Dramatic developments in the Spending Review: it appears that the Government is going to protect the schools budget, in real terms, and that Defence is probably only going to be cut by 10% rather than 25%. What does this mean?

[All figures are in this years prices].

Education: Spending on schools is between £35 and £50bn – so a real terms protection rather than a 25% cut represents about £8.75bn and £12.5bn a year by 2014-15.

If the pupil premium is extra, on top of this, it adds about £1.75bn a year, bringing the figures for displaced savings to totals of between £10.5bn and £14.25bn.

Defence: £36bn – so 25% would have been £9bn. If it is 10%, then it’s only £3.6bn, meaning that £5.4bn has to come from elsewhere.

Assuming the lowest Education figure, this means another £14bn has to be found from somewhere else – more than one and half times the Home Office (£9.4bn) or Justice Ministry (£9bn) budgets or the entire budget for Wales (£13.8bn) or almost half the entire local government budget (£26bn).

This makes the likelihood that government is going to deliver its target reductions more and more unlikely.

[PS – since I wrote this it has become apparent the Defence budget is only going to be cut by about 7%, meaning even larger savings have to found elsewhere. The consensus seems to be that the welfare budget will be the biggest victim – but of course promises to reduce welfare spending by getting people off benefits and into work are much easier to make than to deliver. More universal benefits, besides child benefit, may now also be in the firing line and will be justified by the need to protect schools and defence.]