Completing a Spending Review this year would now be “a very tall order” and departments should start to prepare the ground for a 2020 exercise instead, the Institute for Government has said.
Martin Wheatley, a senior fellow at the think tank, has said that new chancellor Sajid Javid must quickly decide whether to attempt the full, three-year Spending Review this year, as the government’s current financial plans, agreed in the 2015 Spending Review, will end next March.
In his Spring Statement in March, the then-chancellor Philip Hammond said the Spending Review would take place in summer, “assuming a Brexit deal is agreed over the next few weeks”.
But it looks unlikely a full review will be possible, given no Brexit deal has been reached so far and Boris Johnson has replaced Theresa May as prime minister, Wheatley said.
“If the Spending Review had run on Philip Hammond’s timetable, then it would already be underway, but it now looks like a very tall order to complete a three-year Spending Review before an autumn Budget," Wheatley wrote on the IfG's blog.
“This is partly because of uncertainty about Brexit. Without knowing when and how it will happen, it is difficult to predict the economic and fiscal consequences – this makes decisions about spending across government departments ever harder to make.”
The change of government ministers, as well as speculation that the Budget may be brought forward to September, “would make it impossible to undertake a Spending Review”, he said.
“So an early decision for Sajid Javid will be whether to defer the Spending Review to 2020 and instead attempt a much more limited exercise this year to patch up public service budgets for 2020-21."
As a result, putting in place a one-year plan this autumn, and delaying the three-year review until 2020, “may be the only practical way forward for the new government” and the chancellor “needs to make sure work starts now to prepare the ground for 2020”, Wheatley said.
This would be “bad news for those planning and managing big public services” as value for money depends on having a clear medium-term view, he said. “The only positive that the Treasury can salvage from the wreckage of this year’s process is the chance to use this extra time to prepare.”
Wheatley said that in preparing for a 2020 Spending Review, civil servants need to make sure they have strong evidence and analysis on the big, difficult issues – and ensure that this is well understood by the ministers who will be making the decisions.
“Departments and public bodies will need to lead on gathering this evidence, and the Treasury needs to study it – and demonstrate that it cares – before doling out the cash. The Treasury then needs to figure out a way to conduct a process which results in a review that can actually be followed – in contrast to the 2015 Spending Review’s plans for ambitious savings which unravelled on contact with reality.”