Call to rewire UK government Spending Review process to create ‘always on’ approach
A radical overhaul of how the UK government runs its Spending Reviews is needed to make sure government funding decisions are more responsive and provide real-time information on public service delivery, the Tony Blair Institute has said.
The report by the institute, which comes less than a month after the UK government set out the three-year allocations in its Spending Review, said the current approach was “so bureaucratic and labour-intensive that almost any technology-powered improvements would save time and money”.
It called for the current process, which is the UK government’s central mechanism for managing public money and allocates over £2.2 trillion (US$3 trillion), to be scrapped and replaced with an ongoing “always on” approach, similar in style to private sector money management.
The ‘Reimagining the Spending Review: A New Model for Smarter Public Spending’ report has made three key recommendations to realise this approach. As well as replacing the traditional Spending Review with a more dynamic approach that aligns spending with delivery and outcomes, it also called for real-time tracking of government spending through modern technology to monitor government programmes continuously.
Read more: UK Spending Review sets out how government will make reform of the state happen
How to ensure government doesn’t ‘waste huge amounts of money on things that don’t work’
The review concluded that government should work faster to shift money to projects that work by moving from “funding by habit” to “funding by evidence”. Programmes that deliver results should be scaled up – and those that don’t should be stopped.
To do this, shorter, sharper ‘strategic reviews’ should be undertaken every two years, allowing government to continue planning for the medium-term, while remaining agile.
Dr Laura Gilbert, lead author of the report and ex-Number 10 data director, highlighted that when a company spends money, it understands that that money is limited. “If what you’re spending the money on isn’t working, the company should demand for you to stop and spend it on something else that drives the outcomes you want.
“The way the traditional Spending Review process is set up prevents this level of accountability in government. As a result, Whitehall can waste huge amounts of money – our money – on things that don’t work, and keep doing it again.
“We cannot afford to operate like this when the technology to fix it is there.”
Making the Spending Review work better
The Spending Review process was developed when Tony Blair was prime minister in 1998, with Blair calling it a “new, strategic approach to public spending”.
Under the traditional spending review process, departments provide submissions to the Treasury, usually using narrative business cases. Then, Treasury spending teams – which are often made up of civil service generalists with limited subject-matter expertise – then manually review hundreds of documents, leading to an iterative “challenge process”, where departments are pushed to refine, justify and reconfigure bids.
This leads to a period of negotiation and settlement, with teams in departments and the Treasury both manually preparing detailed analysis and strategic options for ministers.
These “often convoluted negotiations” end up being codified in settlement letters from the chancellor, setting out agreed funding and performance expectations for each department.
The report concluded that this process is both “time-consuming” and carries “large opportunity costs”.
A number of changes were made to the Spending Review process for Labour’s first review since returning to government. The Treasury used internal AI tools, nicknamed HMT-GPT, to analyse departmental submissions and generate cross-cutting insights. According to the review, HMT-GPT was used to help surface thematic links between proposals, identify geographical and policy overlaps, and help connect spending plans to intended outcomes.
However, these changes are partial, and hampered by deeper structural problems. Therefore, the report called for wider reforms to address deeper structural problems with the process itself.
Read more: UK government sets out new ‘start-up’ approach to funding digital and AI projects
Five steps to better spending
To drive this reform, the report sets out the five key steps the government should take to lay the foundations for a different kind of process in two years’ time.
The recommended approach is to:
- Rapidly pilot the new approach with a single department, quickly building a minimum-viable version of a tool that integrates financial and performance data into a shared dashboard. This would help the Treasury to understand spending on key programmes and the department to manage it.
- Publish lessons learned from this exercise, including its impact on outcomes, and use them to inform a full-scale rollout across departments, rewarding early adopters with greater autonomy on spending.
- Build a secure web-based collaborative bid-drafting and submission tool, and test it during upcoming fiscal events.
- Over time, build in more advanced AI and data capabilities, including advice on bid strength, an evidence explorer and duplication detection, working closely with users to rapidly iterate and evolve the system.
- In time for the start of the next Spending Review cycle, develop a tool that integrates spending and performance metrics from across government, and is available to departments as well as the Treasury, the Cabinet Office and the prime minister. This should be used in regular stocktakes and Cabinet meetings, so that by the time of the next Spending Review the government is able to use the tools to operate a new kind of Strategic Review, focused on outcomes and alignment to overarching objectives.
Gilbert said implementing this approach would free civil servants from the bureaucratic burden of outdated processes, and equip them with real-time insights into programme effectiveness. “We owe it to taxpayers to make sure every pound counts,” she said. “This isn’t about spending more or less. It’s about spending better – on what works, and on what improves people’s lives.”
About Richard Johnstone
Related Posts
