Money makes the world go round, and public money makes Westminster go round. The biggest undercurrent to our politics this year will be the Spending Review — a comprehensive multi-year budgeting exercise. We were expecting one this spring, but it has now been pushed back to June.
With pressure on the Government about bad growth figures, rising welfare costs and the trade risks of Trump’s presidency, Treasury Ministers are already out beating the drum that it’ll be a tough time for public spending. Even tougher than they thought it would be back when the Budget was put together, which assumed real-terms cuts for the majority of departments between now and 2029.
This will be a landmark moment for the first Labour Government in power in fourteen years, with five national missions to square against already creaking budgets.
Whitehall hasn’t had to pull off that kind of Spending Review in recent years. The three Spending Reviews I worked on the Treasury (’19, ‘20 and ‘21) were all about more money going into the system, rather than taking money out — and those felt painful enough! Now, the reality is that plenty of officials across Whitehall are sharpening their slide decks to pitch for projects which have no chance in a truly zero-based exercise which is aiming to make cuts across the board.
Some advice on “dos and don’ts” for the Spending Review, and anyone involved:
- Know the basics. For every Spending Review, thousands of pages of documentation are diligently compiled across dozens of organisations, synthesised, and sent to the Treasury. There, they’re distilled further into a handful of financial models and a few supporting facts which go into the key bits of advice. It is too easy to lose the key information about a policy in a haze of buzzwords. The policy teams which are successful at getting their projects funded know the very basics, and communicate them well. How much do you want to spend, how much are you spending now, why should it change, what impact will that have, what’s the evidence base for in support — these should be table stakes.
- Deprioritise. It’s no secret that Whitehall has a prioritisation problem. But even if it can’t force itself to stick to a handful of key priorities, it should be able to pick some things which aren’t priorities at all. A new Government after 14 years of Conservative administrations should be able to find some things it doesn’t want to keep spending on! Is the Government-backed “driverless bus” scheme in Edinburgh, which needs twice as many staff as a normal bus to operate, really a priority for the Chancellor?
- Make targeted cuts. It’s better to fund five projects well, rather than ten projects badly. In a rush to placate ‘stakeholders’, officials often parcel out the money to as many small projects as possible, but and then do none of them well. In an SR with cuts, it’s worth the Treasury and departments sharing the flak of actually cancelling a few under-performing projects, to spare the rest underfunding.
- Be bold. It’s popular to bemoan ‘Treasury-brain’, and accuse HMT of always counting the cost without realising the value of what it spends. But the money does matter. Most people’s main interaction with the State is in paying taxes. It’s right for them to want government to spend less, and for the accountants to stand up for that belief.
- Overcomplicate it. Landing a Spending Review is tricky enough, Whitehall shouldn’t make it any trickier. Departments should forgo the usual ‘bottom-up’ approach, based on compiling bids from every team, and really focus their time on the handful of big programmes which cost the most.
- “Mission-wash”. Focus in government is good. But it can distort behaviour. It’s increasingly fashionable to try and rebadge existing programmes as crucial to driving missions forward. Officials need to avoid this kind of “initiativitis” at their peril, and “keep the main thing the main thing” for each mission.
- Embrace false economies. Whilst plenty Treasury orthodoxy is true, the ‘save now to spend later’ attitude towards transformation is not. Unreformed public services will cost more to modernise the longer they are left to ossify. Transformation and innovation can be risky, but the status quo is riskier still.
- Be unrealistic. The spending framework makes it departments’ responsibility to plan within their budgets. Often, the Treasury assumes that means they’ll take difficult decisions internally to cut discretionary spending to fund new priorities or pressures. In practice, they rarely do, and baking that assumption in has made departmental budgets less realistic. Take a look at this graph from the IfG’s Whitehall Monitor: since Covid, budgets have flipped from routinely averaging underspends to routinely managing overspends — more realism is needed.
Finally, and most importantly: don’t leave reform for later. The Treasury’s favourite way of securing efficiency is “conditions” — letters setting out all the things which departments have to do in exchange for the billions of pounds they get from taxpayers. But in practice, these are rarely kept to. The Government’s promise to the NHS of “no money without reform” is good, but it’s much harder to buy the reform after you’ve already agreed to hand over the money. Our research has focussed on how efficiency isn’t just a policy for Spending Reviews, it needs to be an everyday exercise in Whitehall.
