LONDON (Reuters) - Britain’s decision to protect the budgets of some government departments from spending cuts on principle risks wasting taxpayers’ money and distorting policy priorities, a panel of lawmakers said on Tuesday.
Even though Britain is searching for ways to reduce a large budget deficit and to assert its fiscal credibility, it shielded the spending of the departments that administer healthcare, education and international aid from 11.5 billion pounds ($18.5 billion) worth of cuts announced in June.
The special protection - known as ‘ring-fencing’ - meant the three budgets, which together will account for 172 billion pounds annually or around half of total departmental spending in the next financial year, were not only protected from being cut, but were also allowed to rise.
Behind in the polls ahead of a national election in 2015, Prime Minister David Cameron’s government decided to protect healthcare and education to try to assuage voters’ concerns that austerity might affect frontline public services.
But the parliamentary committee that scrutinises the finance ministry on Tuesday published a critical report on the latest spending round, which laid out cuts for the financial year 2015-16, saying the practice of ‘ring-fencing’ budgets could lead to “waste or worse” in the protected departments.
“Ring-fencing places the full burden of financial stringency on non ring-fenced departments which, as each year’s reductions on their budgets take effect, have to bear a heavier burden,” said Andrew Tyrie, the Treasury Select Committee’s chairman.
“As each year goes by there is a risk that ring-fencing distorts the allocation of resources between government priorities.”
The report urged the government to publish its rationale for maintaining the ring-fences and provide more details on the value for money that ring-fenced budgets provided.
In preparing the report, the committee took evidence from Conservative Finance Minister George Osborne and Danny Alexander, the Liberal Democrat lawmaker responsible for pressing ministers to find savings in their departmental budgets.
A Treasury spokesman said the government subjected spending in protected areas to detailed scrutiny despite its special status in order to identify possible savings, but said there was a principle involved in its decision.
“The Government recognizes that protecting the health, schools and overseas aid budgets increases the savings required from other departments,” the spokesman said. “However, the Government is committed to fairness and lower income groups are the biggest beneficiaries of spending in these areas.”
($1 = 0.6219 British pounds)
Reporting by William James; Editing by Andrew Osborn and Ron Askew