Spending review will help a ‘Britain on the rise’, says George Osborne

George Osborne was keen to present the spending review, on Wednesday, as the latest stage in a strategic plan to fix the British economy, rather than an emergency cost-cutting exercise.

He set out three rather Brownite-sounding principles, of reform, growth and fairness, which had guided the Treasury’s decisions about where the cuts should fall, and which he claimed would help create a “Britain on the rise”.

As part of this drive to kick-start growth, the business secretary, Vince Cable, managed to secure a minimal 6% cut in his department’s budget, with spending on science and apprenticeships protected.

And even as it cut back in some areas, the Foreign Office promised to expand embassies in fast-growing emerging economies to help create shopfronts for British businesses abroad.

Osborne also emphasised strong infrastructure spending as a key part of his plan. Capital expenditure was cut sharply in the coalition’s spending review in 2010 but since then the Treasury has sought to find extra pounds to spend on upgrading roads, railways and broadband connections, to create the conditions for a sustainable economic recovery.

To that end, the chancellor promised that capital spending would amount to £50bn in 2015-16, and add up to £300bn over 10 years – though that claim was based on gross investment, not the net figure normally used in analysing public spending, which excludes deterioration in existing assets. And, even on that measure, capital spending will stand unchanged between 2014-15 and 2015-16.

Capping Britain’s welfare budget each year in cash terms was also presented by Osborne as part of his economic vision; he said slapping a ceiling on benefits spending would act as a “limit on the nation’s credit card”.

However, he excluded some of those benefits, including Jobseeker’s Allowance, which rise rapidly when growth slows down. Economists call such payments automatic stabilisers because they help in hard times to limit the speed of a slowdown.