Regular spending reviews can help governments to systematically review existing expenditure to reallocate funding in line with government priorities and create fiscal space for emerging spending needs. Nearly all OECD countries have implemented spending reviews. Each country takes its own approach, but experience shows that effective spending reviews should have clearly specified objectives, scope and governance arrangements, and produce recommendations that can contribute to decisions in the budget process.
Quality Budget Institutions
Developments in OECD Countries
Abstract
The government’s budget process focuses mostly on new and additional spending, driven by the desire to progress policy priorities and respond to emerging needs. Each budget cycle brings forward new initiatives, typically outpacing the fiscal space available between top-down ceilings and existing expenditure baselines. This creates pressure to prioritise among competing proposals.
To ensure fiscal sustainability and effective resource allocation, governments can use spending reviews to scrutinise the existing expenditure baseline. Well-designed spending reviews help identify opportunities for reallocation, efficiency gains, and better alignment of existing programmes with government priorities.
The benefits of spending reviews are well recognised across OECD countries, as nearly all OECD countries have adopted spending reviews (Figure 5.1). This includes countries with longstanding practices, such as Denmark and the Netherlands, as well as countries that started to use spending reviews more recently.
Percentage of OECD countries
Note: The number of OECD countries has increased over time. The data is for survey respondent OECD countries at that point in time. The 2020 dataset refers to all current 38 OECD countries. In 2023, 34 OECD countries out of 35 survey respondent OECD countries implemented Spending Reviews.
Source: OECD (2023), Survey on Spending Reviews, Question 1.
With spending reviews established in nearly all OECD countries, the challenge is to continue to improve the effectiveness of these tools as fiscal conditions change. For OECD most countries, this will involve:
1. Setting objectives that respond to the current government’s policy priorities and fiscal objectives while preserving a link to budget decision-making.
2. Establishing governance arrangements for running an effective spending review.
3. Ensuring spending reviews are linked to the budget process and inform budgetary allocations.
Spending reviews are tools for systematically analysing the government’s existing expenditure. They are clearly linked to the budget process. The purposes of a spending review include: (i) enabling the government to manage the aggregate level of expenditure; (ii) identifying savings and/or reallocation measures; and (iii) improving effectiveness and efficiency within programmes and policies. (Tryggvadottir, 2022[20])
The emphasis on finding targeted savings from spending reviews and the close integration with the budget process distinguishes spending reviews from policy evaluation. Once institutionalised, spending reviews can become a permanent feature of the budget process with strong engagement from ministers and senior officials in the government.
5.2.1. Spending reviews identify savings to reprioritise in the budget
Spending reviews create a mechanism to review existing spending in order to fund new priorities. They give officials a mandate to review existing spending and to propose options for making targeted savings or reallocations that can be included in the budget.
A spending review can examine a specific programme (e.g. state pension), portfolio (e.g. Ministry of Social Affairs) or cross-cutting area of spending (e.g. public procurement). It can assess the strategic value of a particular spending area or propose ways to deliver similar outcomes with fewer resources by improving efficiency or eliminating duplication.
Savings measures can be used for different purposes, including to reduce legacy spending or to reallocate resources to higher priorities. This helps to align spending with government policy objectives and fiscal targets. It also gives the government options to free up fiscal space for new policy measures within medium-term expenditure ceilings.
Spending reviews are an alternative to budget cuts that apply the same percentage reduction across all ministries. A general cut to spending can undermine the quality of expenditure by cutting spending for government priorities, high-performing ministries and programmes, and services that are already under-resourced.
Regular spending reviews reduce the dependence on broad-based cuts to ministry budgets and ensure that changes to existing programmes are politically and operationally feasible. Even when fiscal positions improve, a well-designed spending review can help to show whether programmes remain relevant to the government’s policy and fiscal objectives.
5.2.2. Spending reviews are closely linked to the budget process
Run regularly, the spending review process has its own cycle that is closely aligned with the budget process (Figure 5.2). Each cycle can involve multiple reviews covering different areas of the budget. This creates a structured process to:
1. Define the scope and objectives of each spending review.
2. Prepare savings/reallocation options and recommendations.
3. Determine which options to include in the budget and monitor implementation, where necessary.
The timeline for spending reviews ensures that recommendations can contribute to budget negotiations. This allows ministers to take decisions that include options for savings from existing expenditure.
A country’s spending review framework sets out how each spending review will be run. This determines what will be reviewed, why, when, how and by whom. The framework also sets requirements for the transparency, independence and quality assurance of spending reviews. The core features can be stable for many years, though each spending review will have its own goals and modifications to suit the government’s needs.
Source: OECD.
5.2.3. Spending reviews are implemented in a variety of ways
The experiences from OECD countries show that there is no single approach to spending reviews. Every country has found its own way to design and implement spending reviews. In some cases, governments adapt existing processes to focus more on finding savings. In other cases, governments create new structures to run spending reviews. As a result, there are different interpretations of what a spending review should do and how.
Some of the important differences between spending reviews across OECD countries are:
Scope and timing: Most countries run targeted spending reviews that assess specific ministries or programmes and generate recommendations for the annual budget process. In a few cases, the spending review aims to cover all (or most) ministries. A spending review of this nature is an intensive exercise so it is usually run periodically, for example to coincide with the election of a new government or the process for setting multi-year budget ceilings for ministries, or both where these coincide.
Governance and responsibilities: The spending review is usually led by the CBA with the involvement of line ministries. In a few cases, the CBA conducts the spending review and generates recommendations for the line ministry to respond to. However, it is more common for line ministries to produce the recommendations or to work with the CBA and other experts in a joint review. A small number of OECD countries have passed the responsibility for running spending reviews to an independent body, such as an IFI or SAI.
Adaptability is one of the strengths of the spending review. Countries with a long experience of conducting spending reviews have often experimented with different approaches depending on the needs of the government, the pressures on the budget, and the capacity and information available.
An effective spending review is both a political and an administrative exercise. Strong engagement from ministers helps government officials to focus on issues that are important for the government. Political leadership also creates space to challenge existing programmes and ways of working. This mandate for spending reviews is best secured early in the review process, when the scope and objectives of the spending review are decided.
The broad adoption of spending reviews shows that OECD countries increasingly recognise the contribution of regular spending reviews to sound budgetary practices. However, many OECD countries have found that spending reviews need to be able to respond to the government’s changing demands and to maintain a focus on improving the efficiency of spending. Governments do this by running regular reviews, by using spending reviews flexibly, and by setting targets for savings measures that can help build fiscal space for the government’s priorities.
Spending reviews in the Netherlands have broad, cross-party support. The results of past reviews contribute to public debate and can influence party manifestos and the formation of the coalition agreement for a new government. Regular spending reviews are also seen as a key tool for the government to progress the budget plans set through the coalition agreement.
The figure below shows the sustained commitment to regular spending reviews since they were established in the 1980s. The orange bars indicate the years when spending reviews covered a broad range of spending, either to support fiscal consolidation (1980, 2009) or inform an upcoming election (2020). The blue bars reflect the regular programmed approach to spending reviews in the intervening years. These regular reviews explore issues of importance for the government, while also aiming to cover all areas of expenditure over a parliamentary term.
Number of spending reviews
Source: Ministry of Finance, the Netherlands.
5.3.1. The objectives and scope of spending reviews respond to a changing mandate
The demand for spending reviews tends to be higher at the start of a government’s term, or when the government is committed to fiscal adjustment. Several OECD countries first introduced spending reviews to address fiscal pressures, including Denmark and the Netherlands in the 1980s, Canada in the 1990s, and Ireland after 2009. In these conditions, spending reviews were used to identify savings that could contribute to fiscal consolidation and align public expenditure to the government’s policy agenda. In many cases, countries also aimed to review a wide range of public expenditure at the same time, often covering all (or most) ministries in a single spending review round. Having the ability to scale up spending reviews to meet these demands is important to enhance impact.
When fiscal pressures ease, there may be less external pressure to review expenditure baselines for savings. In such circumstances, governments have responded by using spending reviews not only for expenditure control, but also to enhance value for money and to align spending with government priorities. Many countries also reduced the scope of spending reviews and instead prioritised sustained and more frequent spending reviews, which have an incremental impact over time (as illustrated in Box 5.1 using the example of the Netherlands).
5.3.2. Regular spending reviews build impact
Spending reviews should be conducted regularly, which usually means annually as a routine part of the budget process. Spending review topics should focus on key priority areas of spending for the government. Over time, it is important that no area of expenditure is excluded from the spending review process.
OECD countries adopt various strategies when it comes to the coverage of spending reviews:
Periodic reviews: Covers expenditure that is subject to negotiations over multi-year spending plans, as is the practice in Denmark (for large spending ministries with multi-year political agreements on spending plans) and the United Kingdom (for setting multi-year expenditure ceilings).
Regular reviews: Covers most expenditure over a given period, as has been used in Ireland where the 2017-2019 Spending Review aimed to cover all expenditure over three years. Similarly, in the Netherlands where a programme of spending reviews is part of the coalition agreements.
Regular reviews can help to incrementally build the understanding of expenditure baselines. Consistent application can also help to integrate spending reviews into the normal culture of budgeting.
5.3.3. Flexibility of spending reviews maintains relevance
Spending reviews are highly adaptable processes. OECD countries have used spending reviews to explore a wide range of issues, including expenditure related to individual ministries; specific programmes or policies; cross-sectoral policies; public administration costs; and financial management processes. Denmark has developed different types of spending reviews that are used to fulfil different purposes (Box 5.2). The Netherlands produces a mix of options that are likely to be implemented by the current government and options that can inform the public debate for the next coalition agreement.
Denmark has run spending reviews since the 1980s. Spending reviews are a tool the government uses to create fiscal space for new spending without raising expenditure ceilings. Spending reviews are grouped into four main types that serve different purposes:
Recurring spending reviews are conducted periodically (typically every 4-5 years) for policy areas with multi-year budget plans that are set through political agreements (defence, police, courts, the royal theatre, and the railroad authorities).
Regular spending reviews covering a number of specific institutions or policy areas each year. These are usually conducted in response to a specific problem or development, such as when a ministry or public entity has been subject to a significant change in responsibility.
Strategic spending reviews are used to guide strategy for a specific policy area or function. They may aim to increase efficiency or build knowledge about emerging trends or reforms. For example, a 2008 review examined the possibility of establishing shared government IT and administration services.
Directly implementable spending reviews make proposals to free up fiscal space, with little or no new analysis. The Ministry of Finance maintains a catalogue of these reviews to accommodate new spending pressures. They are deployed “offensively” to create fiscal space or “defensively” to accommodate emerging pressures.
The government typically conducts between 5-10 spending reviews each year through a process that is closely integrated with the annual budget cycle. These are guided by a general target to identify a minimum savings of 2% of the spending areas under review, with specific savings targets included in the Terms of Reference of each review. Topics are decided by the Economic Co-ordination Committee, which is chaired by the Minister of Finance. The spending reviews involve the Ministry of Finance and relevant line ministries.
When the reviews are completed, the Ministry of Finance prepares a report for ministers on the findings of the spending reviews. The report often includes a discussion on implementation challenges and potential savings (as shown in the in illustrative example below) to help compare the recommendations.
Source: Lange (2024[21]).
5.3.4. Savings targets focus the spending review process
Budgetary targets set at the start of the spending review process help to clarify the goals of a spending review and provide a specific link to the budget. This typically involves a target for the value of savings that need to be identified in the final spending review report, based on the objectives of the spending review.
Savings targets are sometimes associated with periods of austerity, but this misunderstands their value. Countries such as Denmark and Norway use targets in spending review processes to keep spending reviews focused on their core objectives. By requiring the spending review to identify savings, ministers gain information about how they could use existing resources differently. It generates information for future budget negotiations on how best to advance the government’s policy agenda.
In circumstances where savings targets are viewed with caution, one option is to identify more than one savings target to enable the spending review to provide ministers with options. The Netherlands and the United Kingdom have sometimes asked for scenarios that would achieve a 10% or 20% reduction against the baseline costs, while Ireland has targeted 5% and Denmark 2%. These scenarios can be produced together with other options, such as a cost-neutral scenario.
One of the most important ways to increase political support for spending reviews is to produce useful advice. To enhance the quality of the spending review process, it should:
Set clear goals to guide clear recommendations
Make effective use of existing knowledge and expertise
Align with the budget framework
5.4.1. Setting clear goals guides clear recommendations
A clear political mandate guides public servants when conducting a spending review. Usually, ministers decide on the scope and objectives of a spending review, with advice from the ministry of finance and relevant line ministries (Figure 5.4). This mandate may be communicated to officials through an updated spending review framework and a terms of reference. Clear direction from ministers encourages engagement from line ministries and helps officials to produce relevant advice for the government.
Where spending reviews are well-established, the process will have broad support within the government. In a few countries, this is visibly embedded in the government’s policy agenda, as seen in the Programme for Government in Ireland and coalition agreements in Belgium and the Netherlands.
The details of each spending review are normally decided by the same structures as the budget. That usually means the finance minister leads the spending review process and secures support for the spending review from her or his colleagues. Political engagement is particularly important at the start and end of the review, as it helps to:
Establish the purpose, scope and approach to the spending review: The spending review framework will usually be agreed by a committee of ministers or endorsed by the full cabinet. Having strong backing from the president or prime minister will also help create the right expectations of the spending review.
Resolve any disagreements over the analysis and recommendations: Disagreements are inevitable, as spending reviews surface measures that result in changes from the status quo. These matters are usually resolved bilaterally between the finance minister and the line ministers responsible for the spending under review.
Decide which options to implement in the budget: As with the budget more generally, this may be negotiated bilaterally between ministers, but also gain approval by cabinet.
Political engagement in setting the goals and approving the terms of reference for a spending review reinforces the breadth of engagement that occurs in government through the spending review cycle.
Number of OECD countries reporting the involvement of different actors, 2023
Note: Data for Israel, Japan and Türkiye is not available. The answer options “other” and “not applicable” are omitted from the graphs.
Source: OECD (2023), Survey on Spending Reviews.
Identifying the right topics is crucial to the final influence of a spending review. Spending review topics that propose changes in high-priority public services (e.g. health policy) or changes in the budget (e.g. significant savings and reallocation) secure more engagement from centres of government and other high-level stakeholders.
Ministerial views are needed to focus the spending review on salient issues where governments believe they have space to take action. These decisions are guided by proposals from officials, usually led by the finance ministry. Budget officers in the CBA already engage in policy and spending discussions with line ministries and can use their knowledge to help inform the selection of topics for spending reviews. This is best done with inputs from line ministries to help ministers understand the opportunities and challenges from reviewing a specific area of baseline expenditure.
In Portugal, the Ministry of Finance has strengthened the approach it takes to identifying potential topics for spending reviews by increasing the breadth and co-ordination of inputs into the identification process. A further example is from the Danish Ministry of Finance which prepares a catalogue of potential spending reviews to focus discussions with ministers on a feasible shortlist of topics.
The objectives of a spending review should be communicated from the outset and framed within terms of reference that are approved by ministers. These are usually prepared by the finance ministry and the line ministries involved in the review. The terms of reference should include the objectives, scope, the main tasks, governance structure, access to information, deliverables, timetable and milestones, as well as the resources available for the review.
5.4.2. Making use of knowledge and expertise in line ministries
Harnessing existing information and knowledge, particularly in line ministries, is a critical function of a good spending review. Spending reviews are delivered on well-planned timelines to inform decisions in the annual budget cycle. Most of the analytical work is prepared by officials and is usually conducted over a period of three to six months, which reduces the scope for generating new information or knowledge on the effectiveness of spending. Some additional analysis is usually required, but a good spending review must also translate what is known into credible savings options.
Line ministries have more extensive information on spending performance and will be able to advise on the feasibility of different savings options. Countries have used different approaches to gather this information from line ministries:
Delegating the analysis and challenging the results: This approach relies on the finance ministry having clear lines of responsibility for the spending review framework and process, well-developed capacities to review the analysis.
Preparing the spending review jointly: Convening a joint working group with representatives from the finance ministry and the line ministry can improve access to information and analysis, and ensure that the spending review report considers line ministry perspectives throughout the preparation and decision-making stages of a spending review.
Countries have also experimented with other ways to enhance the quality of the analysis from a spending review. Several include officials from other ministries and agencies joining the working group or involve external experts. These practices reflect a general shift in approach by CBAs, from spending reviews that are “done to” a line ministry to reviews that are “done with” the line ministry (Figure 5.5).
Number of OECD countries reporting the involvement of different actors, 2023
Note: Data for Israel, Japan and Türkiye is not available. The answer options “other” and “not applicable” are omitted from the graphs.
Source: OECD (2023), Survey on Spending Reviews.
Spending reviews make use of existing information and knowledge, including analysis from other tools that are used to make more informed spending decisions. Public policy evaluations, performance information and performance audits by SAIs are regularly used as inputs into the spending review. This may be supplemented by research from independent research bodies, international organisations or from universities. Countries often supplement this with in-depth analysis of administrative data from line ministries and other public entities.
Data limitations are a common constraint for spending reviews, even in countries that have conducted spending reviews for many years. This is rarely a sufficient reason not to conduct a spending review, which can draw information from a variety of sources. Regular spending reviews can also lead to improvements in the quality of information for expenditure and policy analyses. The 2010 spending review in the Netherlands influenced changes to performance budgeting. In Ireland, spending reviews have prompted further investments in data and evaluation.
The demands of a spending review can be significant. This is especially true for spending reviews that cover all government spending. However, even an approach that runs a small number of reviews each year will require resources, including budget experts and information systems, as well as ministerial time. Countries like Denmark, Germany and Ireland have gradually built their capacity to conduct spending reviews. Germany, for example, started with two spending reviews in 2015 and has gradually increased their number and complexity as officials gained experience with the process.
5.4.3. Aligning with the budget framework
Embedding the spending review closely into the budget framework will improve its relevance to the government and increase the impact of recommendations on spending decisions. This means aligning timetables, goals, and processes.
Where spending reviews are institutionalised, the timetable for conducting the spending review should ensure that recommendations are ready for budget negotiations. This will allow ministers to take decisions that may include the recommendations from spending reviews when allocating resources in the budget.
In most OECD countries, regular spending reviews are run to feed into the annual budget process. Topics for the next spending review might be agreed 12 or more months ahead of the next budget. In Denmark and Germany, the topics are agreed with the indicative spending ceilings (Figure 5.6). In the Netherlands, topics are often chosen later in the budget cycle, when the final budget is discussed by Cabinet, in order to feed into the preparations for the next budget.
However, the core work of the spending review usually takes 3-6 months, allowing adequate time for ministers to engage with the results and decide which measures will be included in the budget. Scheduling must also provide sufficient time for line ministries to prepare to implement agreed-upon measures, for example, by drafting legislation for parliamentary approval.
Source: OECD (2024[22]).
The goals of each spending review should be guided by the MTBF that bridges the government’s fiscal objectives and top-down expenditure ceilings. This will calibrate the scope of savings options that are needed to deliver fiscal policy goals or create space for emerging policy priorities.
The spending review should clearly identify the expenditure baseline for the area under review, and understand the cost drivers. The final recommendations should be presented in relation to the existing baseline, showing how each recommendation will change spending over the medium-term. When spending review establishes savings targets, these will be easier to quantify and monitor if they are linked to specific budget lines.
The design of spending review frameworks will also influence what types of expenditure will fall within the scope of the spending review. In Denmark, “recurring spending reviews” are conducted every 4-5 years as an input into political agreements for multi-year spending plans for large ministries. These extensive reviews take significant time and resources and are usually planned to begin up to two years before the expiry of the existing political agreement.
This point also illustrates the relationships within the OECD Spending Better Framework. Securing engagement in a spending review is stronger if the top-down expenditure ceilings are credible. If the fiscal objectives are regularly revised and budget ceilings are only loosely enforced, then ministries have fewer incentives to identify and implement savings measures. Part of the reason spending reviews are impactful in countries such as Denmark and the Netherlands is that spending controls are tightly enforced.
5.5.1. Clear recommendations
Clear objectives at the start of the spending review need to be matched by clear communication at the end of the process. That means producing a high-quality spending review report and actionable recommendations for ministers. The conclusions of the individual spending review will be shared with the finance minister and the line minister(s). This facilitates political agreement over what actions to take or recommend to Cabinet.
The final stage of the spending review should help ministers trade-off different options. Each spending review should conclude with a credible set of savings options. Where multiple reviews have been run together, a report consolidating the recommendations from the full spending review cycle can support more strategic level discussions with the finance minister, committees or the cabinet.
5.5.2. Monitoring the implementation of recommendations
Once decisions are taken on the recommendations from a spending review, the agreed measures should be incorporated into expenditure baselines and monitored through the normal routines of budget execution and oversight. This reinforces ministerial and departmental accountability for implementation of spending reviews.
Monitoring the implementation of spending reviews has been a challenge in many OECD countries, which has prompted efforts to more closely track progress on agreed measures. For example, Spain’s Ministry of Finance publishes an annual monitoring report that tracks the progress of spending review implementation. The report outlines which measures—such as regulatory or programmatic reforms—have been carried out or adopted. When recommendations from the final spending review have not been implemented or have diverged from the proposed approach, the report includes a brief explanation justifying these deviations.
5.5.3. Increase transparency to build support and impact
An increasing number of OECD countries publish the spending review framework, terms of reference and final conclusions of the spending review (Figure 5.7). A few, including Ireland, the Netherlands and Slovakia go further by publishing the full report from each spending review.
This practice provides transparency on the inputs into a spending review and the findings upon completion. Publishing the conclusions from spending reviews supports the effective implementation of the decisions taken from a spending review by showing the findings from the review process. It informs debate in public and the general public which can help build consensus for taking difficult decisions that will strengthen the efficiency and effectiveness of public spending.
Number of countries reporting each transparency practice, 2023
Note: Data for Israel, Japan and Türkiye is not available. For Panel A, other includes but is not limited to decisions on a case-by-case basis and disclosure through the budget documents. For Panel B, other includes the disclosure of spending review reports or procedural guidance.
Source: OECD (2023), Survey on Spending Reviews.
References
[2] Lange, N. (2024), Spending Reviews in Denmark: A Case Study on the use of Spending Reviews in the Danish Context.
[3] OECD (2024), Spending Reviews in Germany: Highlights, https://reform-support.ec.europa.eu/document/download/e9db1177-a123-4108-a010-291f681dffd0_en?filename=Germany%20-%20Further%20strengthening%20of%20the%20Spending%20Review%20framework%20in%20Germany%2023DE01%20-%20highlights.pdf.
[1] Tryggvadottir, Á. (2022), “OECD Best Practices for Spending Reviews”, OECD Journal on Budgeting, Vol. 2022/1, https://www.oecd.org/en/publications/oecd-journal-on-budgeting-volume-2022-issue-1_10bfd8e5-en.html (accessed on 24 March 2025).