Chancellor John Healey plans to ringfence preventative public spending in next year’s review to stop problems from escalating. Healey said, "For too long, governments have spent more dealing with the consequences of problems rather than getting ahead of them." This shift aims to deliver better services and save taxpayer money.
Healey says next year's spending review will mark shift by protecting investment that stops problems escalating
Chancellor John Healey has promised an overhaul of public spending controls, vowing that new rules to ringfence "preventative" programmes would save money further down the line.
Healey said next year's spending review would mark "a big long-term shift" by protecting investment that stops problems escalating with the creation of a new category of public spending.
"For too long, governments have spent more dealing with the consequences of problems rather than getting ahead of them," Healey told the FT. "This leaves people worse off and taxpayers picking up a bigger bill."
He added: "In this way we can deliver better public services while getting better value for every pound we spend."
Treasury officials have previously been sceptical about the idea of a so-called preventative departmental expenditure limit, or PDEL, and Rachel Reeves, the previous chancellor, did not adopt it.
But Healey believes the PDEL would help reduce overall spending, with some Treasury insiders describing the move as "quietly radical".
The change comes ahead of next year's spending review -- not likely to happen until autumn 2027 -- which will put Healey is under pressure to find around £11bn a year for increased defence spending and billions of pounds more to fund stretched public services.
Yvette Cooper, health secretary, on Wednesday called for large chunks of the £200bn NHS budget to be left untouched in next year's spending review after Healey introduced the new ringfence for pre-emptive spending.
"I do think a lot of our treatment services have an impact in terms of saving money elsewhere," the health secretary said, speaking to the Commons health committee. "Mental health is a really good example of that."
Other areas that could be covered include spending to reduce youth offending and homelessness, education and moves to tackle violence against women and children.
One Healey ally said: "This is not some sneaky way to spend more money." They added that "tough decisions" would be taken to cut money in other areas "downstream" of where the preventative spending was being allocated.
Alan Milburn, the former cabinet minister who is due to publish a review into youth inactivity this month, will also be pushing for upfront spending to get young people off benefits into work and save money further down the line.
Anita Charlesworth, at the King's Fund think-tank, who pushed for the adoption of PDEL, rejected the scepticism among Treasury officials who have argued that classifying preventative spending will be difficult.
"The focus should be on activities whose principal purpose is prevention," she said, which would capture about 5.6 per cent of health spending.
"The same approach could be applied across public services: in children's social care, for example, early-help and family-support services can be distinguished from acute intervention," Charlesworth added.
The idea of PDEL was promoted by the Demos think-tank as a way of "injecting long-termism into public spending".
The last big reclassification of public spending happened when Gordon Brown was chancellor in 1998 when he split revenue (RDEL) and capital budgets (CDEL) to ensure sufficient capital investment in the public sector.
While these budgets have repeatedly been raided to top up day-to-day spending, one official said the CDEL classification had made this harder than it would otherwise have been, suggesting PDEL would have a similar effect.
Andy Burnham placed a significant focus on prevention during his later years as mayor of Greater Manchester.
Last year's 10-year NHS plan agreed to make the city region a national model in the field, giving it more flexibility over funding pots to create neighbourhood "Live Well" hubs bringing together GPs, employment support, housing advice, social care, police and voluntary services.
The hubs, proposed by Burnham in 2024, aim to prevent problems such as homelessness and mental health crises and reduce demand on expensive and overwhelmed services such as A&E and prisons.