Preparing for the Next Spending Review: A briefing note

This briefing note explains the pressures facing public services, and the process by which public spending decisions are taken – and explains five changes needed for the next spending review to be effective.

Resumed growth means that the post-election spending review will take place against a far more positive-sounding backdrop than either the 2010 Spending Review or the 2013 Spending Round. However, this fiscal consolidation is taking longer than the Government planned. Spending reductions are set to be a long-term feature of UK public finances, rather than a short and sharp experience.

Looking forward, more than half the planned spending cuts have yet to be made but there are substantial areas of public spending where pressures on public spending are far beyond the control of the Treasury – and in most cases this is because of increasing demand for public services. In this briefing note we look at the pressures facing prisons, the NHS and local government.

These pressures on the sustainability of government spending, together with public opinion and political support, will come together in the post-election spending review. Rather than run on similar lines to the 2010 Review, five changes are needed to address the weakness of 2010 and to face new challenges of finding further cuts:

1. Cover a longer period of time, almost certainly five years to cover the full length of the parliament.
2. Lengthen the allocation process to enable more rigour and collaboration.
3. Take decentralisation seriously through a pre-commitment and clear support from the prime minister and chancellor.
4. Plan the next phase of civil service reform to ensure Whitehall will have the people with the right skills to devise and deliver savings.
5. Prepare properly now, with the civil service taking their stewardship responsibilities seriously by serving the government both in the short term, and by planning on a longer timescale.