Could a New UK Spending Category Shift Policy Toward Prevention?

A new category in the UK government’s budget could change how spending on prevention is assessed before next year’s spending review.

John Healey’s debut budget introduced the preventative departmental expenditure limit, or PDEL. The idea is to identify spending intended to prevent problems from becoming more costly later, with the possibility that some of it could be protected during a difficult funding round.

The Treasury has not yet set out detailed criteria. Departments will have to make the case for individual projects to be treated as preventive, and it remains unclear how much practical influence the category will have.

Why prevention is being considered

Preventive programmes can span several departments because their effects may appear in different parts of the public sector. Spending in one area could potentially reduce later costs in welfare, health or criminal justice.

The impetus for PDEL came partly from No 10, with Andy Burnham arguing that upfront spending can save the state money over time, including in relation to rough sleeping. The Treasury has identified rough sleeping as one possible area for PDEL.

A 2023 paper from Demos claimed that £22bn in government costs could have been avoided through preventive programmes. Polly Curtis of Demos said governments have historically been more likely to reward spending on responding to crises than on stopping those crises from developing.

What the category could include

Possible areas mentioned include early mental health support, obesity prevention and programmes for children and young people. Alan Milburn is also expected to make a similar case in a forthcoming review of young people not in education, employment or training, focusing on employment support and potential future welfare, health and housing costs.

Research funded by the Nuffield Foundation found that Labour’s Sure Start centres improved children’s educational performance, increased their future wages and reduced hospital admissions. These findings are cited as evidence that some day-to-day spending may produce benefits well beyond the period in which it is funded.

Demos argues that cancelling such spending can create a short-term cash benefit while generating higher net costs over time. Gavin Kelly said improved data now makes it more feasible to assess preventive spending.

How PDEL fits into the public finances

PDEL is intended to appear alongside two existing categories in Treasury documents: RDEL, covering day-to-day resource spending, and CDEL, covering investment.

The classification of spending can influence how it is debated. Before Labour came to power in 1997, day-to-day spending and investment were not formally separated in the public finances. The distinction later enabled Gordon Brown to set the “golden rule”, under which government could borrow to invest while current spending was expected to be covered by taxation.

The article says preventive spending could potentially be treated as investment for fiscal-rule purposes if it were defined tightly enough. However, the Treasury says that is not the plan.

A difficult test ahead

The next spending review is expected to be challenging. The Institute for Fiscal Studies has described it as “brutal” and estimates £27bn in spending pressures. The review could take place as late as the autumn.

That makes the treatment of preventive programmes significant for services whose benefits may emerge over years rather than within a single budget cycle. Yet the Treasury has provided few details about how PDEL will operate, including which projects will qualify or whether funding will be ringfenced.

It remains uncertain whether PDEL will become a major feature of the spending review or a minor addition to Treasury documents. Its potential significance is that it could encourage policymakers to consider longer-term outcomes alongside immediate spending demands.

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