John Healey’s debut budget was far from a blockbuster, but it may come to be remembered for the birth of a plucky new character in the tax and spend universe – little PDEL. It may not have the charm of Disney’s Wall-E, but PDEL (pronounced P-Del), Preventative Departmental Expenditure Limit, to give it its full name, marks a welcome, and potentially very consequential, addition. The chancellor made clear that ahead of what the Institute for Fiscal Studies (IFS) has said will be a “brutal” spending review next year, the Treasury is prepared to ringfence the budget for preventive policies.
The impetus for the move came partly from No 10. Andy Burnham knows that to achieve some of the missions closest to his heart, such as tackling rough sleeping, he will have to make the argument that it’s worth spending more upfront to save the state in the longer term. It’s an intuitive idea, yet it’s not how the government tends to think about spending – and it’s certainly not how the Treasury makes decisions.
In the cut and thrust of a spending review, a process in which the Treasury’s power over the public purse is at its most muscular, individual departments are under pressure to show how they will save money from their own budgets. Yet many of society’s greatest challenges have impacts across several departments. The future savings made by spending on, say, Family Hubs, may show up years in the future, and across several other departments – in the welfare bill, the health budget, even the criminal justice system.
In a 2023 paper that introduced the idea of PDEL, thinktank Demos identified £22bn of costs to government that it claimed could have been averted by preventive programmes. In the Treasury documents that accompany the spending review, and more importantly in the months of wrangling beforehand, PDEL will have its own storyline, alongside RDEL – day-to-day, or “resource” spending for each department, and CDEL – investment. It sounds technical, and it is – but we have plenty of evidence that the way public spending is categorised changes the way it is debated and understood.
Before Labour came to power in 1997, day-to-day spending and investment were not formally separated in the public finances, but Gordon Brown was rightly keen for long-term investment and day-to-day spending to be considered separately. Disaggregating RDEL and CDEL allowed him to set the “golden rule” – that it was fine for the government to borrow to invest, but current spending should be covered by taxation. Separating out capital spending didn’t prevent the Tories raiding it repeatedly during the austerity years – and indeed, Whitehall departments have just been asked to cut back future capital budgets to fund the Defence Investment Plan.
But it does allow additional scrutiny, and a new kind of conversation about which areas of public spending are most important. Demos’s argument is that some kinds of day-to-day spending, while not “investment,” in strict accounting terms, are worth protecting, because scrapping them might bring short-term cash benefits, but carry net costs to the government over time. Gavin Kelly, chief executive of the Nuffield Foundation, which funds social research, says the shift to thinking about preventive spending makes sense now, because we have better data to inform policymakers.
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