Harvard M-RCBG Paper, ‘The Political Economy of Public Spending Reviews: The UK Experience Since 1997’, April 2019
A finance ministry-led public spending review sounds a quintessentially technocratic exercise: an opportunity to make sure that existing public service budgets are being spent as efficiently as possible; the chance to make sure that performance is being properly measured; a time to test whether public spending objectives are properly articulated and capture what the Government is trying to achieve; and a time to ensure that the allocation of public resources reflects those objectives.
This paper, drawing upon the UK experience of regular public spending reviews under the Prime Ministerships of Tony Blair and Gordon Brown between 1997 and 2010, argues that the opposite is the case. While these important activities should and do grab the attention and enthusiasm of career civil servants, the success of a spending review is vitally dependent on whether the politicians are properly engaged from the outset and throughout the spending review. In New Labour’s thirteen years in Government from 1997, it was certainly the case that spending reviews were politically led from the outset. This paper outlines the lessons learned in the UK over that period, which will be useful to governments in other countries as they plan public spending reviews for the future.
This Working Paper is based on a presentation to the European Semester Workshop in Belgium, Designing, conducting and implementing spending reviews: lessons-learned in the EU, which took place at the European Commission in Brussels, January 2019. It draws on previous presentations given by the author on IMF missions and has benefitted greatly from technical input from Richard Hughes with whom the author has worked at both HM Treasury and the IMF, advising on fiscal frameworks and performance budgeting. It also draws on Richard Hughes’ paper “Performance Budgeting in the UK: 10 Lessons from a Decade of Experience” published in Arizti et al. eds, Results, Performance Budgeting and Trust in Government, World Bank: Washington DC, 2010. It has been informed by study group discussions at the Harvard Kennedy School over the last four years and the comments of co-lecturers and students on the King’s College London course, ‘HM Treasury and an Introduction to Economic History since 1945’ which the author has co-taught since 2015.
Read the full paper here.