Chapter 1: Overview

From a platform of economic stability, the Government aims to build a Britain where there is opportunity and security for all. The 2000 Spending Review allocates spending and sets out in Public Service Agreements (PSAs) the outcomes that every part of government will deliver to the public in return. This White Paper reports the spending plans set in the Spending Review, covering the period from 2001-02 to 2003-04, and some of the key PSA targets. It sets out the improvements in public services which the public can expect over the next three years and describes how the Government will allocate its funds to achieve these improvements. These public spending plans are based on the firm and prudent limits announced in the March 2000 Budget, consistent with the fiscal rules.

In allocating its funds, the Government has been guided by four key objectives:

increasing opportunity for all;
building responsible and secure communities;
raising productivity and sustainable growth; and
securing a modern international role for Britain.

1.1 This Spending Review builds from the Government's platform of economic stability which has made a sustainable expansion of public services possible. Through the application of a clear framework for monetary and fiscal policy - underpinned by two strict fiscal rules - and as a result of tough choices made to improve the position of the public finances, it is possible to increase public spending in line with the envelope set out in Budget 2000.

1.2 The Review is delivering stability and strong public services - by setting public spending at a sustainable level so that the strict fiscal rules are met, and investing in strong public services accountable to the public, with clear targets for delivery in Public Service Agreements. The Review sets spending plans to meet the Government's key objectives:

increasing opportunity for all - by tackling poverty, deprivation and disadvantage at its roots, so that all children have the best possible start in life and people in all parts of the community have the chance to fulfil their potential through education and employment;
building responsible and secure communities which are strong, healthy and protect the environment - by tackling crime and the causes of crime, by investing in a modern National Health Service, by encouraging voluntary activity and by improving access to sport, music and the arts;
raising productivity and sustainable growth - by increasing skills, research and development, enterprise and competition, by delivering a fast and reliable transport system and by improving efficiency throughout Britain's public services; and
securing a modern international role for Britain - by investing in a modern defence capability helping to secure democracy, stability and security around the world, by investing in overseas aid to help combat disease, famine and illiteracy in the poorest countries and by working to prevent conflict in Sub-Saharan Africa and elsewhere.

1.3 To deliver these objectives the Government is investing more in key public services while continuing to modernise and improve efficiency throughout the public sector. In particular this Review:

to increase opportunity for all

builds on substantial improvements in literacy and numeracy, higher GCSE attainment and smaller infant classes to deliver an average 5.4 per cent a year real increase in funding for UK education over the next three years. Together with the extra boost for education in 2000-01 announced in the Budget in March, this represents an average growth rate of 6.6 per cent over four years from 1999-2000 to modernise schools and deliver demanding new targets for literacy, numeracy, science and Information and Communications Technology (ICT), the highest growth rate over a four year period for 20 years;
extends policies that have delivered the lowest rates of unemployment for over 20 years and the highest ever number of people in employment extending the ONE service, to be delivered by the new working age agency, providing a 'one-stop shop' for employment and benefits advice and enhancing the New Deal to improve employment opportunities for the long-term unemployed, matching rights with responsibilities;
supports children in deprived areas from birth to adulthood with the introduction of a Children's Fund and the expansion of Sure Start and other services; and building on the £7 billion a year support for children through taxes and benefits from 2001 as confirmed in the Budget, by making substantial new investment in these services;
attacks deprivation by investing in raising standards among those who are being left behind in education, in the job market, in health, in getting decent housing, or who live in unsafe communities, with specific targets to start narrowing the gap between the most deprived areas and the rest of the country;

to build responsible and secure communities

increases spending on the police by an average of 3.8 per cent a year in real terms over the next three years to cut vehicle crime by nearly a third and burglaries by a quarter;
provides for the UK the longest period of sustained funding growth for the NHS in its history - an average of 6.1 per cent real growth a year over the four years from 1999-00, compared with 2.9 per cent between 1978-79 and 1996-97, combined with reform to tackle variations in efficiency, performance and health outcomes;

to raise productivity and sustainable growth

delivers the first stage of the Ten Year Plan for Transport to deliver by 2010 better and more reliable trains, a renaissance in local public transport, a step improvement in transport for London, reduced congestion on our busiest roads, and to tackle the maintenance backlog on local roads with public investment doubling in real terms over the next three years to over £6 billion;
enhances the UK's world-leading position in science, with increased spending, including a new £1 billion capital programme over two years (2002-03 and 2003-04) to tackle the investment backlog in laboratories and equipment, in partnership with the Wellcome Trust. Overall there will be a 5.4 per cent a year real terms growth in spending on science and engineering over the next three years including new money to boost key research areas like the human genome, and for creating jobs and wealth from the science base;

to secure a modern international role for Britain

delivers better equipped armed forces, able to play a full role in the post-Cold War world by providing a real terms increase in the defence budget over three years, the first for more than a decade; and
helps tackle poverty in the developing world by providing a 6.2 per cent a year real terms increase over three years in funds for international development.

1.4 This chapter sets out the objectives of the Review and some of the highlights, and gives an overview of where the new money goes. The next chapter explains the economic background to the Review, showing how the spending plans are fully consistent with meeting the Government's fiscal rules, and the framework within which the Review has been conducted. Section II of the White Paper shows how the Review delivers the Government's key objectives set out in paragraph 1.2 above. Section III provides more details of the outcomes and spending allocations for each department, matching money with modernisation. Section IV sets out the implications of the Review for the devolved administrations. Section V describes the detailed outcomes of each of the 15 cross-departmental reviews which have been one of the major innovations of this Review.

Box 1.1: Meeting the Government's long-term economic goals

The 2000 Spending Review moves the Government closer to fulfilling its key goals of:

abolishing child poverty: that by the end of the decade, child poverty will be halved, and abolished within 20 years. The outcome of the Review includes a major expansion of the Sure Start programme;
providing educational opportunity for all:that by the end of the decade, and for the first time, the majority of the UK's young people can expect to go on from school or college into higher education. There is extra money to modernise schools and deliver demanding new targets for literacy, numeracy, science and ICT, and funding for more places in higher education;
increasing employment opportunity for all:that by the end of the decade there will be a higher percentage of people in employment than ever before. Extending the ONE service, to be delivered by the new working age agency, will provide an integrated work-focused service for employment and benefits advice;
raising prosperity: that over the next decade Britain will have a faster rise in productivity than its main competitors as it closes the productivity gap. There is a boost for Britain's science infrastructure, and extra funding for the Small Business Service and for Regional Development Agencies; and
delivering strong and dependable public services.

Delivering change

1.5 This Review is delivering change through reform and innovation by setting out in Public Service Agreements what the public can expect from the money spent on services, with clear and specific targets to be met and by improving departmental co-operation and co-ordination through 15 cross-departmental reviews. These features of the Review are discussed in more detail in Chapter 2.

Allocating spending to priorities

1.6 Over the next three years, as announced in the Budget in March, current spending will increase by 21/2 per cent a year in real terms, in line with the Government's neutral view of the economy's trend rate of growth; and net investment will more than double, rising to 1.8 per cent of GDP by 2003-04 and thereafter remaining within this ceiling as a share of GDP, consistent with the debt to GDP ratio will be set well below 40 per cent in the medium term. Taken together this gives an average real increase in total spending of 3 1/4 per cent a year over the next three years. On a consistent basis £43 billion of additional funding has been allocated to Departmental Expenditure Limits (DELs) by 2003-04 over the DEL allocations for 2001-02 set out in Budget 2000, (see Table 2.3 in Chapter 2).

1.7 Table 1.1 sets out the figures for total spending, Total Managed Expenditure (TME), and its component parts: the new departmental spending plans (DEL) which are set for three years, and Annually Managed Expenditure (AME) which includes items which cannot reasonably be subject to multi-year limits.

Table 1.1: Departmental Expenditure Limits and Total Managed Expenditure
£ million
	1999-00^[2]	2000-01^[2]	2001-02	2002-03	2003-04
Departmental Expenditure Limits:
Education and Employment (DfEE)	15460	18900	21310	23480	25670
Health	40930	45290	49460	54440	59010
of which: NHS (England)	40230	44490	48190	52260	56650
Environment, Transport and Regions	9780	10740	13190	15510	17850
Local Government	34200	35350	36800	39240	41860
Home Office	7510	8170	9600	10280	10610
Legal Departments	2770	2990	3140	3200	3230
Defence	21890	22980	23570	24200	24980
Foreign and Commonwealth Office	1160	1130	1200	1270	1320
International Development	2510	2760	3120	3350	3560
Trade and Industry	2980	3750	4630	4320	4260
Agriculture, Fisheries and Food	1080	1040	1260	1330	1350
Culture, Media and Sport	990	1020	1120	1170	1240
Department of Social Security	3190	3230	3850	4250	4180
Scotland	13870	15050	16230	17370	18430
Wales	7140	7760	8450	9140	9790
Northern Ireland Executive	4900	5310	5670	5970	6290
Northern Ireland Office	1030	1020	1090	1140	1030
Chancellor's Departments	3250	3740	4080	4280	4310
Cabinet Office	1380	1380	1450	1450	1520
Employment Opportunities Fund	480	870	880	850	1370
Capital Modernisation Fund (CMF)	0	120	400	900	1200
Invest to Save Budget (ISB)	0	0	70	70	80
Policy Innovation Fund	0	0	50	50	50
Reserve	0	2660	1500	2000	2500
Total Departmental Expenditure Limits^[1]	176,800	195200^[4]	212100	229300	245700
Annually Managed Expenditure1	163900	176400	180800	186200	193900
Total Managed Expenditure^[1] ^[3]	340700	371600	392900	415400	439600
Education spending in UK	40580	45820	49460	53400	57700

1. Figures rounded to nearest £100 million.
2. Existing plans for 1999-2000 and 2000-01 have been restated in resource budgeting terms.
3. Total Managed Expenditure is equal to the sum of Departmental Expenditure Limits and Annually Managed Expenditure.
4. Includes previously unallocated Budget 2000 addition of £5.9 billion and a further 2000 Spending Review additional allocation of £3 billion - see Table 2.3.

Table 1.2: Changes in Total Managed Expenditure accounted for by social security benefits and debt interest payments

1.8 The Spending Review has set spending plans to deliver significant improvements in key public services. The Government can afford to spend more on these priority services because of prudent management of the public finances, its success in reducing unemployment and by dealing with fraud and unnecessary bureaucracy:

by 2003-04 the cost of paying interest on government debt will be £5 billion a year lower than in 1997-98;
social security spending and tax credits will grow on average by only 1.2 per cent a year in real terms over the period 1997-98 to 2001-02 compared to 4 per cent a year over the period 1992-93 to 1996-97 as the Government cuts the cost of worklessness and fraud;
fraud and errors in Income Support and Jobseekers' Allowance will be cut by 25 per cent by 2004, rising to 50 per cent by 2006; and
spending on the administration costs of government will fall as a share of government spending over the next three years, providing a greater share for frontline public services.

1.9 As a result, social security benefits and debt interest payments account for 17 per cent of the change in TME in the period 2000-01 to 2003-04. This compares to 20 per cent in the period 1996-97 to 2003-04 and 42 per cent in the period 1978-79 to 1996-97, as shown in Table 1.2. This means greater resources are available for public services.

£ million
	1978-79 to 1996-97	1996-97 to 2003-04	2000-01 to 2003-04
Social security benefits¹
Central Government Debt interest payments

1 For the purpose of comparison, social security includes the Working Families' Tax Credit and Disabled Persons Tax Credit.
1.20 Of the rise in spending on public services between 2000-01 and 2003-04 over half will be allocated to education and health and a further 20 per cent will go to transport, housing and law and order as shown in Chart 1.1. Together these priority areas will account for more than 75 per cent of the rise in spending.