Select Committee on Environmental Audit Minutes of Evidence


2000 Spending Review Guidance (extract)

A.  OVERVIEW

  1.  This pack is the Treasury's guidance to departments on the preparation of their submissions to the 2000 Review.

Coverage of the Review

  2.  The 2000 Review will roll forward existing plans for 2001-02, converting these to resource terms, and will set new resource-based plans for the following two years. Apart from the technical adjustments necessary to make the change to resource budgeting, the strong presumption is that plans for 2001-02 will remain unchanged.

  3.  The Review continues the three-year planning cycle established in the Comprehensive Spending Review. The three-year plans it sets for Departmental Expenditure Limits (DELs) will be firm and will not change, unless in the case of some major shock or if inflation varies substantially from forecast.

  4.  The 2000 Review will not involve the zero-based analysis of all programmes undertaken in the Comprehensive Spending Review (CSR). But it will look at some issues in depth, and must make sure that the Government's new spending plans fully reflect its priorities and the scope for greater effectiveness and efficiency in service delivery.

Public Service Agreements; Output Based Analyses

  5.  A central feature of the Review will be that all spending must be linked to clear objectives and outputs. The Treasury proposes to agree new Public Service Agreement (PSA) targets at the same time as setting new spending plans, so that outcomes, outputs and resources are considered in parallel. Departments are required to prepare a draft new forward looking PSA as one of their initial submissions.

  6.  In making proposals for new resources departments will need to be able to say what specific, quantified increase in outputs against the Government's objectives these increases in funding would buy. Performance against existing Public Service Agreement (PSA) targets will be taken into account in deciding allocations in the Review. Proposed spending for which departments are unable to adduce definite outputs will be subject to specially close scrutiny.

  7.  Departments are asked to submit an output based analysis of the pressures and priorities facing them by 18 February 2000. Guidance on preparing this is at Section B. Guidance on preparing a draft PSA is at Section C below. This must also be submitted to the Treasury by 18 February. Section C also provides guidance on preparing a draft Service Delivery Agreement (SDA), the companion document to the Public Service Agreement which will set out key commitments for the management of the public sector. Drafts of SDAs for each department must be submitted to the Treasury by 30 March.

Capital investment; Departmental Investment Strategies

  8.  Sound strategic planning of both new capital spending and the utilisation of existing assets are essential to delivery of the Government's objectives. Departments are challenged to propose outcome-focussed, innovative measures to modernise the public infrastructure to meet these objectives, covering conventional and PFI routes. Plans for investment, effective management of existing assets and robust mechanisms for decision making should be set out in a draft Departmental Investment Strategy (DIS) to be submitted by 17 March. Guidance on preparation is at Section D below.

Resource Budgeting

  9.  The Review will be conducted in resource terms. The Government is committed to placing its accounting and budgeting on a more commercial, accruals footing. Over the course of 1999 all departments have been dry-running resource budgeting procedures with the Treasury. Guidance, drawing on the lessons of this dry run, on converting existing cash baselines for 2001-02 into resource terms, and on resource budgeting policies, is at Section E below. This guidance is provisional pending final decisions by Ministers on the detailed set of budgeting assumptions to be employed. Final guidance will be circulated at the end of November. Baselines need to have been agreed with departments' spending teams and submitted to the Treasury by 17 January 2000.

Cross-cutting reviews

  10.  In preparing their own submissions departments will wish to take account of linkages and overlaps with issues being covered in cross-cutting reviews.

  11.  Further guidance on the remits, special requirements and timetable for cross-cutting reviews will be circulated when the list of issues suggested by Ministers for cross-cutting treatment has been approved by the Prime Minister.

Themes

  12.  The Chief Secretary's letter of 4 August stated that the Review's overall aim would be to determine how best departments' programmes can contribute to the achievement of the Government's objectives, including in particular its aims of:

    —  opportunity for everyone to fulfil their potential through education and employment;

    —  a fair and inclusive society in which communities are healthy and secure;

    —  higher productivity, sustainable economic growth and effective co-operation with our European and international partners.

  13.  The Review will examine how departments' programmes and proposals contribute to the Government's objectives and especially these overarching themes. It will entail a rigorous scrutiny of departments' performance in delivering effective and responsive services, improving efficiency, and managing assets and other resources. When drawing up their proposals, departments will wish to consider how they take account of the views and needs of different client groups. Departments are asked in particular to consider how their proposed new objectives, new targets and spending proposals take account of sustainable development; equality; productivity; employment and employability; child poverty; and the Modernising Government agenda. Guidance on these issues is contained in Annex A.

Timetable

  14.  Section F sets out an indicative timetable for the main stages of the Review. In summary, the key early deadlines for departments are:



17 January 2000    Departmental baselines agreed with spending teams and submitted to Treasury
18th FebruaryDepartments' draft PSAs and output based analyses submitted to the Treasury
18 MarchDepartments' Departmental Investment Strategies submitted to the Treasury
30 MarchDepartments' draft Service Delivery Agreements submitted to the Treasury


Contacts

  15.  A list of contacts for each departmental review, in the Treasury and in lead departments, is at G. This is intended to help officials make contact with related areas of work. Contact names and numbers for cross-cutting reviews will be circulated once the Prime Minister has approved the list of suggested topics.


 
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Prepared 16 March 2000