Spending reviews

Canada: Evolving objectives of spending reviews

The Canadian government has used spending reviews since the 1990s and the objectives of those reviews have changed alongside changes in the economic environment. During the fiscal crisis in the 1990s, reviews aimed to address budget deficits through expenditure reductions. In 2003, the expenditure reviews focused on results during a time of greater economic prosperity. This focus continued until the late 2000s when the focus moved to strategic reviews with an emphasis on gaining oversight and understanding of expenditure outcomes.

Denmark: Informing budget negotiations and medium-term frameworks

Spending reviews have been undertaken for more than 20 years in Denmark. They are led by the Ministry of Finance, with the government using them to reallocate resources and increase efficiency. The spending reviews inform budget negotiations and decisions on multi-annual budget agreements. The reviews are conducted over a relatively short period, where the decision on which reviews to conduct is taken in January or February and the reviews are undertaken over the ensuing months with the aim of having the findings available by the beginning of May. This ensures the findings of a spending review are available when the government decides on budget priorities in June.

Estonia: Introducing spending reviews

In Estonia, the government introduced spending reviews into its public financial management processes in 2016. After undertaking two reviews covering almost 3% of the national budget, the government has recently conducted several spending reviews covering both the activities of a single ministry and multiple ministries. As such, the objective is to scale up the use and scope of spending reviews and make them a standardised instrument in the budget process.

Germany: Building capacity over time

The first two spending reviews took place in 2015 in Germany. These reviews had a limited scope while the Ministry of Finance and the relevant line ministries accumulated experience in undertaking spending reviews. In subsequent rounds of spending reviews, the scope of the review was increased, as did the complexity of the reviews by analysing the inter-relationships between several expenditure programmes within a given area of policy.

Ireland: Setting clear objectives

 In Ireland, spending reviews aim to improve the allocation of public expenditure across all areas of government. The Department of Public Expenditure and Reform is responsible for spending reviews and the way in which spending reviews integrate with the annual budget process. The Irish Government Economic and Evaluation Service (IGEES), established in 2012, supports the Department in this role in conjunction with the departments being reviewed and external experts. Through the IGEES, the government is systematically assessing the efficiency and effectiveness of government expenditure by applying dedicated resources to spending reviews. The objectives of spending reviews specifically consider the extent to which the government is achieving its goals through the expenditure committed from any given activity. The scope of the Spending Review 2020-2022 has broadened from the previous approach adopted from 2017-2019 to encompass policy analysis and evaluation in addition to the focus on expenditure re-prioritisation.

Latvia: Improving processes over time

Latvia implemented spending reviews as an integrated part of the 2016 State Budget. Latvia has since looked at how to improve the process by carrying out deeper analysis of spending and the possible ways to reduce the administrative burden. A separate division (Budget Development Division) was established within the Budget Department in mid-2018 dedicated to spending review.

The Netherlands: Strong political leadership

In the Netherlands, during the formation of government following general elections, the coalition agreement includes a statement on spending reviews. The statement identifies the priority and focus of the spending review programme over the four-year term of the new government. The coalition agreement is politically binding but is an instrument for the executive of the government and does not have a legal status through parliament. Political leadership is demonstrated through key stages of the spending reviews:

• The Cabinet determines the topics and/or areas of government to review based on government priorities and the politics of the day.
• The Cabinet approves the terms of reference of a spending review and publishes the terms in the Budget Memorandum along with guidance information on the conduct of the review.
• The Cabinet determines which recommendations from the spending review it will approve.

The analysis underpinning a spending review occurs through a non-political working group, co-ordinated by the Ministry of Finance. Both the report by the working group and the Cabinet’s decisions are released publicly.

Norway: Alignment to budget process

In Norway, spending reviews are closely aligned with the budget process and is a routine part of budget planning. In 2017, the Norwegian government initiated a budget strategy conference in early fall, as the first of three budget conferences. At that conference, the economic outlook over the medium-term was discussed. Based upon that discussion, the government decided its priorities and guidelines for the budget process for the following year. Mandates for spending reviews were an important part of the discussion, and the results of previous spending reviews are reviewed. Soon after the final spending review report was delivered, the Ministry of Finance, in close cooperation with line ministries, presented the recommendations to the government for approval at a budget strategy conference. Thus, recommendations that had a direct effect on spending were an integral part of the budget process.

United Kingdom: Monitoring the results of spending reviews

The UK is well known for undertaking comprehensive spending reviews. The UK has used the spending review process to set fixed three-year Departmental Expenditure Limits and through Public Service Agreements, defined the key improvements that the public can expect from these resources. Thus in the UK, the term spending reviews refers to a more general process of budgeting than what the term implies in other countries, as spending reviews are the main mechanism through which departmental budgets are set and in that sense identical to what some other countries might call the budget setting process. After the publication of a spending review, the Treasury is responsible for overseeing its implementation, including spending controls during the year, and monitoring potential risks (e.g. savings that have been identified in the spending review but may fail to materialise) through regular engagement by the Treasury’s spending teams with spending departments.