The Effectiveness of the UK Spending Review as a Strategic Fiscal Control Tool Introduction The economic downturn has created constrains in the allocation of limited public funds in the pursuit of seemingly limitless public needs. What was originally a measure adopted in 1998 to maximize the effectiveness of the attainment of goals has, in 2007 when the nation was in the cusp of an economic crisis and recession, gained more urgent relevance as a means of controlling the spending of precious public funds…
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Definition and history of Spending Reviews The Spending Review is ‘the HM Treasury led process that allocates public expenditures.’1 It is intended to ‘set a clear direction for reform, focused on shifting power from central government to the local level.’2 In the late 1990s, the New Labour government came into power in the U.K., and embarked on several reforms whereby public spending may be made more effectively. One of these reforms is the introduction of medium-term spending reviews. The first Comprehensive Spending Review was conducted in 1998 and published in July of that year. Three subsequent spending reviews were conducted in the years 2000, 2002 and 2004. The subsequent Comprehensive Spending Review was conducted in 2007, and the next after that in 2010.3 The diagram on the following page shows the progression of Spending Reviews from 1998 when the process was first adopted and the first Comprehensive SR was conducted, to the next CST in 2007. ...
Source: OECD Senior Budget Officials Network4 The adoption of the CST98 was in line with the public sector reform for that year, which introduced the three year spending plans, as well as the use of resource based accounting and budgeting. The review stressed greater protection for capital spending, proper asset management, and was anchored on outcome-focused performance targets.5 In 2009, the Government borrowed one pound for every four pounds it spent. As a result, the cost of debt servicing (which is comprised of interest payments on public debt) exceeds what the Government spends for England’s schools in one year.6 Significance of spending reviews as strategic tool for government Spending reviews provide government a tool for controlling public spending in two ways: (1) that during the budget planning process, proposed spending could be more effectively aligned with the strategic goals of government; and (2) that interim reviews could act as a monitoring tool to ensure that the actual expenditures are consistent with the budgeted allocations and, if not, that justification could be found which nevertheless serves the strategic goal, and where none could be found, that further spending could be halted along this line before runaway expenses could be incurred. There is a fundamental difference between the Comprehensive Spending Review conducted in 1998, 2007 and 2010, and the spending reviews conducted in 2000, 2002 and 2004. The CSR is a fundamental strategic review of spending priorities, while the SR creates ‘merely incremental changes to existing priorities.’7 There is a distinction between two types of public expenditures that are provided for in the spending reviews. The first is the annually
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