Background to the 2013 Spending Review

The Chancellor will present the 2013 Spending Review to the House of Commons on the 26 June. This will divide government spending in the year 2015/16 between departments.

In total, the Departmental Expenditure Limit for all departments will be reduced by 2.8% in real terms compared with 2014/15. However, the NHS, schools and international development budgets will be protected, meaning that some of the other departmental budgets will face larger reductions.

This Note explains the economic and public finance background to the Spending Review. Some key concepts and trends in public expenditure are analysed, including current and capital spending and the distinction between Departmental Expenditure Limits and Annually Managed Expenditure.

Some of the likely announcements in the Spending Review include:

The NHS, schools and international development budgets will be protected from spending reductions.

Savings totalling £11.5 billion from current spending.

Capital spending plans to 2020/21.

A review of Annually Managed Expenditure which will introduce a “firm limit” on some areas of welfare spending.