1 Introduction
1. The Chancellor of the Exchequer presented
his Spending Review on 20 October 2010. It was clear from the
Budget statement that this would be a review which attempted a
far-reaching reshaping of United Kingdom public expenditure. We
immediately arranged a more extensive programme of oral evidence
than in previous years, to assess both the process by which the
review was conducted, and the substance of its conclusions. As
part of that assessment, we looked in more detail at some selected
departmental policy areas. In addition to taking evidence from
the Chief Secretary to the Treasury, the Rt Hon Danny Alexander
MP, and the Chancellor of the Exchequer, the Rt Hon George Osborne
MP, we heard from Lord Turnbull, a former Cabinet Secretary, the
Institute for Fiscal Studies and Citizens Advice, experts on health,
housing and defence, and officials from HM Treasury.[1]
We also had the benefit of written submissions from a wide variety
of organisations, who responded impressively quickly. We are very
grateful to all those who gave oral evidence or submitted written
material to our inquiry.
2. In any spending review, the Treasury sits
at the heart of a process intended to assess spending priorities
across government. This Government has agreed to undertake a significant
fiscal consolidation, with a particular impact on certain departmental
budgets. The Spending Review has spelt out the allocation of that
consolidation. It has done so relatively quickly. Nor has it simply
reduced spending across the board. This is a substantial overall
package of reforms for both departmental and welfare spending.
It is also a far-reaching package, with tensions between priorities
for different departments. In areas such as housing benefit the
Government argues that it is acting to influence incentives and
behaviour in certain markets.
3. There will be political debate over both the
detail of individual reforms, and whether the overall package
carries undue economic risks. There are major risks and uncertainties
which need testing and examination. This Report identifies some
of these, but we do not attempt to resolve them. That will come
later, with Office for Budget Responsibility forecasts, full government
policy statements and the resulting analyses and debates.
4. The Government has also changed the reporting
process. Public Service Agreements have been replaced by Departmental
Business Plans, and attempts have been made to improve procurement
and financial oversight. The NAO provided us with a useful paper
on performance measurement as background to this inquiry. However,
since the Departmental Business Plans appeared some weeks after
the Spending Review, we have not looked at performance management
in any detail in this report. The changes in organisation and
approach at the centre will be one of the matters that we examine
in future financial enquiries.
5. The 2010 Spending Review is in practice the
beginning, rather than the end, of a process, and the overall
expenditure totals will be delivered by many different departments
and organisations. Even in the brief time between the Review and
this Report, more detail has emerged about the policy changes
in areas such as welfare which were prefigured in the Review.
6. Our current inquiry began the task of collecting
a wide range of evidence and putting this initial evidence on
record. It is too early to come to firm judgements. Scrutiny of
the Government's consolidation and reform plans will be one of
our key tasks over the entire course of this Parliament. We will
examine how policy and expenditure evolve, as will our colleagues
on departmental Committees. We expect to conduct regular inquiries
into the Government's fiscal and expenditure planning and the
OBR's forecasts; this regular examination will, we trust, help
our Parliamentary colleagues to assess whether the Government
is successful in meeting its objectives for public spending.
1 Carl Emmerson, Acting Director, Institute for Fiscal
Studies, and Mike Brewer, Director, Direct Tax and Welfare, Institute
for Fiscal Studies; John Appleby, Chief Economist, King's Fund,
and Simon Maxwell, Senior Research Associate, Overseas Development
Institute; Dr Paul Cornish, Head, International Security Programme,
Chatham House, Trevor Taylor, Professorial Research Fellow in
Defence Management, and Malcolm Chalmers, Professorial Fellow
in British Security Policy, RUSI; Adam Lent, Chief Economist,
TUC, Ian McCafferty, Chief Economist, CBI, Priyen Patel, Policy
Adviser Economic Affairs, Federation of Small Businesses, and
Dr John Philpott, Chief Economist, Chartered Institute of Personnel
and Development; Gillian Guy, Chief Executive, and Lizzie Iron,
Head of Welfare Policy, Citizens Advice, David Montague, Chief
Executive, L&Q Group, and David Orr, Chief Executive, National
Housing Federation; Sir
Nicholas Macpherson, Permanent Secretary, Public Services, Mr
Andrew Hudson, Managing
Director, Public Services and Growth, HM Treasury, Mr
James Richardson, Director,
Public Services, HM Treasury, and Ms
Indra Morris, Director,
Personal Tax and Welfare Reform, HM Treasury. Back
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