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Comprehensive spending reviews: the UK and the EU

Comprehensive spending reviews are just that: they affect every area of society. But just how deep is their impact?

In the UK, the practice of conducting a comprehensive review of public spending gained widespread attention in the 2000s. The first major Comprehensive Spending Review (CSR) came in 2007, when the government attempted to contain the growth of public spending and to reduce deficit and debt accumulation. Further austerity measures were introduced in the 2010 CSR, which included 19% average departmental cuts in four years. This placed enormous pressure on particular areas of the public sector. The National Health Service (NHS), for example, struggled to maintain service standards in the face of pressures from demographic and seasonal demand; local governments were forced to cope with transfer cuts while the government limited the choices available for service delivery; and prisons struggled to deal with overcrowding and prison numbers rising above expectations.

In 2015, the newly elected government announced a new CSR in an effort to continue pursuing departmental savings and to reach an overall surplus in 2019-20. The declared aim was to increase NHS funding and defence spending and to maintain government commitments to foreign aid and schools, while reducing spending across government departments by cuts of 25% and 40% by 2019-20. Prime Minister Theresa May has expressed the intention to pursue spending review policies after Brexit, for example by reducing spending on foreign aid sent to the EU.

Have a look at this graph to see the breakdown of UK public sector spending for 2016-17: Office for Budget Responsibility: A brief guide to the UK public finances

Source: Office for Budget Responsibility: A brief guide to the UK public finances (Click to expand)

Across the EU over recent years member states have also been asked to contain the growth of expenditures. The Economic and Financial Affairs Council of the Council of European Union (Ecofin) has recommended that areas of expenditure (and revenues) should be planned over a period of at least three years and measures should be taken to limit public spending. Unlike the UK, most other European countries focus public expenditures on health, education and general public services, however there’s a growing focus on increasing social protection programmes, especially since the 2007-8 financial crisis. You can see the breakdown of spending per country in the table below. Compare UK expenditures against other EU members to see the main differences.

EU expenditures

Source: Pench, L., and M. Governatori, The quality of public expenditures in the EU, EU Commission Occasional Papers No. 125, 2012 (Click to expand)

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This article is from the free online course:

Understanding Public Financial Management: How Is Your Money Spent?

SOAS University of London