The Coalition: together in the national interest Mid-Term Review Mid term review January 2012 This Mid-Term Review document provides an update on the progress we are making in implementing our Programme for Government. For a definitive account, this document should be considered alongside the quarterly reports that are published on progress against the commitments in departmental business plans. The Coalition: together in the national interest Mid-Term Review 3 Contents Foreword 5 Fixing the Economy 7 Deficit Reduction 7 Business, Enterprise and Growth 8 Banking 13 Personal Taxation 14 Cost of Living and Consumer Protection 14 Jobs and Welfare 15 Universities and Further Education 17 Energy and Climate Change 18 Europe 20 Improving Public Services 22 Schools 22 NHS and Social Care 24 Crime and Policing 26 Justice 28 Government Transparency and Information Technology 29 4 The Coalition: together in the national interest Building a Better Society 31 Families and Children 31 Pensions and Older People 32 Social Action and the Big Society 33 Communities and Local Government 34 Immigration 35 Equalities 36 Civil Liberties 37 Political Reform 37 Environment, Food and Rural Affairs 39 Culture, Media and Sport 41 Standing Tall in the World 42 National Security 42 Foreign Affairs 43 Defence 44 International Development 46 Mid-Term Review 5 Foreword Two and a half years ago, our and Turkey have been surging forward. In the coming years, some countries in the parties came together in the developed world will respond to this shift in national interest and formed a economic power; but some will not. Those that coalition at a time of real economic do will prosper. Those that do not will decline. It is that simple. danger. The deficit was spiralling out of control, confidence was That is why we have not baulked at the tough decisions needed to secure Britain’s future. plummeting, and the world was Whether it is reducing the deficit, rebalancing looking to Britain with growing the economy, regulating the banks, tackling climate change, modernising our energy and anxiety about our ability to service transport infrastructure, putting our universities our debts. on a sustainable financial footing or dealing with the challenges of an ageing population This Government’s most urgent job was to and reforming public sector pensions, we restore stability in our public finances and have consistently chosen to do what is right confidence in the British economy. In just two over what is easy or popular; what is in our years we have cut the deficit by a quarter country’s long-term interest over our parties’ and have set out a credible path towards our short-term interest. goal to balance the current budget over the economic cycle. Ultimately, however, Britain will only prosper in an increasingly competitive global economy Dealing with the deficit may have been our if we can realise the full potential of each and first task, but our most important task is to every person in our country. That is why our build a stronger, more balanced economy plans for economic recovery are accompanied capable of delivering lasting growth and widely by a radical agenda of social renewal, to shared prosperity. In essence, this involves build not only a strong economy, but a fair two things: growing the private sector, and society in which everyone, no matter what reforming the public sector so that what the their background, can rise just as high as their Government does – and the money it spends aspirations and talents can take them. – boosts, rather than undermines, Britain’s competitiveness. Above all, that means having a welfare system that works and schools that teach our children Meeting this challenge is imperative if Britain properly. Since we came to office, more than isn’t to fall behind in the global race, for while 1 million jobs have been created in the private the Western economies have stalled in recent sector. We are fundamentally changing our years, the emerging economies such as India, welfare system to make work pay. And we China, Indonesia, Malaysia, Brazil, Mexico 6 The Coalition: together in the national interest have injected new ambition into our education Today, at the half-way point in this Parliament, system: making exams and testing more we are taking stock of the progress we have rigorous; backing teachers on discipline; made in implementing the Coalition Agreement allowing people who are passionate about that we signed in May 2010. But we are education to open new schools in the state also initiating a new set of reforms, building sector; and, crucially, supporting the poorest on those already under way, to secure our pupils through our Pupil Premium. country’s future and help people realise their ambitions. We fully recognise that the changes needed to get Britain fit for the global race, combined We will support working families with their with the strong economic headwinds we are childcare costs. We will build more houses still facing, have put many families’ budgets and make the dream of home ownership a under strain. That is why we are doing reality for more people. We will set out plans everything we can to help those who are for long-term investment in Britain’s transport working so hard to help themselves: moving infrastructure. We will set out two big reforms rapidly towards a £10,000 personal income tax to provide dignity in old age: an improved state allowance, freezing council tax, helping with pension that rewards saving, and more help energy bills and cutting fuel duty. with the costs of long-term care. And as we take these steps to reshape the British state So we are dealing with the deficit, rebuilding for the 21st century, we will take further steps the economy, reforming welfare and education to limit its scope and extend our freedoms. We and supporting hard-working families through will be making announcements about each of tough times. And on all of these key aims, our these policy initiatives in due course. parties, after 32 months of coalition, remain steadfast and united. Of course there have Our mission is clear: to get Britain living within been some issues on which we have not its means and earning its way in the world seen eye to eye, and no doubt there will be once again. more. That is the nature of coalition. But on Our approach is consistent: to help hard- the things that matter most – the big structural working families get by and get on, so that reforms needed to secure our country’s long- everyone can reach their full potential. term future – our resolve and sense of shared purpose have, if anything, grown over time. And our resolve is unwavering: we will continue to put political partisanship to one We came to office at a difficult time for our side to govern in the long-term interests of country. An economy still in shock. The the country. Eurozone facing crisis. The inevitability that difficult cuts would have to be made. Worry, uncertainty and worse for many families and businesses. We have been determined to work in a way that keeps our country together through these times. That is why we have David Cameron protected the NHS from spending cuts and Prime Minister protected schools, while other departments have faced significant spending reductions. That is why we have made sure that the richest have paid the most towards reducing the deficit. We have protected pensions, with the largest increase in the basic state pension. Nick Clegg And we have kept our promises to the poorest Deputy Prime Minister in the world – meeting the pledges made about overseas aid. Mid-Term Review 7 Fixing the Economy Deficit Reduction • We have reduced the deficit by a quarter in just two years by delivering on our detailed Reducing the unprecedented level plan to reduce public spending and increase of borrowing left by the previous revenues, bringing lower interest rates on mortgages for home owners and on loans administration was never going for businesses than in countries which have to be easy, quick or popular. failed to address their deficit. But it is necessary and it is right. • We have set out our fiscal mandate to Demonstrating our continued balance the current budget adjusted for the economic cycle. Due to our actions, Britain’s determination to restore the public structural deficit has fallen by 3 per cent of finances to health is essential if GDP, the sharpest fall in the G7. we are to keep interest rates low • We have created an Office for Budget to support the recovery, retain Responsibility (OBR) to provide independent our economic destiny in our analysis of the UK’s public finances; all fiscal events are now underpinned by the OBR’s own hands and avoid placing an forecasts. unsustainable burden of debt on • We have given priority to economically and future generations. The events socially important budgets such as long- of the last two and a half years term infrastructure investment, schools and the NHS, while also protecting low-income in the Eurozone, where several groups – for example, by exempting those countries have been forced to earning under £21,000 from the public accept emergency bail-out loans sector pay freeze. and budget policies imposed by • We have supported government departments others to avoid bankruptcy, serve to save a total of £12 billion through the work of the Cabinet Office Efficiency and Reform as a constant reminder of what Group. We delivered these savings through can happen when countries lose a programme of efficiency and reform control of their public finances. We across central government, including: tough spending controls; renegotiating some of will not let that happen to Britain. the Government’s biggest contracts; and establishing a Major Projects Authority to ensure that projects are delivered to cost, time and quality. 8 The Coalition: together in the national interest European markets but also in the • We will continue to pursue our deficit fast-growing markets of Asia and reduction plan while protecting vulnerable groups and key long-term investments. other parts of the world, where exports of UK goods are up 47 per • Before the summer, we will set out detailed plans for public spending for the cent to China, 33 per cent to Brazil 2015/16 fiscal year, in line with the overall and 33 per cent to India over the path of deficit reduction which we have last two years. already set out to 2017/18, to maintain economic stability and credibility, and ensure that we retain the confidence of • We have provided an environment in which international markets. businesses have created more than 1 million private sector jobs and in which, last year, • Our Efficiency and Reform Group will there were more private sector firms in support Whitehall departments in delivering existence than in any year on record. £20 billion of savings per year by 2014/15 by bearing down on fraud and error, • We have made our tax system more increasing debt recovery to the Exchequer competitive and provided new funding for and continuing the evolution towards business by: government as a single customer when – reducing corporation tax from 28 per engaging with suppliers. cent to 24 per cent, with legislation to • We will aim to ensure that 25 per cent reach 21 per cent in 2014, and reducing of government business goes to small the top rate of income tax – formerly the and medium-sized enterprises (SMEs) highest in the G20 – from 50 per cent to by 2015. 45 per cent in order to make our tax rates internationally competitive, while ensuring that the wealthiest pay more overall; Business, Enterprise and – setting up, with the Bank of England, a Growth new Funding for Lending Scheme, which has already begun to reduce the cost and The Government believes that the increase the availability of credit; private sector, and SMEs in – increasing the rate of Research and particular, is the crucial driver of jobs Development tax credits for SMEs to and growth for our country. We are 225 per cent from April 2012; – increasing the Enterprise Investment determined to lay the foundations Scheme income tax relief to 30 per cent for sustainable, broadly based and increasing the annual investment limit growth by rebalancing the economy to £1 million for individuals, and the annual amount that qualifying companies can across sectors and regions. We are receive to £5 million; also determined to reduce burdens – creating the new Seed Enterprise on business by creating an Investment Scheme to attract investments internationally competitive tax in small, high-growth companies; and regime and by cutting out – cancelling the previous Government’s proposed increase in employer National unnecessary and costly regulation. Insurance Contributions. And we will do everything we can • We have encouraged innovative industries to help industry and commerce to through the tax system by creating a Patent seize opportunities, not just in Box and legislating for creative sector