A new focus on prevention spend: what needs to happen next?

The Budget contained a surprising announcement that may seem a technicality, but has the potential to transform how government makes decisions about public spending to better support the nation’s health. 

The Chancellor announced a new category of ringfenced public spending – Preventative Departmental Expenditure Limit (PDEL) – to be introduced at the 2027 Spending Review. The government's stated ambition for it is to help ‘facilitate shared resource and accountability across budget holders’ and ‘protect programmes that generate benefits over the longer term’.

The commitment to PDEL and the potential to protect preventative spending is a very welcome step and follows several years of work by the Health Foundation and partners including Demos, CIPFA and the Institute for Government. But it is ultimately a means, not an end. Success will depend on whether it catalyses change in how government allocates resources to meet need, and facilitates a cross-government approach in policy design and delivery, rather than simply reclassifying expenditure. 

The opportunity 

The introduction of PDEL recognises two longstanding problems in public spending. First, pressure to meet immediate demands can make it difficult to invest in action that prevents problems arising in the first place or where benefits take years to emerge. Second, departments are accountable for their own budgets and short-term priorities. But the benefits of prevention may accrue to different departments or parts of the system. 

Consider early years support. While costs are incurred today, benefits may not be realised until years later through improved health, educational attainment and employment outcomes, as well as reduced demands on public services like health care and the welfare budget. The experience of Sure Start illustrates how short-term decision making, at a time when immediate fiscal tightening was the priority, took funding away from a programme with increasingly well-evidenced long-term benefits.

PDEL should help government take a more systematic approach to prevention, prioritising spending with long-term benefits and reducing acute demand across public services.

Being clear about what can be achieved also matters. Prevention happens along a spectrum of activity, from action on the wider drivers of future need through to interventions that stop existing problems escalating. A line will need to be drawn as to what is in and out of the classification, but enabling a preventative approach to public services needs to be the aim. PDEL should not just consist of a list of early intervention programmes, nor should it be driven purely by generation of short-term cashable savings. 

Instead, it should enable better and cost-effective allocation of resources with the aim of preventing or reducing acute need from arising – rather than paying more to manage its consequences. A process that provides visibility of such decision making and classification of spend will be important for its credibility, particularly in relation to the wider fiscal rules. 

Three things government must get right 

At this stage, the Budget announcement is no more than a statement of intent. Crucial questions remain about what expenditure will be included, which departments and activities will be covered and whether the ringfence creates the incentives to enable a shift towards more preventative spending. Government will also need to clarify how PDEL will operate alongside existing departmental resource and capital spending limits (RDEL and CDEL), the wider fiscal rules and in a more devolved context. 

Next year's Spending Review is the opportunity to start turning the commitment into practice. There are several implementation challenges that will need to be solved. Three stand out:

1. Agree a clear definition of prevention and apply it consistently 

Government needs a clear understanding of prevention and its different stages, from addressing the wider conditions that give rise to future need through to stopping existing problems from escalating. This understanding can then be applied consistently to expenditure data, allowing spending to be identified and tracked across the spectrum of preventative activity, as well as informing the decision as to what sits within PDEL.

We have been supporting CIPFA to develop a framework for identifying preventative activity and applying it to local authority expenditure data. Scotland's recent budget-tagging exercise offers an example that can be learnt from. 

2. PDEL must be used to shape spending decisions, not just to establish a new budget category  

To track progress, government will need to distinguish genuine shifts in investment after an initial reclassification of existing expenditure and ensure categorisation is accompanied by additional incentives to prioritise preventative activity. But this must also consider the quality of spending decisions: understanding the needs government is seeking to address and directing resources towards responses that deliver the greatest improvement in future outcomes for the resources invested. 

3. Departments need to be accountable for longer term costs and able to share in the benefits of decision making 

Government will need to establish how responsibility is shared when costs and benefits fall across departments, agencies or systems. This is not straightforward. Preventative interventions can take years to deliver results and it can be difficult to attribute changes in outcomes. An approach to evaluation must recognise this uncertainty, while still holding departments to account for the wider consequences of their spending decisions. 

Ultimately, PDEL will need to be part of a broader shift in how spending is assessed and prioritised across government, and better support long-term decisions. Experience with ringfencing capital spending (CDEL) shows that a separate spending category does not, on its own, guarantee the planning, infrastructure or sustained investment needed. 

What the next Spending Review should deliver

The Budget announcement creates an opportunity to give prevention a more prominent place in policy and spending decisions. Next year’s Spending Review should lay the foundations for a credible and sustained approach to preventative spending. Getting the design right will be crucial and there are a range of difficult technical issues to resolve. But perfection shouldn’t stand in the way of making significant progress towards enabling a shift to a more preventative state.