151110 Resource and capital DELs
  • Dividing spending… Looking at government spending, there are a thousand different divisions and sub-divisions. The most important has been covered in a previous To The Point post: between departmental expenditure and annually managed expenditure. The latter is the sort of spending, including social security spending and debt interest, that can’t really be decided in advance because it fluctuates with both the country’s economy and its demographics. The former is all the other spending that departments get to do. It’s set for five-year periods in Spending Reviews.
  • …into ever smaller parts. When George Osborne talks of departments being subjected to 30 per cent cuts in the forthcoming Spending Review – as he did yesterday – he’s talking about their Departmental Expenditure Limits, or DELs. But these can be divided further. There’s the resource spending which goes towards paperclips and administration costs. Then there’s the capital spending that expands the public sector’s collection of fixed assets. Apparently, the 30 per cent cuts will come from what the Chancellor calls “everyday” – which is to say “resource” – spending. Capital budgets will be left relatively unharmed.
  • Resource cuts… The chart at the top of this post shows the capital and resource DELs for ten departments in the last financial year. (There are figures for the current financial year, in tabs 1.6 and 1.9 of this spreadsheet, but they haven’t yet been achieved, so I’m leaving them alone for now.) The four departments facing 30 per cent cuts to their blue bars in this Parliament – on top of the cuts they are already implementing this year – are Transport, DCLG, DEFRA and Osborne’s own Treasury. Yet three of these also have proportionately large pink bars. For Transport, capital spending is 78.6 per cent of all its departmental spending. For DEFRA it’s 27.2 per cent. And for the DCLG it’s 21.8 per cent.
  • …and capital injections. And so, a large part of these departments’ overall spending will, most likely, be spared the axe. We shall have to wait for the Spending Review for the actual numbers, but the experience of the last Parliament is instructive. Osborne became keener and keener on capital spending to the point where he asked some departments to find extra resource savings so that others could invest in infrastructure. The Department for Transport actually had its capital budget increased by 19.9 per cent across those five years, even after inflation is accounted for – and even as its resource budget was reduced by 53.9 per cent.
  • The new Whitehall. Which isn’t to diminish the scale of these 30 per cent cuts. They will leave departments operating very differently to how they did several years ago, not least in the balance of their spending. If resource budgets are whittled down to naught, whilst capital budgets survive, what remains? In 2011, in a column for The Times (£), I half-joked about entire ministries being reduced to algorithms for distributing money. Perhaps, instead, some of them could be combined under the banner “Infrastructure projects”. Such are the decisions that will face the next government.