The Chancellor, George Osborne, will set out the Government’s four-year public spending plans in the Spending Review at 12:30 on Wednesday 20 October 2010.
An introduction to Spending Review
What is a Spending Review?
The Spending Review is a Treasury-led process to allocate resources across all government departments, according to the Government’s priorities. Spending Reviews set firm and fixed spending budgets over several years for each department. It is then up to departments to decide how best to manage and distribute this spending within their areas of responsibility.
In addition to setting departmental budgets, the 2010 Spending Review will also examine non-departmental spending that cannot be firmly fixed over a period of several years, including social security, tax credits, some elements of local authority spending and spending financed from the proceeds of the National Lottery.
Spending Reviews have been an important part of governmental planning since the late 1990s. Prior to their introduction, departmental budgets were set on a year-by-year basis which made multi-year planning more difficult.
The 2010 Spending Review will cover the four years from 2011/12 to 2014/15.
When will the outcome of the 2010 Spending Review be announced?
The Chancellor will make a speech and present the Spending Review to Parliament on 20 October 2010.
How does the 2010 Spending Review relate to the June Budget?
The June Budget set out the overall level of public spending for the four years from 2011/12 to 2014/15. This is often referred to as the spending envelope.
The 2010 Spending Review is the process through which this spending is allocated to pay for all areas of Government activity including public services, social security, and administration costs.
How are public spending levels (also known as the spending envelope) set?
Public spending levels were set in the June Budget by looking at how much Government can spend whilst meeting its plan to reduce the deficit, given the level of forecast economic growth and taxation.
The June Budget announced that the spending envelope will increase from £640bn in 2011/12 to £659bn in 2014/15. In the absence of any policies that affect Government spending, it is reasonable to assume that over the next four to five years total Government spending would have grown in line with general inflation in the economy. Compared to that assumption, Government spending will be £83bn lower in four to five years’ time as a result of planned cuts inherited by the Government – and new policies announced in the June Budget.
The June Budget announced some specific cost reduction measures, including £11 billion of welfare reform savings and a two year freeze in public sector pay, except for those earning less than £21,000 a year.
How is this Spending Review different to previous ones?
Due to the scale of Britain’s deficit, the 2010 Spending Review will necessitate some tough choices about how the Government allocates spending.
Successfully reducing the deficit will require a completely different approach. So at the 2010 Spending Review, the Government will:
- think innovatively about the role of government in society;
- take decisions collectively as a Government, led by the Public Expenditure Committee of senior Cabinet Ministers appointed by the Prime Minister and chaired by the Chancellor to advise the Cabinet on the high-level decisions that need to be taken; and
- consult widely with experts and the wider public, to get their ideas
The Government has said that its approach to these tough choices will be guided by the principles of freedom, fairness and responsibility. It has also said that these choices should be supported by new and radical approaches to the provision of public services.
In addition, the Government appointed an Independent Challenge Group (ICG) of Civil Service leaders, complemented external experts, to bring independent challenge to the Spending Review process. The group will have a remit to think innovatively about the options for reducing public expenditure and balancing priorities to minimise the impact on public services.
How have you consulted with the public and what difference can the public make to the Spending Review?
The Government launched the Spending Challenge to give public sector workers and the general public the opportunity to submit their ideas on how government could get more for less and tackle the deficit. Three of the ideas are already being taken forward.
What is the process for determining departmental settlements?
At Spending Review 2010 decisions will be made collectively by the Government. Leading the collective approach is a Committee of senior Cabinet Ministers, called the Public Expenditure (PEX) Committee. This is sometimes referred to as the Star Chamber.
The PEX Committee will advise the Cabinet on the high level decisions that will be taken in the Spending Review.
Throughout the process of preparing the Spending Review, PEX Committee meetings will be supplemented by discussions between departments and the Treasury.
A Permanent Secretaries Spending Review Group also meet to build the Government’s understanding of the issues, ensuring support for the overall principles and approach and discussing cross-cutting issues.
What is a Star Chamber?
The Star Chamber takes its name from an English court of law established in the 15th century in the Palace of Westminster. The court took its name from the room in which the court met.
The court was initially intended to bring prominent and powerful people to justice, where ordinary courts could not.
The term Star Chamber was used again in the 1980s for meetings between senior departmental Ministers and the Treasury to resolve spending issues.
Who are the members of the Public Expenditure (PEX) Committee / Star Chamber?
Where can I find additional information on the Spending Review?
The Chancellor set out the Government’s approach to the Spending Review on 8 June 2010. The accompanying document, The Spending Review Framework sets out details of the Government’s strategy for delivering the Spending Review.