House of Commons - Spending Review 2010

Spending Review 2010 - Treasury Contents

3 Process

Star chamber

24. In June 2010, HM Treasury published The Spending Review framework, which set out the Government's plans for the Spending Review. As part of the Spending Review, the Public Expenditure Committee (PEX), referred to as the 'star chamber' by many witnesses, was revitalised. The Treasury stated that the PEX would ensure "the Government takes the time to consider collectively the effect of different options on its agreed priorities, and on different groups of society".[37] It also noted that "Over the summer, the PEX Committee will test and challenge departments' plans, and ensure that they respond to external engagement. These deliberations will be informed and supplemented by the detailed conversations that will take place between the Treasury and departments".[38]

25. The Treasury suggested that this system "draws on lessons learned from international examples of successful fiscal consolidations in the past, such as in Canada in the 1990s. They used a "Star Chamber" model of programme review boards at Ministerial and senior official level to challenge departmental spending plans using a series of key questions to promote innovative thinking".[39] In written evidence, the Institute for Government suggested that comparison with the Canadian system might not be completely appropriate:

The UK's spending review followed a fairly traditional route. The spending review committee was designed as a "star chamber", there to act as judge and jury. This was a form of committee structure that the UK is use[d] to employing, and in the relatively short timescales it could be argued it was the only choice.

The UK did not follow the model used in somewhere like Canada, w[h]ere the ministerial committee was charged with devising the plan, and deliberately contained those members of the cabinet who were most likely to be "difficult" in the process. The logic was that, by building the plan in this way, there would be more political support for taking on the difficult political challenges involved in implementing the plan.[40]

26. The initial PEX was formed of the Chancellor of the Exchequer as Chair, the Chief Secretary to the Treasury as Deputy Chair, the Foreign Secretary, the Minister for the Cabinet Office and Paymaster General and the Minister of State at the Cabinet Office.[41] The Treasury noted that "Other Cabinet Ministers will be eligible to be considered as members of the Committee once they have settled their departmental allocation".[42] Lord Turnbull told us that someone had described it to him as "a game of British bulldog: as you capture someone, they then play on your side".[43] He described the usefulness of the PEX as follows:

I don't think that the detailed negotiations get dealt with by a Committee like PEX, but they are worthwhile exercises in building your collective commitment, and they are an investment—an insurance against problems further down the line. It isn't people simply getting a bilateral deal, sidling up to the Chancellor of the day and doing a deal with him, but people feeling a collective responsibility.[44]

27. Treasury officials provided more information on how the PEX had operated. Mr Richardson, Director, Public Services, HM Treasury, told us that "in the end, the Secretary of State for Energy and Climate Change, the Home Secretary, the Secretary of State for Communities and Local Government, the Secretary of State for Scotland and the Secretary of State for Environment, Food and Rural Affairs all joined the committee".[45] He also told us that:

I think there were seven meetings of PEX in total. There were also two meetings of the sub-committee of PEX on pay and pensions, which is a rather wider group that involves the Secretary of States with the big work forces—so Health, Education, Defence and so on—and that met to discuss specific issues around particularly public sector pensions and met to discuss Lord Hutton's interim report. So there were a number of fora. There was also a committee specifically on asset sales and that met on at least one occasion; it may have met twice.[46]

28. There was however a wide range of other meetings taking place during the process. One such set of meetings concerned the 'quadrilateral', formed of the Deputy Prime Minister and the Prime Minister, Chief Secretary and Chancellor.[47] According to Mr Richardson, this group met "about" nine times.[48] The Chancellor suggested that this institution was a necessity of the Coalition. He told us that:

[...] our coalition partners need to be constantly involved. So, for example, decisions around taxation would normally be the preserve of the Chancellor and the Prime Minister, discussing it together and pronouncing it to the Cabinet on the day of the Budget. Here, at every step, we involve the Deputy Prime Minister, and the Chief Secretary is much more involved than previous chief secretaries would have been in these decisions, and we establish a quadrilateral process that worked both in the run-up to Budget and the run-up to the spending review.[49]

29. However Policy Exchange suggested that the Star Chamber may not have been as effective as it might have been. They noted that:

Previously successful consolidations have involved allowing ministers to keep a proportion of the identified savings to be 'recycled' back into their own budget (e.g. Canada in the 1990s). The prospect of membership of a 'Star Chamber' does not seem to have been an adequate replacement for such financial incentivisation given the significant number of 'last minute' deals. In any case, this process seems to have been overridden by political and time pressures.[50]

30. We questioned Treasury officials as to how well these systems had operated, compared to previous spending reviews. Mr Richardson told us that "compared with the previous Administration where the public spending committee rarely met and played a much lighter touch role, this was a more collective process—not only through PEX, but also through some of the other fora, like quadrilateral, through bilateral discussions and through some of the collective processes on big issues".[51] The Chief Secretary confirmed the collective nature of this Review:

It has been of great material benefit that we sought to have a process that was collective, where in addition to one-to-one exchanges between the Treasury and Departments and between myself and Secretaries of State, we had a Cabinet Committee—the Public Expenditure Committee—which had a key role in the major decisions that we made.

The process had very close working relationships between the Treasury, the Prime Minister and the Deputy Prime Minister, so both the Deputy Prime Minister and Prime Minister were able to give, if you like, their "political steers" to the process as it went along and the Cabinet had regular discussions about the spending review. That ensured that we took the best quality decisions that we could.[52]

The evidence we have received from those within the process suggests that the wider use of the Public Expenditure Committee, and a wide-ranging system of meetings of more select groups reflecting the new coalition arrangements, led to a collective decision making process in reaching the final position outlined in the Spending Review.

Speed

31. The Spending Review was published only five months after the election. Treasury officials explained that most of the spending reviews under the previous Government had taken about a year,[53] The Treasury felt there were two reasons for speed. Mr Richardson explained that "we inherited a position where there were no budgets set for Departments from the next financial year".[54] He also considered that:

There were also market-related reasons why it was important for the Government to have a clear fiscal plan quickly. I don't think, even if we had had more time, that it would have been wise in terms of market perceptions to have taken more time because people needed to see that we had a fully worked-up fiscal plan.[55]

32. When asked whether the spending review suffered as a result of tight timescales, Mr Hudson replied "I don't think so" .[56] He explained that:

There had been a lot of preparation because, as I said earlier, it was clear that, whoever won the election, there would have to be a spending review and that it would have to be on pretty much this timescale [...]the current settlements run out in March. It's good to get the numbers sorted early for planning purposes for everybody. It's necessary to do it for local government because of statutory requirements to consult and then set budgets by a given time. And so it was clear to everybody that this was roughly the timescale we'd have to follow.

Lord Turnbull told us that:

The first thing you notice is that this is not a hastily constructed exercise. It has been five months since the election and the civil service was working on this from the time the election was called. It has been known for two years that an exercise of this kind—an announcement of the big picture followed by an announcement of departmental settlements—would be required. So people have seen this coming and been able to plan for it.[57]

We note that while the Spending Review was conducted relatively quickly, the Civil Service had clearly been making preparations for it for some time.

Spending challenge and consultation

33. In June, in advance of the Spending Review, public sector workers and members of the public were invited to suggest money saving ideas through the 'Spending Challenge' website. Government witnesses were positive about the tool. Mr Andrew Hudson, Managing Director, Public Services and Growth, HM Treasury, said that the Treasury had "received 100,000 responses, of which 63,000 came from within the public services, and there's some savings totalling up to £500 million from things like collaborative procurement".[58] We are sceptical about how new some of the large savings from the 'Spending Challenge' are in reality. For example the Office of Government Commerce's (OGC) Collaborative Procurement Programme has been running since 2007.

34. The Chief Secretary considered the exercise was worthwhile as "it is important with decisions of this scale that you seek to engage with people" and insisted that it was not a "gimmick".[59] He stated that the suggestions had made a "useful contribution" and, as an example, explained that by abolishing National Insurance plastic cards there would be savings of £1 million a year.[60]

35. Although the Treasury and Chief Secretary were very positive about the 'Spending Challenge', we have received written evidence from organisations who felt the process of engagement and consultation could have been improved. While the TaxPayers' Alliance agreed that the 'Spending Challenge' website was a good idea in principle they felt it was "not well executed". In particular they noted that the listing and rating system for ideas resulted in most prominence for ideas which were deliberately designed to be malicious or humorous. They consider that this devalued the tool in the eyes of members of the public who wanted to engage with it seriously. Overall they "would have liked to see more effort to genuinely involve the public" rather than something which "looked tokenistic and half-hearted".[61]

36. The Institute for Government while noting some minor results from the 'Spending Challenge' stated in their written evidence that "there was potential to go much further in involving the public, and thereby understanding their concerns".[62] Reform considered that the "Government did not go anywhere near far enough to engage the public in the Review".[63] They felt this compared unfavourably with the example of Canada in the 1990's, when before plans to reduce the deficit were made there had been in-depth consultation and engagement with the public.

37. Although the 'Spending Challenge' website allowed members of the public to contribute we note that there was no straight-forward method for interest groups to put their ideas and evidence forward. This was raised by The Joseph Rowntree Foundation who stated that "there was no uniform, transparent and cross-government mechanism to feed in wider research evidence to inform decisions".[64] The British Chambers of Commerce felt that more could have been done to consult with business. They stated in written evidence that Government should have done more "to solicit views on which areas of spending were considered essential to supporting private-sector growth" and that the "Treasury could usefully have conducted a coordinated, high profile programme of consultation with business in the regions during the months leading up to the Spending Review".[65]

38. Seeking the views of public servants and the general public can produce some worthwhile suggestions for savings and income generation. This has to be set against the resources required to manage and review tools such as the 'Spending Challenge'. Short-term e-consultation can be useful but it cannot be a substitute for longer-term engagement with public sector employees and responsiveness to input from stakeholder groups. The Committee may return to the 'Spending Challenge' to examine its effectiveness.

37 HM Treasury, The spending review framework, June 2010, p 16, para 4.10 Back

38 HM Treasury, The spending review framework, June 2010, p 16, para 4.10 Back

39 HM Treasury, The spending review framework, June 2010, p 5, para 1.11 Back

40 Ev 40-41 Back

41 HM Treasury, The spending review framework, June 2010, p 16, para 4.7 Back

42 HM Treasury, The spending review framework, June 2010, p 16, para 4.7 Back

43 Q 16 Back

44 Q 16 Back

45 Q 502 Back

46 Q 503 Back

47 Q 481 Back

48 Q 482 Back