A spending review, or occasionally a comprehensive spending review, is a governmental process in the United Kingdom carried out by HM Treasury to set firm expenditure limits and, through public service agreements, define the key improvements that the public can expect from these resources. [1]
Spending reviews typically focus upon one or several aspects of public spending while comprehensive spending reviews focus upon each government department's spending requirements from a zero base (i.e. without reference to past plans or, initially, current expenditure). The latter are named after the year in which they are announced – thus CSR07 (completed in October 2007) applies to financial years 2008–2011.
Other developed countries have similar review processes, e.g. Canada, New Zealand, The Netherlands, [2] Italy, Ireland, [3] and France. France conducted its first comprehensive spending review (called in French "la Révision Générale des Politiques Publiques") in 2008. The Netherlands have been carrying out spending reviews since 1981.
As a consequence of the COVID-19 pandemic, the 2020 review covered just a one-year period in contrast to previous years. The 2021 spending review was subsumed into the October 2021 budget.
The 2002 Spending Review (SR02) set a target for expanding the role of voluntary sector organisations in the provision of public services, anticipating growth by 5% in the period to 2005-06. [4]
The UK's 2007 Comprehensive Spending Review (CSR07) included three significant changes. The first was that it represented the first test of the capacity of the Spending Review process to plan and deliver a discretionary fiscal consolidation in the UK. The previous four Spending Reviews had taken place during periods of steady public growth in the economy from 37% in 1999–00 to 42% by 2007–08. As both the UK's then fiscal rules (the "Golden Rule" and the sustainable investment rule) began to bite,[ vague ][ citation needed ] the UK government desired to halve the real rate of growth in public spending from 4% per annum over the last decade to 2% per annum over the next three years – a 0.5% below than the trend rate of growth of the economy. A second noteworthy development in the 2007 CSR was a marked extension in the certainty that the UK system provided to public sector managers about their future budgets. Finally, CSR07 saw the UK's public service 110 largely departmental-based Public Service Agreements consolidated into 30 inter-departmental agreements. The review aimed to achieve savings of £35 billion. [5]
During 2009, the National Audit Office undertook a series of reviews of departmentally-reported CSR07 value for money savings. [6]
A spending review for the years 2011/12 through to 2014/15 was announced by the coalition government. This review was driven by a desire to reduce government spending in order to cut the budget deficit. [7]
Chancellor of the Exchequer George Osborne announced the details of the spending review on 20 October 2010. [8] The cuts were described as the biggest since World War II. [9] The review led to an £81 billion cut in public spending in the following 4 years of the parliament, with average departmental cuts of 19%. In addition major changes in welfare were announced including £7 billion of extra welfare cuts, changes to incapacity benefit, housing benefit and tax credits and a rise in the state pension age to 66 from 2020. [9] Public sector employees would face a £3.5 billion increase in public pension contributions.
The Home Office faced cuts of 25%, [10] local councils would face a yearly 7% cut in funding from central government each year until 2014. [10] The Ministry of Defence faced cuts of around 8%. DEFRA withdrew funding support from seven waste management PFI projects where least progress had been made with contract procurement and obtaining planning permission, [11] on the basis that the UK’s 2020 landfill diversion targets set by the EU could still be met without the curtailed projects. [12] The government argued that the withdrawal of funding credits reflected "reasonable assumptions", [13] and a legal challenge by Cheshire East and Cheshire West and Chester Councils against the DEFRA decision was unsuccessful. [14] In addition many other public sector bodies saw cuts to their funding. [10] Although not part of government, the BBC had its licence fee frozen for 6 years and took on the funding of the BBC World Service, BBC Monitoring and S4C. [10]
The Office for Budget Responsibility predicted that the spending review led to a loss of about 490,000 public sector jobs by 2015. [10] The NHS saw a 0.4% increase in spending in real terms over the following 4 years. [10]
A £200 million payment was announced to compensate savers in the collapsed savings society Presbyterian Mutual. [15]
A report published in late 2013 by Trust for London and the London School of Economics and Political Science estimated that local government budgets in London had taken a 33% real terms cut in central government funding for local government between 2009/10 and 2013/14. [16]
A spending review for the years 2016–17 to 2020-21 was announced by chancellor George Osborne alongside an Autumn Statement on 25 November 2015.
Chancellor Rishi Sunak delivered his first spending review on 25 November 2020. In contrast to previous years, and as a consequence of the COVID-19 pandemic, the review covered a one-year period from 1 April 2021 to 31 March 2022. [17] [18]
The 2021 spending review (SR21) was subsumed into the October 2021 budget. [19] SR21 set departmental resource and capital budgets from 2022-23 to 2024-25 and covered the devolved administrations' block grants for the same period of time. [20] Chancellor Jeremy Hunt's Autumn Statement of 17 November 2022 referred to the maintenance of committed budgets "for the remaining two years of this Spending Review", [21] and similarly his March 2024 budget speech was described as "sticking to the plan". [22]
On 29 July 2024, and after Labour had won the 2024 general election, Chancellor Rachel Reeves conducted a spending review, arguing there was a need to make "necessary and urgent decisions" because of an "unfunded" and "undisclosed" overspending of £21.9bn by the previous Conservative government. Among the decisions she made were to axe winter fuel payments for pensioners not receiving pension credit (roughly around 10 million people), and announcing the cancellation of several infrastructure projects. Shadow Chancellor Jeremy Hunt dismissed her claims as "spurious", and argued that details of all government spending had been released by the Office for Budget Responsibility. [23] [24]
His Majesty's Treasury, occasionally referred to as the Exchequer, or more informally the Treasury, is a ministerial department of the Government of the United Kingdom. It is responsible for developing and executing the government's public finance policy and economic policy. The Treasury maintains the Online System for Central Accounting and Reporting, the replacement for the Combined Online Information System, which itemises departmental spending under thousands of category headings, and from which the Whole of Government Accounts annual financial statements are produced.
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The Barnett formula is a mechanism used by the Treasury in the United Kingdom to automatically adjust the amounts of public expenditure allocated to Northern Ireland, Scotland and Wales to reflect changes in spending levels allocated to public services in England, Scotland and Wales, as appropriate. The formula applies to a large proportion, but not the whole, of the devolved governments' budgets − in 2013–14 it applied to about 85% of the Scottish Parliament's total budget.
The Gershon Efficiency Review was a review of efficiency in the UK public sector conducted in 2003-4 by Sir Peter Gershon.
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John Matthew Patrick Hutton, Baron Hutton of Furness, is a British politician who served in several offices in the Cabinet of the United Kingdom. He was Work and Pensions Secretary from 2005 to 2007, Business Secretary from 2007 to 2008, and Defence Secretary from 2008 to 2009. A member of the Labour Party, Hutton served as Member of Parliament (MP) for Barrow and Furness from 1992 to 2010.
The March 2010 United Kingdom Budget, official known as Budget 2010: Securing the recovery, was delivered by Alistair Darling, Chancellor of the Exchequer, to the House of Commons on 24 March 2010.
The Office for Budget Responsibility (OBR) is a non-departmental public body funded by the UK Treasury, that the UK government established to provide independent economic forecasts and independent analysis of the public finances. It was formally created in May 2010 following the general election and was placed on a statutory footing by the Budget Responsibility and National Audit Act 2011. It is one of a growing number of official independent fiscal watchdogs around the world.
The June 2010 United Kingdom Budget, officially also known as Responsibility, freedom, fairness: a five-year plan to re-build the economy, was delivered by George Osborne, Chancellor of the Exchequer, to the House of Commons in his budget speech that commenced at 12.33pm on Tuesday, 22 June 2010. It was the first budget of the Conservative-Liberal Democrat coalition formed after the general election of May 2010. The government dubbed it an "emergency budget", and stated that its purpose was to reduce the national debt accumulated under the Labour government.
The 2007 United Kingdom Budget, officially known as Budget 2007: Building Britain's long-term future: Prosperity and fairness for families, was formally delivered by Gordon Brown in the House of Commons on 21 March 2007. It would turn out to be Brown's last Budget as Chancellor of the Exchequer, becoming Prime Minister on 27 June 2007.
Infrastructure UK (IUK) was a division of HM Treasury within the Treasury's Public Services and Growth Directorate, which advised the UK government on the long-term infrastructure needs of the UK and provided commercial expertise to support major projects and programmes between 2010 and 2016.
Government spending in the United Kingdom, also referred to as public spending, is the total spent by Central Government departments and certain other bodies as authorised by Parliament through the Estimates process. It includes net spending by the three devolved governments: the Scottish Government, the Welsh Government and the Northern Ireland Executive.
The United Kingdom national debt is the total quantity of money borrowed by the Government of the United Kingdom at any time through the issue of securities by the British Treasury and other government agencies.
The Budget of His Majesty's Government is an annual budget set by HM Treasury for the following financial year, with the revenues to be gathered by HM Revenue and Customs and the expenditures of the public sector, in compliance with government policy. The budget statement is one of two statements made by the Chancellor of the Exchequer in the House of Commons, with the Spring Statement being made the following year.
The United Kingdom government austerity programme was a fiscal policy that was adopted for a period in the early 21st century following the Great Recession. Coalition and Conservative governments in office from 2010 to 2019 used the term, and it was applied again by many observers to Conservative policies from 2021 to 2024, during the cost of living crisis. With the exception of the Truss ministry, the governments in power over the second period did not formally re-adopt the term. The two austerity periods are separated by increased spending during the COVID-19 pandemic. The first period was one of the biggest deficit reduction programmes seen in any advanced economy since the Second World War, with the emphasis on shrinking the state, rather than fiscal consolidation as was more common elsewhere in Europe.
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The Infrastructure Cost Review was a 2010 report commissioned by the government of the United Kingdom and written by Infrastructure UK to find efficiency savings in the delivery of infrastructure projects. The British government aimed to make savings of up to £3 billion per year on current expenditure by 2015, primarily in the pre-construction phase. The report made a series of recommendations for changes in government procurement and planning. Cost savings were quickly realised and Infrastructure UK reported savings of £1.5 billion at the end of the first reporting year and £3 billion by 2014. The programme was projected to have saved £50 billion in expenditure by the end of the 2010s. Infrastructure UK was absorbed into the Infrastructure and Projects Authority which launched its Transforming Infrastructure Performance in 2017 which aims to make £15 billion in annual savings.
The 2018 United Kingdom budget was delivered by Philip Hammond, the Chancellor of the Exchequer, to the House of Commons on Monday, 29 October 2018. It was Hammond's third as Chancellor of the Exchequer since being appointed to the role in July 2016, and his last before being replaced by Sajid Javid by means of Boris Johnson's cabinet reshuffle upon becoming prime minister in July 2019. Following the budget in March 2017 the government moved the annual budget to the Autumn, with the following budget held on 22 November of the same year. On 26 September 2018, Hammond announced that the 2018 budget would be held earlier, in October, so as to avoid clashing with the final stage of Brexit negotiations. On 28 October he suggested that a second budget would be needed in the event of a failure to negotiate a Brexit deal, since the scenario would require a "different response", with a need for "fiscal buffers" to provide support for the economy.
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