Spending Review: What’s it all about?

Every few years, the British government undertakes a process that determines how much money every public service — from the National Health Service and schools to the police and the courts — will receive for the years ahead. This process is called a Spending Review, and while it may lack the dramatic headline moments of a Budget, its consequences are in many ways more far-reaching, because it sets the financial foundation on which every aspect of public life is built. In 2019, with Brexit uncertainty dominating political debate, a scheduled multi-year Spending Review was eventually compressed into a one-year Spending Round — but its significance was no less real.

The mechanics of a Spending Review involve each government department bidding to HM Treasury for the funding it believes it requires. Treasury officials then scrutinise these bids, challenge assumptions, and negotiate settlements with departmental ministers in a process that can take months. The resulting allocations are announced publicly and form the basis of departmental budgets. Crucially, Spending Reviews typically set what are known as Departmental Expenditure Limits — the caps on day-to-day running costs and capital investment for each department — rather than demand-driven spending like welfare benefits, which fluctuates with economic conditions.

The September 2019 Spending Round, announced by Chancellor Sajid Javid, was politically significant for its explicit rejection of austerity. Javid declared it was time to ‘turn the page’ on the cuts that had defined public spending since 2010, announcing the fastest planned increase in day-to-day departmental spending in 15 years — a 4.1 per cent real-terms rise across government departments. Every single department received at least an inflation-matching increase, the first time this had happened since 2002. The NHS received a further cash uplift of £33.9 billion per year, schools saw their budgets rise, and the Home Office secured funding for 20,000 new police officers.

For ordinary people, the relevance of a Spending Review becomes visible only gradually — as class sizes shrink or grow, as waiting times at hospitals lengthen or shorten, as potholes on local roads get filled or ignored. It is the least glamorous but most consequential machinery of government: the annual translation of political promises into the pounds and pence that determine whether public services can actually deliver. Understanding what a Spending Review is — and demanding that politicians explain clearly how they intend to run one — is, in the end, one of the most practical forms of democratic engagement available.