Osborne to set out recovery plan
The Spending Review will set out "the next phase" in the Government's economic plan and deliver measures to move Britain "from rescue to recovery", Chancellor George Osborne has promised.
The review, setting out spending limits for 2015/16, is expected to slice £11.5 billion off the day-to-day budgets of Whitehall departments, extending the age of austerity beyond the next general election. But Mr Osborne is also expected to confirm that billions of pounds of additional investment are to be directed into major infrastructure projects to boost growth over the years to the end of the decade, with details of the plans to be set out by Treasury Chief Secretary Danny Alexander on Thursday.
The Chancellor is expected to tell MPs on Wednesday: "Britain is moving from rescue to recovery. But while the British economy is leaving intensive care; now we need to secure that recovery... We're saving money on welfare and waste to invest in the roads and railways, schooling and science our economy needs to succeed in the future. I know that times are still not easy for families. But we have a clear economic plan. We've stuck to it. It is working. And I'm determined to go on delivering it. Now, together, we're moving Britain from rescue to recovery, let's build an economy that works for everyone.''
Mr Osborne is also expected to reveal how he intends to implement a proposed cap on previously uncontrolled parts of the public finances, such as welfare, debt interest and payments to the European Union.
The cap on so-called "annually managed expenditure" (AME) was floated in the Chancellor's Budget in March, when Mr Osborne said he would impose a limit on a "significant proportion" of AME, which is made up of elements of public spending which can go up and down due to factors beyond the Government's control. The Treasury has signalled that the state pension will not be affected by any cap and Mr Osborne has said it will not impact on the "automatic stabilisers" which come into effect in a downturn, suggesting that unemployment benefits could also be excluded.
A thinktank warned on Tuesday that failure to include pensions in the cap will force future governments to shave as much as £40 billion off spending for priorities like health and education as the population ages over the next 50 years.
In a pamphlet for Policy Exchange, former Treasury official Matthew Oakley pointed out that the state pension bill is set to rise from 5.6% of GDP in 2016-17 to 8.3% in 2061-62, and warned that any cap will be "meaningless" unless it includes the full range of benefits which are driving AME spending up.
Speaking during Treasury Questions in the Commons on Tuesday, Mr Osborne insisted that there would be "real protection" for the NHS and schools.
The Chancellor said: "I can confirm that I will be offering real protection for our National Health Service and to our schools. These are vital public services, they are an investment in our economic future and they are all about doing what we need to do to win that economic race."
Labour said that Wednesday's statement will lay bare "three years of failure" since Mr Osborne's last spending review in 2010, which have seen the slowest UK economic recovery for over 100 years with growth of just 1.1%, compared to the 6% predicted at the time.