The Chancellor sets out his cost savings for the next four years

The Chancellor of the Exchequer, George Osborne delivered on 20 October – the ‘Spending Review 2010’ – using his speech to announce the key headlines of the Spending Review – with one of the stand-out figures being a further £7bn cut in welfare spending.

The Chancellor says the main Whitehall departments will make cost savings of £6bn in how they are run over the next four years and the Office for Budget Responsibility forecasts that 490,000 public sector jobs will go over the four years of the Spending Review period. Most will be through natural turnover, although there will be ‘some redundancies’.

The Spending Review is a Treasury-led process to allocate resources across all government departments, according to the government’s priorities. Spending Reviews set firm and fixed spending budgets and it is then up to each department to decide how best to manage and distribute this spending within their areas of responsibility.

In addition to setting departmental budgets, ‘Spending Review 2010’ also examines non-departmental spending that cannot be firmly fixed over a period of several years, including social security, tax credits, some elements of local authority spending and spending financed from the proceeds of the National Lottery.

Spending Reviews have been an integral part of governmental planning since the late 1990s. Prior to their introduction, departmental budgets were set on a year-by-year basis which made multi-year planning more difficult.

‘Spending Review 2010’ covers the four years from 2011/12 to 2014/15.