UK government spending ‘facing December cliff edge’

A new report from the Institute for Government think tank has warned that whoever wins the UK general election should “launch a one-year spending round” within the first few weeks of the new parliament and complete it ahead of a December 2024 spending “cliff edge.”

The Institute said the UK government is facing “levels of government spending uncertainty not seen in decades.”

The report said it shows “how the next general election will be held closer to the point at which government departments’ budgets expire than at any time in over 40 years – potentially much closer if the general election is held in the autumn or winter.”

It said no UK government since at least 1998 “has left it later than November to set spending plans for the following financial year.”

The Institute said: “Budgets reach a ‘cliff edge’ moment in December 2024 – completing a spending review any later would lead to high levels of instability – and with government departments, local authorities and devolved administrations not knowing their budgets from April 2025 there is already a risk of delayed and inefficient spending on services and projects.

“An autumn polling day could leave just weeks to set spending plans. A winter election could land the next government in unchartered territory from day one.

“Government spending commitments on the NHS, schools, childcare, international development and defence means  spending is set to fall in other areas by 2.6% per year in real terms over the next four years.

“Reconciling these spending plans, the wafer thin margin against fiscal rules adopted by both main parties, and poor performance of public services underlines the need for politicians and civil servants to prepare now for a series of highly consequential spending choices, both from politicians and the civil service.

“For the next government to provide urgently-needed certainty, and to give itself flexibility, the IfG recommends that it conduct two spending reviews over its first year of the parliament: a one-year spending round to allocate budgets for 2025/26 followed by a comprehensive multi-year spending review.

“The one-year spending round should be launched within the first few weeks of the new parliament and completed by December 2024, if possible.

“It should revise spending plans in a small number of areas to help deliver immediate priorities and potentially provide longer-term certainty for capital budgets in a small number of priority areas.

“A comprehensive spending review should be a strategic and comprehensive multi-year spending review that is completed by summer/autumn 2025. It should review existing policy and set budgets for the remainder of the parliament that align with the government’s priorities.”