Comprehensive Spending Review

On 20 October 2010 the Chancellor of the Exchequer delivered the first Comprehensive Spending Review (CSR) since 2007. The review followed on from the Emergency Budget in June in which the Chancellor announced the overall spending projections for the next five years.

In accordance with the main aim of the Budget, which was to eliminate the country’s fiscal deficit within the next four years, the Chancellor announced where spending cuts were going to take place and how extra revenue through taxation was going to be collected.

There were three key themes to the CSR which were ‘fairness’; ‘growth’ and ‘reform’.

Because the cost of debt interest payments, contributions to the EU and the department budgets for Health and International Development are projected to rise in real terms for the next five years, other departments are facing severe cuts to their budgets.

The direct impact on tourism

While the Chancellor did not mention tourism in his speech there will be some impacts as a result of the spending decisions.

The national tourist boards, VisitEngland and VisitBritain are both funded by the Department for Culture, Media and Sport (DCMS) which has been presented with cuts of over 25% to its budget over the next four years. Both VisitBritain and VisitEngland are being retained by the government but they have both had their budgets cut. Over the next four years VisitEngland’s budget will shrink by 34%. VisitBritain’s budget will go down from £28.8 million this year to £21.2 million in 2014/15. A number of tourism industry representatives have criticised this move as one that jeopardises the potential legacy from the Olympics in 2012. The Tourism Alliance has also suggested that the decision is at odds with David Cameron’s professed desire to promote the tourism industry in the UK.

Funding for the Olympics has been protected and the planned £9.3 billion for the Games will still be spent to deliver a world class event. The tourism industry in the South East should be well placed to reap the benefits of the Olympics.

One other announcement from the DCMS was that free entry to museums and galleries would be retained.

It was also revealed that the cost of TV licences was to be frozen for the next six years which will be a welcome relief for many accommodation providers.

Other department funding decisions

Local government was one of the biggest losers from the spending review. The Chancellor announced that there would be a control shift from centre to the locality that was accompanied by ‘unavoidable cuts’. Ring fencing of most grants to local government and the complex targeting and reporting system are being abolished which will give councils more discretion over how they use their budgets. However these budgets are being cut by 7.1% every year for the next four years. As a result many local authorities will need to consider cutting the amount that they spend on non-statutory services such as economic development and tourism.

The department for Business, Innovation and Skills announced cuts such as the abolition of the Train to Gain service but also announced that there would be an additional £250m of funding for adult apprenticeships which could benefit the tourism sector.

A more significant announcement was that the Regional Growth Fund is being extended to last for three years rather than two and is being increased from £1bn to £1.4bn. The new Local Enterprise Partnerships (LEPs) will provide strategic leadership to set local economic priorities in their areas. It will be important for the tourism industry to be recognised as a key sector for growth by the LEPs in order to attract some of this funding and offset the impact of the Regional Development Agencies being abolished.

The Department for Transport will continue to invest substantial sums in the rail and road networks but much of this spending will occur in the North. Investments that will affect the South East include the Crossrail project, a widening of the M25 and the continuation of improvement works to the A3 at Hindhead.

More Information

For more information on the Comprehensive Spending Review and the impacts on the tourism industry contact the development team.