Managing Budgeting in Government - Public Accounts Committee Contents

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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Prepared 8 March 2013