New public spending category PDEL is a welcome and could have big impact | Heather Stewart
Chancellor John Healey has introduced a new public spending category called PDEL (Preventative Departmental Expenditure Limit) to ringfence budget for preventive policies ahead of a challenging spending review.
John Healey's debut budget may not have been a blockbuster, but it introduced a potentially consequential addition to the UK's fiscal framework: PDEL (Preventative Departmental Expenditure Limit). This new category marks a significant shift in how the government approaches public spending, prioritizing preventive policies that could yield long-term savings.
The chancellor made clear that ahead of what the Institute for Fiscal Studies (IFS) has described as a 'brutal' spending review next year, the Treasury is prepared to protect the budget for preventive measures. The impetus for this change came partly from No 10, with Andy Burnham recognizing that achieving key missions like tackling rough sleeping requires upfront investment to save money in the longer term.
Systemic Shift
The introduction of PDEL represents a departure from traditional Treasury decision-making. During spending reviews, departments are typically pressured to demonstrate how they will cut their own budgets, despite many societal challenges affecting multiple government departments simultaneously.
Future savings from preventive programs like Family Hubs might materialize years later across various departments—welfare, health, and criminal justice—making them vulnerable to short-term budget cuts. Demos identified £22bn of government costs in a 2023 paper that could have been prevented through such programs.
For decades, governments have talked about the importance of prevention, but the system has consistently rewarded spending on dealing with crises rather than stopping them from happening in the first place.
Historical Context
The way public spending is categorized significantly influences how it's debated and understood. Before 1997, day-to-day spending and investment weren't formally separated in public finances. Gordon Brown's distinction between RDEL (day-to-day spending) and CDEL (investment) allowed for the 'golden rule'—borrowing for investment but covering current spending through taxation.
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