Jane Dudman: Evidence-based budgeting? George Osborne's approach to the Spending Review leaves much to be desired

Opinion: A private business of comparable size would give as much data as possible to its leaders, to enable them to assess competing priorities

By Jane Dudman

20 Nov 2015

Paris is still in shock after the terrorist attacks of 13 November, but its residents have made clear that normal life must continue. One such sign? Two new sets of outdoor equipment in the 20th arrondissement.

These are the first fruits of an innovative participatory budgeting programme launched last year by the city’s mayor, Anne Hidalgo, that from now until 2020 will see 5% of the city hall investment fund – some £335m (€426m) –  allocated to projects voted on by the people of Paris. Other projects include planting greenery on city walls.

And while £335m is a drop in the ocean compared to the £750bn that will be allocated by chancellor George Osborne in this month’s Spending Review, the Parisian scheme, and others like it around the world, are a more directly democratic way to allocate public funds than we will see here in the UK, where Osborne has spent the past six months deciding where the axe will fall on public sector budgets.

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The chancellor will announce his full rollcall of cuts of 25 November, which will outline departmental budgets for each of the four financial years up to the next general election in 2020.

There won’t be much left to reveal, since the process of allocating cuts is now widely pre-announced. The past few months have been spent by ministers and departmental chiefs poring over spreadsheets and options, while dire warnings of the effect of cuts have poured in. From the head of NHS England warning that the Spending Review may not provide a workable solution for the NHS, to the Conservative-led Local Government Association warning of inevitable cuts to social care, and former senior diplomats urging the chancellor to spare the FCO from further cuts, there have been no shortage of admonitions for Osborne about impact of his plans on public sector staff and our society.

Is this really the best way to conduct such an important process, with blatant lobbying by interested parties and much not-very-behind-the-scenes ministerial jockeying? Osborne has been forced, for instance, to deny reports of a bitter argument with the work and pensions secretary Iain Duncan Smith over the fate of the latter’s Universal Credit plans.

After the 2013 Spending Review, which set the 2014-15 departmental budgets, Andrew Harrop, general secretary of the Fabian Society, said the process exemplified the short-termism of modern government, with the chancellor simply rolling forward most of his existing plans for another year. “We should never do Spending Reviews like this again,” he wrote. “Instead the expenditure process should be turned on its head and ministers should start by thinking decades into the future and then work backwards.”

What would the chancellor need, if he were putting together a truly democratic, evidence-led budget for the next four years?

First, he’d want excellent information about the state of current public services and about the impact of potential cuts on those services. A private business of comparable size would give as much data as possible to its most senior managers, to enable them to assess competing priorities for the business. They would, generally, have a clear and lengthy timeline for collating that information and setting budgets. In the civil service, the Home Office can’t even calculate its own budget and was forced earlier this month to postpone plans for a new police funding formula.

Not that there is a private business of comparable size. The largest company in the FTSE 100, mining conglomerate BHP Billiton, has a turnover of £148bn, while BP, where civil service CEO John Manzoni used to work, has a turnover of £91bn. Both pale into the shade against the amounts the chancellor needs to consider. Manzoni himself has been heard to observe that no private business would set its budgets this way.

Jill Rutter, former senior civil servant and programme director at the Institute for Government, has also criticised the secrecy that surrounds the process. Giving the Cabinet no advance knowledge of the budget arithmetic is a poor way of making fiscal policy, she points out.

How could things be better done? One potential answer has come from the former head of the civil service and cabinet secretary, Lord O’Donnell. An economist by training, O’Donnell has now turned his attention to wellbeing. He recently wrote a fascinating Guardian article, outlining what the Spending Review could look like, if the government were to put quality of life at the heart of its policy.  O’Donnell has compiled a list of spending priorities that would aim to reduce inequality and provide real evidence on what actually works. He calls for a government with a compelling vision – to improve everyone’s quality of life.

That’s something Parisians may well agree with, as they begin, even in the face of recent events, to enjoy their outdoor workouts and green walls.

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