Darren Jones' reformed spending review process can help government to deliver

Spending reviews are, in the words of chief secretary to the Treasury, Darren Jones, “one of the most important political processes of any government”. The multi-year spending review currently in train, the first under a Labour government for 17 years, will set out how much money departments will get, and what for, and shape policy for the rest of the parliament.

The government has already announced several improvements to how it will make spending decisions. These include establishing a regular cycle of two-yearly spending reviews (setting resource budgets for three years), a 10 year infrastructure strategy and five year capital budgets to provide greater certainty and stability. 

More recently, Keir Starmer’s ‘Plan for Change’ has put more meat on the bones of the government’s missions, and Rachel Reeves, the chancellor, has said she plans to deliver them by “totally rewiring how the government spends money”. On Tuesday, in a speech at the IfG’s annual conference, Darren Jones further fleshed out what this will mean in practice, with the chief secretary to the Treasury announcing that government is adopting “virtually all” of the recommendations made in the Institute’s research on spending reviews published in 2024.

Darren Jones set out a more collaborative way of running spending reviews

A major failing of previous spending reviews has been that they have tended to pit departments against one another, reinforcing departmental silos. This limits the ability to review spending across the breadth of government activity, which should be a key benefit of a comprehensive spending review. Overcoming this tendency will not be easy, particularly with a tight spending envelope. But Jones outlined a new approach that is intended to be more collaborative.

To tackle a past lack of trust between departments and the Treasury, Jones said this time the Treasury’s “cards will be on the table”, with shared dashboards giving greater visibility about spending plans and the overall envelope to avoid spending time “arguing about what the truth is”. Technology will help to digitise the analogue and outdated processes of the past. Such improvements are much needed, but Jones rightly warned that getting this right will be easier said than done.

A further way government could make the process more open and spending settlements more realistic would be to publish independently scrutinised forecasts of baseline spending for each department, which could then form the basis for negotiations on value for money savings and additional spending.  

Jones’s proposed cross-departmental “mission groups” will help support collaboration, as will holding multi-lateral negotiations, rather than closed, bilateral discussions between departments and the Treasury. The prime minister, chancellor and wider centre of government need to make clear the importance of departments engaging with these ways of working: Jones’s statement yesterday was a good first step. The ultimate test will be showing that this feeds through into allocations, so that departments are incentivised to meaningfully engage in multi-lateral discussions to get programmes funded. The Treasury could do this by setting cross-departmental budgets for cross-cutting priorities.

Watch Darren Jones' keynote speech

Thematic value for money reviews will help put evidence at the heart of the process

The government’s plan to conduct an in-depth, zero-based spending review is positive, but there is only so much evidence that can be gathered and analysis conducted before this review is due. 

The announcement of a “regular programme of thematic value for money reviews” between spending review cycles is therefore welcome. Conducting these reviews (which we termed ‘Dutch-style’ reviews in our report last year) outside the heat of the spending review will help bring in external expertise, build up the evidence base, enable cross-departmental working and make for better policy proposals which can then inform future spending reviews.

It is also welcome that the topics for these reviews will be chosen collectively by the cabinet. A key lesson from the Netherlands, where these reviews are commonplace, is that they should be genuinely cross-government exercises, with the finance ministry facilitating rather than leading them.

For these reviews to reach their full potential, welfare spending and tax reliefs should be within their scope alongside departmental spending, which has typically been the focus of UK spending reviews. Indeed, these other government outlays should be in scope of the spending review as well to ensure it comprehensively considers the trade-offs between them. 

Prioritising prevention in allocations would be a good step forward

The chief secretary said government was piloting a new model to forecast the preventative benefit of policies. Given how frequently funding for preventative programmes is diverted to cover acute pressures, this focus on understanding the value of prevention is welcome. Further protection for such spending could be provided by using the spending review to develop a definition of preventative spending and then putting a ringfence around this. 

Reforms such as those announced by Darren Jones are unlikely to hit the headlines, shift the polls or avoid painful choices in the months ahead. But a better spending review process will pave the way for decisions that are more likely to deliver the outcomes the government is prioritising and the public want.