The following is a summary of the announcements in the June 2010 Budget that are most likely to be of interest to public sector lawyers.

For further information on the June 2010 Budget , see:

The 2010 June Budget is a tough one for the public sector and will have far-reaching effects. What is apparent is that public spending, and not taxation, is where the most dramatic reforms to reduce the deficit lie, although decisions on public spending have been relegated to the Spending Review, scheduled to take place on 20 October 2010.

There are likely to be swathing cuts in public services and job losses to achieve the proposed reduction of 25% in departmental spending over the next four years (although the NHS and overseas aid will not be affected). However, it is important that frontline services that local authorities provide, such as care for the elderly and safeguarding children, are protected against the public spending cuts. Public sector workers and members of the public are to be given an opportunity to engage in a programme, launching on 24 June 2010, that enables them to feed in their ideas on how to reduce public spending while protecting the quality of the services that they provide. It is likely that area-based budgeting would eliminate waste, improve services and allow local people to have a say over the way their neighbourhoods are run, ensuring that savings are achieved while safeguarding services.

The 2010 June Budget included the following proposals that specifically affect the public sector:

The June 2010 Budget puts forward a programme to reduce the bulk of the structural deficit by a further £32 billion from spending reductions by 2014/2015, of which £17 billion is to come from departmental budgets and £11 billion from welfare reform savings and other areas. This is in addition to the £44 billion pledge by the previous government and amounts to cuts of 25% in government spending in areas other than the NHS and overseas aid over the next four financial years.

The Spending Review, which will be on 20 October 2010, will give further information on exactly how departmental budgets will be affected and where the cuts will be made. An engagement programme will launch on 24 June 2010 giving public sector workers and members of the public an opportunity to feed in their ideas for how to reduce spending while protecting the quality of their services.

(June 2010 Budget: Chapter one: Deficit reduction.)

The Chancellor announced that the government will work in partnership with local authorities in England to freeze council tax in the financial year 2011-2012. The June 2010 Budget documents assume that this help will be given assuming a loss of revenue to authorities of 2.9%, (the average of the three years' most recent council tax increases). The government assumption is that this will lead to a loss of revenue for local authorities of £625 million.

(June 2010 Budget: Chapter two: Budget policy decisions: Local, regional and devolved administrations.)

The government proposes to monitor lending from the Public Works Loans Board more closely to ensure a better understanding of the fiscal risks of local authority borrowing decisions. It has also indicated its intention to consider the approach taken in Scotland to increase transparency around borrowing taken more than two years in advance of expenditure.

A two-year pay freeze for the public sector workforce has been announced from April 2011 which will save £3.3 billion a year by 2014-2015. However, those individuals who earn £21,000 or less, about 28% of all public sector workers, will get a flat-rate increase of £250 a year.

The Secretary of State for Education announced on 22 June 2010 that it remained committed to honouring in full the three-year pay award recommended by the School Teachers’ Review Body. This means that the teachers’ pay uplift for this year will be implemented from September 2010, marking the last instalment of their three-year pay award, see DfE: Written Ministerial Statement on Education Spending.

The future of public sector pensions is the subject of a review by former Labour Minister John Hutton, with interim findings to be provided in time for the spending review in October 2010.

(June 2010 Budget: Chapter two: Budget policy decisions: Public sector pay and pensions.)

As flagged up in the Queen's Speech, Regional Development Agencies (RDA) will be abolished through the Public Bodies Bill, see Legal update, Queen's Speech 2010: local government implications. In place of RDAs, the government will enable locally-elected leaders, working with business, to lead local economic development in the form of local enterprise partnerships (LEPs). These LEPs will co-ordinate public and private investment in transport, housing, skills regeneration and other areas of economic development. As part of its proposals, which will be set out in a White Paper later in the summer, the government will consider the most appropriate framework for local authorities to support growth, which will include exploring options for business rate and council tax incentives, allowing local authorities to reinvest the benefits of growth back into their local communities.

(June 2010 Budget: Chapter one: Enterprise: Growth in all parts of the UK.)

To help those areas and communities that are particularly affected by reductions in public spending make the transition to private sector-led growth and prosperity, the government proposes the creation of a Regional Growth Fund in 2011-2012 and 2012-2013. This fund will:

(June 2010 Budget: Chapter one: Enterprise: Growth in all parts of the UK.)

In order to support private sector enterprise and investment in those regions that are particularly reliant on the public sector, the government will introduce a three-year scheme to exempt new business in targeted areas from up to £5,000 of class 1 employer National Insurance Contributions payments for each of the first ten employees hired in their first year of business. This measure will apply to all regions outside London, the South East and the East of England and, subject to meeting the necessary legal requirements, the government hopes to have the scheme established by September 2010.

(June 2010 Budget: Chapter one: Enterprise: Growth in all parts of the UK.)

The temporary increase in the threshold for small business rate relief, which was announced by the previous government in the March 2010 Budget giving full relief for eligible businesses occupying premises with a rateable value of up to £6,000 and tapering relief to £12,000, will go ahead from 1 October 2010. The government also announced that legislation will be introduced to cancel backdate business rates bills, mainly affecting ports.

(June 2010 Budget: Chapter one: Budget report: Enterprise: Employment and enterprise.)

As part of introducing greater transparency in the way that it does business, the government plans to promote small business procurement by publishing central government tenders online and free of charge. This facility will be made available by the end of 2010.

(June 2010 Budget: Chapter one: Budget report: Employment and enterprise.)

The package of reforms announced by the government are aimed at saving £1.8 billion in housing and council tax benefits. From April 2011, local housing allowance rates will be capped at:

The government also proposes an increased contribution to Discretionary Housing Payments by £10 million in 2011-12 and £40 million in each year from 2012-2013.

For more information, see Legal update, June 2010 Budget: property implications: Housing benefit.

(June 2010 Budget: Chapter two: Budget policy decisions: Tax credits and benefits.)

From 4 January 2011, the rate of VAT will increase from 17.5% to 20%. Although local government does not pay VAT on the majority of its transactions, there will be an impact on payments to individuals and voluntary organisations where these are not zero-rated.

(June 2010 Budget: Deficit reduction: tax measures.)

HMT: Easy-to-browse Budget document.