Strengthening incentives for cross-government working; a sharper focus on long-term outcomes; and better transparency are the hallmarks of an improved approach to government planning and spending, according to a new National Audit Office (NAO) report.
Lessons learned: a planning and spending framework that enables long-term value for money comprises eight lessons to help ministers and senior officials as they plan the 2025 Spending Review. The report is also intended to help Parliamentarians and other stakeholders scrutinise government spending and delivery.
Spending reviews were first introduced in 1998 to address inadequate government long-term planning by replacing yearly cash budgets with a system distinguishing between capital investment and day-today government spending. When NAO last examined this topic in 2018, it found underlying weaknesses, including spending decisions taken on poor data and evidence.
There have been some positive developments since the NAO last reported, including the introduction of the HM Treasury’s (HMT) Shared Outcomes Fund to test innovative ways of joining up planning and spending across the public sector.
The NAO’s report, Reducing harm from illegal drugs, documented how senior leadership and strong governance can make a difference on joint departmental working. But despite clear HMT guidance, Whitehall’s finance ministry has received fewer joint bids than it would have hoped for.
Recent national and global crises have resulted in an increasingly short-term, reactive approach to government spending. Consequently, there has been no multi-year spending review since 2021, as decision-makers dealt with the immediate economic challenges of COVID-19 and then energy price rises, rather than focusing on long-term planning.
Transparency has also waned in recent years, with departmental outcome delivery plans – tracking progress against government priorities – unpublished since 2021. It is important for government to be transparent about its objectives, plans, spending choices and risk appetite and assessments, as well as the performance and outcomes delivered.
Previous closed and competitive approaches to spending reviews led to the use of unrealistic cost estimates to gain approvals for major projects, alongside a failure to plan for inflation. As Parliament has observed, these missteps are often exacerbated by official and ministerial churn, which in turn affects accountability.
The NAO’s recommendations focus on adding greater transparency to government planning and spending, embedding good behaviours and building in evaluation from the outset.
They include:
- Annually publishing departmental outcome delivery plans and cross-cutting mission board plans.
- Publishing (post spending review) a summary of spending choices with sufficient data allowing an understanding of allocations by department, priority outcome and strategic programme.
- HM Treasury and Cabinet Office to re-balance behaviour and decision-making towards long-term value for money, backed by senior ministerial and official leadership.
Gareth Davies, head of the NAO, said: “Limited resources, amid growing challenges and ambitious missions, means real change is needed if the next spending review is to set up the government for future success.
“The government can use the planning and spending framework to help make a cultural shift towards a focus on long-term value for money.
“Our report makes practical recommendations to support this change.”
