1 Background
1. Since 1998 the Treasury has run spending reviews
every two or three years to set the medium-term allocation of
spending across government departments. Spending reviews set spending
boundaries (envelopes) for departments based on their bids and
negotiations with the Treasury. Departments' settlements contain
some information on what their funding will be spent on, but in
practice they have considerable freedom to decide how they allocate
funding. Departments operate within the rules the Treasury sets
and it monitors their adherence. The Treasury's aim is to keep
overall spending under control, but also to ensure departments
are incentivised to prioritise their spending to provide high
quality public services and value for money to the taxpayer.[2]
2. Spending is split into two main types. Departmental
Expenditure Limits (DEL) comprise: capital investment in assets
such as buildings and equipment; and resource spending on programmes
and administration, which is the main component accounting for
nearly 90% of the total. The other main type of spend, Annually
Managed Expenditure (AME), is on items such as welfare and benefits,
where expenditure is outside the Department's direct control.[3]
3. The fiscal and political environment for Spending
Review 2010 (SR10) was different to previous reviews as it focused
on reducing spending. The Government committed itself to spending
cuts totalling £203 billion over the four years. The Treasury
ran the process for SR10 between June and October 2010 - treating
the different types of spend in different ways. It asked departments
to split their resource spending into up to five high level priority
areas, and then negotiated these settlements, including proposed
savings, bilaterally with each department. For capital spending,
the Treasury ran a separate exercise in which it collated all
proposed spending on individual projects and programmes from across
government and compared them in terms of the value they were expected
to deliver.[4]
2 C&AG's Report para 1.1, 1.6-1.7, 1.10 - 1.11 Back
3
C&AG's Report para 1.7 Back
4
C&AG's Report paras 1.12 - 1.16 Back
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