Demos Comment: Biggest overhaul of Treasury spending rules in decades will help shift government from crisis management to prevention

The Chancellor today announced the most significant change in decades to the way the Treasury manages public spending, creating a new ringfenced category for preventative spending known as Preventative Departmental Expenditure Limits (PDEL).

The reform means funding for programmes designed to stop problems before they escalate will be formally identified and protected from being diverted to cover short-term spending pressures.

In practice, that could mean greater protection for investment in areas such as obesity prevention, community family hubs, early mental health support, employment programmes that help people stay in work, and other initiatives designed to improve outcomes and reduce future costs to taxpayers.

Until now, Treasury spending has been broadly divided into day-to-day expenditure, such as public sector pay and running costs, and capital investment, such as buildings, equipment and infrastructure. Today’s announcement introduces a new category focused specifically on prevention, recognising that investing early can reduce demand for more expensive interventions later.

Cross-party think tank Demos first proposed the creation of PDEL in 2023 and welcomed the Chancellor’s announcement as a landmark reform of the public spending framework.

In its 2023 report, Revenue, Capital, Prevention: A New Public Spending Framework for the Future, Demos argued that governments of all political persuasions have found it easier to prioritise immediate spending pressures than longer-term preventative investment, despite evidence that prevention often delivers better outcomes and better value for money. 

Jess Sargeant, Director of Policy at Demos, said:

“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.

“Today’s announcement changes that. By creating protected budgets for prevention, the Government is putting long-term investment on a much firmer footing and helping ensure that money intended to tackle problems early is no longer squeezed out by immediate pressures.

“This is one of the most significant reforms to the way public spending is managed in a generation. If implemented well, it has the potential to improve people’s lives, ease pressure on public services and deliver better value for taxpayers over the long term.”

ENDS

Notes to Editors

• Demos is a cross-party think tank working to strengthen democracy and improve public policy.
• Demos first proposed Preventative Departmental Expenditure Limits (PDEL) in its 2023 report with the Health Foundation, REVENUE, CAPITAL, PREVENTION: A New Public Spending Framework for the Future. The report argued for a new ring-fenced category of public spending dedicated to prevention. 
• The report also recommended the creation of a Treasury working group to define preventative expenditure and a dedicated Preventative Investment Unit within HM Treasury. 
• This work forms part of Demos’ wider programme on public service reform, developed in partnership with The Health Foundation, CIPFA and NCVO.
• For interviews or further information, contact Jess Sargeant on 07899 977668