Spending Review

Spending Review
Name	Spending Review
Country	United Kingdom
Established	1970s
Administered by	HM Treasury, Prime Minister of the United Kingdom
Frequency	Periodic
Purpose	Allocation of departmental resource and capital budgets
Notable	1990 Maastricht Treaty era adjustments, 2010 Coalition government austerity measures

Spending Review

The Spending Review is a periodic fiscal exercise led by HM Treasury and coordinated with the Prime Minister of the United Kingdom that sets public spending plans for multiple financial years. It brings together decisions affecting Department for Work and Pensions, Department for Education, Ministry of Defence, and other major departments to determine resource and capital allocations. The process interfaces with fiscal rules established after the 1997 United Kingdom general election reforms and interacts with audits by National Audit Office and oversight from the Treasury Select Committee.

Overview

Spending Reviews translate high-level commitments from administrations—such as those from the Conservative Party (UK), Labour Party (UK), or a coalition—into multi-year budget envelopes for departments like the Department of Health and Social Care and agencies such as the National Health Service and British Transport Police. Outcomes influence public services delivered through institutions like the BBC, Higher Education Funding Council for England, and local authorities referenced in negotiations with the Local Government Association. Spending Reviews are often timed alongside fiscal events like the Chancellor of the Exchequer's Budgets or Autumn Statements, embedding commitments from manifestos such as those of the 2010 United Kingdom general election or 2019 United Kingdom general election.

Purpose and Scope

The primary purpose is to set aggregate limits for resource and capital expenditure across departments including the Home Office, Foreign, Commonwealth and Development Office, and Department for Business, Energy and Industrial Strategy. It defines spending envelopes that affect projects run by bodies like Transport for London, Network Rail, and Highways England. Scope frequently covers welfare payments administered by Department for Work and Pensions and defence procurement managed by UK Strategic Command and contractors such as BAE Systems and Rolls-Royce Holdings plc. Reviews also tie into compliance with frameworks like the Public Sector Accounting Standards and obligations arising from treaties like the Maastricht Treaty where relevant to deficit and debt targets.

Process and Methodology

Spending Reviews are conducted through negotiations between HM Treasury officials and departmental Permanent Secretaries who represent secretariats including Cabinet Office. Methodology includes baseline setting, efficiency target setting, and scenario modelling using inputs from the Office for Budget Responsibility and forecasting by the Bank of England. Departments submit bids and savings plans, often employing tools used by the Government Actuary's Department for long-term projections and procurement assessments referencing frameworks used by Crown Commercial Service. Cross-cutting reviews evaluate programmes like the National Health Service restructuring or defence modernization, with appraisals drawing on analyses from the Institute for Fiscal Studies, Resolution Foundation, and academic institutions such as the London School of Economics.

Political and Economic Implications

Decisions taken in a Spending Review shape delivery by bodies including the National Health Service, Metropolitan Police Service, and Universities UK, influencing outcomes in elections like the 2015 United Kingdom general election and political debates led in the House of Commons. Economic implications include effects on public investment in infrastructure projects such as Crossrail and housing programmes administered by the Ministry of Housing, Communities and Local Government. Reviews interact with macroeconomic policy set by the Bank of England and fiscal scrutiny from the Office for Budget Responsibility, affecting indicators tracked in reports by the International Monetary Fund and the Organisation for Economic Co-operation and Development.

Historical Evolution and Notable Reviews

Spending control exercises trace back to post-war public expenditure planning and evolved through administrations including those of Margaret Thatcher, Tony Blair, and David Cameron. Notable reviews include the 1990s reforms following the Maastricht Treaty fiscal disciplines, the 2010 Comprehensive Spending Review under the Coalition government that introduced austerity measures, and subsequent rounds linked to the financial crisis responses after the 2008 United Kingdom bank rescue. Later reviews during the tenures of Gordon Brown and Theresa May adjusted capital plans for infrastructure projects such as High Speed 2 and energy investments interacting with policy instruments like Contracts for Difference that affected firms such as EDF Energy.

Criticisms and Controversies

Critics from organizations like the Institute for Fiscal Studies, Britain Stronger in Europe, and trade unions such as Trades Union Congress have argued that some Spending Reviews precipitate programme cuts for the National Health Service, local councils, and welfare administered through Department for Work and Pensions. Controversies often arise over assumptions used in modelling by the Office for Budget Responsibility and accusations of politically timed announcements aligning with party manifestos, provoking scrutiny in hearings by the Treasury Select Committee. High-profile disputes have occurred over procurement choices involving contractors like Serco Group and G4S, and over forecasts later revised in reports by the National Audit Office.

Category:Public finance in the United Kingdom