julian kelly, hm treasury
TRANSCRIPT
UK Spending Reviews
Julian Kelly, Director, Public Spending
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Contents
1.The UK system & spending2.Setting parameters for Spending Reviews3.SR10 and SR13: The process4.SR10 and SR13: The results5.Key Reflections
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UK Institutional framework
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ParliamentEach year votes to approve: (a) ‘Finance bill’ – tax policy for year ahead and for future; (b) central government budgets for the year
HM TreasurySets economic and fiscal policy and public spending plans
HM Revenue & Customs Central government departments
Regional / local government Responsible for some public services +
some taxation
TAX SPEND
Office for Budget Responsibility
Independent Forecaster
Office for National Statistics
National Audit Office
LEG
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SG
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Treasury within the UK government
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HM Treasury Cabinet Office
No. 10 – Prime Minister
Spending Departments and Local Government
The OBR
• UK Budgeting system is HM Treasury’s system – with the rules published in the Consolidated Budgeting Guidance .
UK Budgeting System
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Key Features
Departmental Expenditure Limits (DEL) Line Ministry expenditure – capital & resource – e.g. Health, education, defence. y
Annually Managed Expenditure (AME): Key components:• Welfare/social security• Debt Interest• Local Authority Self Financed Expenditure.
AME51.4%
DEL48.6%
Total Managed Expenditure (TME) for 2013/14 = £718bn
A brief history of Spending Reviews
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Prior to 1992 •Public Expenditure Surveys.
•Annual bilateral negotiations between Treasury & departments.
1992-1998 •More top-down approach.•Overall “control total” set each year for next three years.•Only first year set in stone.
1998-2013 •Separation into DEL/AME and current/capital.•Firm and fixed multi-year departmental budgets set in SRs
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Contents
1.The UK system & spending2.Setting parameters for Spending Reviews3.SR10 and SR13: The process4.SR10 and SR13: The results5.Key Reflections
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The Need for Consolidation
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Source: OBR December 13 EFO
UK Spending: Expenditure v Receipts
Contents
1.The UK system & spending2.Setting parameters for Spending Reviews3.SR10 and SR13: The process4.SR10 and SR13: The results5.Key Reflections
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Anatomy of a spending Review
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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.
1-2 months
•Guidance to line ministries, including planning assumptions
•Initial departmental settlements agreed and made public.
•Bilateral discussions begin.•Cabinet Committee (PEX) constituted.
End Period •Early departmental settlements (announced)•Publish spending round (Resource & Capital and
headline departmental allocations.
Key Features
• Chief Secretary lead
• Chancellor in
reserve
• PM/Quad – final
arbiter.
Contents
1.The UK system & spending2.Setting parameters for Spending Reviews3.SR10 and SR13: The process4.SR10 and SR13: The results5.Key Reflections
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Cumulative departmental reductions 2010-11 to 2015-16
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CLG Communities
Environment, Food and Rural Affairs
Cabinet Office
CLG Local Government
Transport
Work and Pensions
Justice
HM Treasury
Law Officers' Departments
Business, Innovation and Skills
Foreign and Commonwealth Office
Home Office
Culture, Media and Sport
Energy and Climate Change
Small and Independent Bodies
DWP with non-baselined spending
HM Revenue and Customs
Defence
Single Intelligence Account
Wales
Scotland
Northern Ireland
Education
NHS (Health)
International Development
-70.0% -50.0% -30.0% -10.0% 10.0% 30.0%
Distributional impact of SR13 remains within the commitment at Budget 2010
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• Source: HM Treasury, June 2013
Contents
1.The UK system & spending2.Setting parameters for Spending Reviews3.SR10 and SR13: The process4.SR10 and SR13: The results5.Key Reflections
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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.
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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
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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)
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