John Healey’s first budget introduced a new category of public spending known as a preventative departmental expenditure limit, or PDEL. The measure is intended to protect funding for policies that may reduce costs for the government over time, even when their benefits are spread across different departments and appear years later.
The Treasury has indicated that preventive policies could be ringfenced ahead of next year’s spending review, which the Institute for Fiscal Studies has warned could be exceptionally difficult. Departments will need to make the case for individual programmes to qualify under the new framework.
The idea has received support from Demos, which proposed PDEL in a 2023 paper. The thinktank estimated that £22bn in government costs could have been avoided through preventive programmes. Its chief executive, Polly Curtis, said that public spending systems have traditionally rewarded responses to crises rather than efforts to prevent them.
Preventive projects often create savings outside the department that initially pays for them. Spending on family hubs, for example, could eventually affect welfare, healthcare and criminal justice budgets, making the financial benefits difficult to capture in a conventional departmental spending review.
Rough sleeping is one area the Treasury has identified as a possible focus. Other examples include employment support for young people not in education, employment or training, early mental health assistance and obesity prevention. These programmes could require investment now while producing savings in welfare, housing or health services later.
Supporters argue that improved data makes it easier to assess these links. Gavin Kelly of the Nuffield Foundation pointed to research on Sure Start centres, which associated the programme with better educational outcomes, higher future wages and fewer hospital admissions. He said policymakers can now connect information across public services more effectively, although spending decisions have not kept pace with those advances.
PDEL would sit alongside existing categories for day-to-day departmental spending, known as RDEL, and investment spending, or CDEL. Separating these categories can influence how spending is assessed and debated, as shown by the distinction between current expenditure and investment in previous public-finance frameworks.
The Treasury has not provided detailed rules for defining preventive expenditure and says it does not currently plan to classify it as investment for the purposes of fiscal rules. If that changed, ministers could potentially borrow to fund programmes expected to reduce future costs, applying a logic traditionally associated with infrastructure investment.
However, the new mechanism will not remove the wider pressure facing public finances. Based on the figures presented in the budget, next year’s spending review could involve an estimated £27bn in pressures, meaning that ringfencing selected preventive programmes is unlikely to resolve the overall squeeze. Its significance will depend on how narrowly PDEL is defined and whether it can bring longer-term considerations into the spending process.
Sources: The Guardian Business.