The document provides an overview of UK spending reviews and the budgeting process. It discusses how spending reviews are conducted every few years to set multi-year budgets for government departments. The last two major spending reviews (SR10 and SR13) aimed to reduce spending deficits and implement austerity measures, with most departments receiving budget cuts of 10-30% over the spending review periods. Key aspects of the spending review process include setting the overall expenditure envelope, providing guidance to departments, bilateral negotiations, and finalizing departmental allocations. Independent bodies provide analysis to inform the reviews.

1. UK Spending Reviews
Julian Kelly, Director, Public Spending
UNCLASSIFIED

2. Contents
1.The UK system & spending
2.Setting parameters for Spending Reviews
3.SR10 and SR13: The process
4.SR10 and SR13: The results
5.Key Reflections
UNCLASSIFIED
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3. INDEPENDENT
BODIES
LEGISLATURE
UK Institutional framework
Parliament
Each year votes to approve: (a) ‘Finance bill’ – tax policy for year ahead and for future; (b) central government budgets for the year
Office for Budget
Responsibility
Office for National
Statistics
National Audit
Office
Independent Forecaster
GOVERNMENT
HM Treasury
Sets economic and fiscal policy and public spending plans
SPEND
TAX
Regional / local government
HM Revenue & Customs
Central government
departments
UNCLASSIFIED
Responsible for some public services + some
taxation
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4. Treasury within the UK government
No. 10 – Prime Minister
HM Treasury
Cabinet Office
The OBR
Spending Departments and Local
Government
UNCLASSIFIED
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5. UK Budgeting System
•
UK Budgeting system is HM Treasury’s system – with the rules
published in the Consolidated Budgeting Guidance .
Total Managed Expenditure (TME) for
2013/14 = £718bn
Key Features
Departmental Expenditure Limits (DEL)
Line Ministry expenditure – capital &
resource – e.g. Health, education, defence. y
AME
51.4%
DEL
48.6%
Annually Managed Expenditure (AME):
Key components:
•Welfare/social security
•Debt Interest
•Local Authority Self Financed Expenditure.
UNCLASSIFIED
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6. A brief history of Spending Reviews
Prior to
1992
1992-1998
1998-2013
• Public Expenditure Surveys.
• Annual bilateral negotiations between Treasury & departments.
• More top-down approach.
• Overall “control total” set each year for next three years.
• Only first year set in stone.
• Separation into DEL/AME and current/capital.
• Firm and fixed multi-year departmental budgets set in SRs
06 UNCLASSIFIED
February 2014
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7. Contents
1.The UK system & spending
2.Setting parameters for Spending Reviews
3.SR10 and SR13: The process
4.SR10 and SR13: The results
5.Key Reflections
UNCLASSIFIED
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8. The Need for Consolidation
UK Spending: Expenditure v Receipts
Source: OBR December 13 EFO
UNCLASSIFIED
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9. Contents
1.The UK system & spending
2.Setting parameters for Spending Reviews
3.SR10 and SR13: The process
4.SR10 and SR13: The results
5.Key Reflections
UNCLASSIFIED
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10. Anatomy of a spending Review
Budget
•
•
•
•
Set envelope for period of SR
Announce key policies: e.g. pay
Zero based capital review
Set priorities – i.e. spending on health, schools and
overseas aid.
Key Features
1-2
months
• Guidance to line ministries, including planning
assumptions
• Initial departmental settlements agreed and made
public.
• Bilateral discussions begin.
• Cabinet Committee (PEX) constituted.
• Chief Secretary lead
• Chancellor in reserve
• PM/Quad – final
arbiter.
End Period
• Early departmental settlements (announced)
• Publish spending round (Resource & Capital and
headline departmental allocations.
UNCLASSIFIED
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11. Contents
1.The UK system & spending
2.Setting parameters for Spending Reviews
3.SR10 and SR13: The process
4.SR10 and SR13: The results
5.Key Reflections
UNCLASSIFIED
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12. Cumulative departmental reductions 2010-11 to 2015-16
International Development
NHS (Health)
Education
Northern Ireland
Scotland
Wales
Single Intelligence Account
Defence
HM Revenue and Customs
DWP with non-baselined spending
Small and Independent Bodies
Energy and Climate Change
Culture, Media and Sport
Home Office
Foreign and Commonwealth Office
Business, Innovation and Skills
Law Officers' Departments
HM Treasury
Justice
Work and Pensions
Transport
CLG Local Government
Cabinet Office
Environment, Food and Rural Affairs
CLG Communities
-70.0%
-50.0%
-30.0%
UNCLASSIFIED
-10.0%
10.0%
30.0%
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13. Distributional impact of SR13 remains within the
commitment at Budget 2010
•
Source: HM Treasury, June 2013
UNCLASSIFIED
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14. Contents
1.The UK system & spending
2.Setting parameters for Spending Reviews
3.SR10 and SR13: The process
4.SR10 and SR13: The results
5.Key Reflections
UNCLASSIFIED
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15. Reflections
• In the UK, the Finance Ministry controls the timetable
and parameter setting – major advantage.
• Owning and setting the key parameters at the start
manages expectations and provides certainty for
departments and markets;
• The negotiation should be around the margin. HMT sets
headline budgets at spending reviews – line ministries
have to plan the detail after the review.
• Parliamentary scrutiny follows allocations.
UNCLASSIFIED
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16. CSR07
SR10
Leitch Review of skills for the future
Hutton review of public sector pensions
Eddington Study on transport
Browne review of Higher Education
Sainsbury Review on science and
innovation
Strategic Defence Security Review
Barker review of land use planning
Stern review on economics of climate
change
Review of children and young people
Policy Review of Counter Terrorism and
Security
UNCLASSIFIED
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17. The SR10 process took some new approaches
• ‘Spending Challenge’: public sector workers and public
submitted ~ 40,000 ideas, leading to 25 policy suggestions
for SR
• Independent Challenge Group: external experts and Civil
Service leaders worked with HMT and departments on
innovative ideas for public spending reforms, reporting to CX
and CST
• Permanent Secretaries Spending Review Group: to address
cross cutting issues (e.g. localism, efficiency)
UNCLASSIFIED
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