Editor's blog Wednesday 20 October 2010: Extracts from Chancellor George Osborne's speech to Parliament on the CSR

"I believe the public sector needs to change to support the aspirations and expectations of today’s population, rather than the aspirations and expectations of the 1950s".

...

"Of course, there is understandable concern about the reduction in the total public sector headcount that will result from the measures in the Spending Review. We believe the best estimate remains the one set out by the independent Office for Budget Responsibility. They have forecast a reduction in headcount of 490,000 over the Spending Review Period.

"Let’s be clear. That’s over four years, not overnight. Much of it will be achieved through natural turnover, by leaving posts unfilled as they become vacant. Estimates suggest a turnover rate of over 8% in the public sector.

"But yes, there will be some redundancies – up to the decisions of individual employers in the public sector – that is unavoidable when the country has run out of money. We feel responsible for every individual who works for the Government, and we will always do everything we can to help them find alternative work".

...

"Mr Speaker, central to this review is reshaping our public services. First, there needs to be a dramatic shift in the balance of power from the central to the local. A policy of rising burdens, regulations, targets, assessments and guidance has undermined local democracy and stifled innovation.

"We will completely reverse this.

"We will give GPs power to buy local services, schools the freedom to reward good teachers, and communities the right to elect their police and crime commissioners. Second, we should understand that all the services paid for by government do not have to be delivered by government. We will expand the use of personal budgets for special education needs, children with disabilities and long term health conditions.

"We will use new payment mechanisms for prisons, probation, and community health services. And we will encourage new providers in adult social care, early years and road management".

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"Some in local government have concerns about the financing of social care. I can announce that grant funding for social care will be increased by an additional £1 billion by the fourth year of the Spending Review. And a further £1 billion for social care will be provided through the NHS to support joint working with councils – so that elderly people do not continue to fall through the crack between two systems.

"That’s a total of £2 billion additional funding for social care to protect the most vulnerable".

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"We also keep the universal benefits for pensioners, in recognition of the fact many have worked hard and saved all their lives. Free eye tests; free prescription charges; free bus passes; free TV licenses for the over 75s; and Winter Fuel Payments will remain exactly as budgeted for by the previous Government – as promised. I am also turning the temporary increase in the Cold Weather Payments introduced by the last government into a permanent increase. In my view higher Cold Weather Payments should be for life, not just for elections.

"And so too are the promises we make on the National Health Service. The NHS is an intrinsic part of the fabric of our country. It is the embodiment of a fair society.

"This Coalition Government made a commitment to protect the NHS, and increase health spending every year. Today we honour that commitment in full. Total health spending will rise each year over and above inflation.

"This year we are spending £104 billion on health care, capital and current combined. By the end of four years, we will be spending £114 billion. We can afford this in part because of the decisions on welfare I have just announced. And also because we have made tough decisions in other parts of the government budget. But to govern is to choose.  And we have chosen the NHS.

"That does not mean we are letting the health department off the need to drive forward real reform and savings from waste and inefficiency. Productivity in the health service fell steadily over the last ten years, and that must not continue. By 2014, we are aiming to save up to £20 billion a year by demanding better value for money. But the money we save will be reinvested in our nation’s health care.

"As the independent forecasts we published in the Budget show, we need to make these savings to deal with our ageing population and the rising costs of new medical treatments. But there are also new services we can offer. A new cancer drug fund will be provided. Spending on health research will be protected and we will prioritise work on treatment for dementia. We will expand access to psychological therapies for the young, elderly and those with mental illness. We will fund new hospital schemes, including the St Helier, the Royal Oldham and the West Cumberland.

"For health spending, as for other spending announcements, there will be consequential allocations for Scotland, Wales and Northern Ireland. The Barnett formula will be applied in the usual way. That means that the increase in health spending and the relative protection of education spending will feed through to the devolved resource budgets. It means that that all three nations will actually see cash rises in their budget, albeit rises below the rate of inflation.

"For Scotland, the resource budget will rise to £25.4 billion in 2014-15. For Wales, it will rise to £13.5 billion. And for Northern Ireland, it will rise to £9.5 billion".

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"Britain is a world leader in scientific research.  And that is vital to our future economic success. That is why I am proposing that we do not cut the cash going to the science budget.  It will be protected at £4.6 billion a year.Building on the Wakeham Review of science spending, we have found that within the science budget significant savings of £324 million can be found through efficiency. If these are implemented, then with this relatively protected settlement I am confident that our country’s scientific output can increase over the next four years.

"We will also:
invest £220 million in the UK centre for Medical Research and Innovation at St Pancras;
fund the molecular biology lab in Cambridge;
the Animal Health Institute in Pilbright;
and the Diamond synchrotron in Oxford".