Alistair Darling's comprehensive spending review will bring real-terms cuts to many public services but it could also highlight the lack of transparency on how priorities are reached, says Colin Talbot

When the comprehensive spending review finally appears in mid-October it is unlikely to hold any major surprises, given that so much has been already publicly announced.

That is not to say that chancellor Alistair Darling may yet follow the pattern of his predecessor and pull a few rabbits out of the hat to grab headlines. Indeed, any distraction will be welcome for a Labour government which now plans to decrease - albeit only slightly - public spending as a share of national wealth after a long period of increasing it. And in fact spending on services is set to decrease marginally even more than that.

It is worth putting this into perspective. When New Labour swept to power in May 1997 they were committed by iron chancellor Gordon Brown to sticking to the spending plans of the previous Conservative government for the first two years. The aim was not to frighten the horses in the City or the Conservative media.

It was an extraordinary pledge in several ways. The most obvious was that it meant reducing public spending as a proportion of national wealth to 37.1 per cent - the lowest it had been in decades and far lower than that ever achieved by Thatcher or Major, who were supposedly committed to rolling back the state.

But it was also extraordinary in quite another way - no government in the almost four decades of the then spending system had ever taken any notice of spending plans in years two, three and beyond. As chancellor for the first time, Mr Brown committed to actually sticking to what the plans said - and he largely did, hence the radical reduction in spending as a proportion of national wealth.

Mr Brown set out to embed this new strategic approach to public spending into Whitehall through the first CSR, which was published in 1998 and covered spending for the three years from April 1999 to March 2002. The old annualised system was proclaimed dead and buried. CSR 1998 also the
chancellor opening the public purse again - the new plans entailed reversing the decline in public spending and bringing it back up to near the 40-year average of 42 per cent of GDP.

Whittled away

For public services the story was even better. One achievement of Brown's 1997-99 squeeze was that public debt had almost vanished, freeing up money which had been spent on interest payments for spending on services. As the economy picked up and unemployment shrank, the costs of social security fell, freeing yet more for services. After the drought of the first two years, 1999 onwards saw money gushing into public services.

In fact, the torrent was so big the system could not cope and by 2001 the government was running an£8bn underspend. In the context of this flood of resources into parched public services, no-one noticed that the much-vaunted strategic aspects of the CSR process were gradually being whittled away.

First, the heavily emphasised radical innovation of three-year plans suffered a 50 per cent cut - the next spending review took place in 2000, not 2001, because of the impending general election in May 2001. (If it had been left until July 2001 the even bigger spending plans on services would not have had the desired political effect before the polls).

So we now had what Treasury officials called - without any hint of embarrassment - a 'three-year spending cycle that is reviewed every two years'. It could be straight out of Yes, Minister. Except of course when we get to where we are now and suddenly the spending review is again a three-year cycle (2004-07) - you can work out for yourself what the political calculus was this time.

Moreover not only did the spending reviews become a two-year cycle, but the chancellor (and sometimes the prime minister) started using all sorts of opportunities to announce spending increases - Budgets, pre-Budget reports and even (on health) the sofas of TV studios. No-one minded too much in the public services, because these were always increases.

So what of CSR 2007? It will confirm that spending over the period 2008-10 will drop by almost 1 per cent of national wealth - and will probably reach more than 1 per cent by 2012 if current policies continue. Ironically, this is something which during the last election campaign Mr Brown denounced as a 'cut' when the Tories were proposing to do something similar. It is doubtful the new chancellor Mr Darling will introduce the CSR in the same terms.

Together with increased levels and costs of government borrowing and commitments to continue increasing spending in some areas (eg health and education) this means - as Robert Chote of the Institute for Fiscal Studies points out in our alternative comprehensive spending review - significant real-terms cuts in many areas. This starts to raise issues across a range of public services and policy areas.

Alternative picture

The issues are not just about money, but the direction of travel in many policy areas, with significant debates emerging about the role of choice and private sector provision of public services, which we have tried to tease out in the alternative review.

Its genesis is rooted in concerns about where our democratic system is going and the poverty of public debate about our government's policies and priorities. Mr Brown is making a great deal of his desire to re-engage people in the democratic process and in active citizenship, but his policies in the first decade of New Labour as chancellor belie this.

Whatever its flaws and abuses, the spending review system did at least offer one tantalising prospect - the possibility of having a serious national debate about spending priorities. The UK currently has probably the least transparent and least participatory system for prioritising public resources of any developed democracy.

This position has developed over many decades. Parliament, back in the dim and distant past, fought a long battle with the monarchy for control over public spending. By the 18th century this battle had been won and it was Parliament that largely decided budgets. During the 20th century the power of Parliament over budgets was gradually whittled away until today it simply acts as a rubber stamp for the executive and only engages in post hoc scrutiny of how well public resources have been used.

The spending reviews offered at least the possibility of changing all that. And indeed things looked promising when about 18 months ago the government started talking about using the delayed CSR as an opportunity to have a great national debate about our priorities.

Shied away

The government published some discussion papers and reviews and put some rather naff 'participatory' titbits on the Treasury website. But when it came to involving Parliament, it yet again shied away.

So what could or should it have done? Well, given the timescales it would have been perfectly possible to have published a draft CSR as a white paper last summer. They could have then asked the various select committees to carry out scrutiny hearings on the proposals, and in the usual way invited interested parties to contribute oral and written evidence.

It is doubtful that select committees could have come up with non-partisan recommendations, but they could have orchestrated the debate and even possibly have come up with options reports or maybe even some specific recommendations that could command wide support.

In my role as an adviser to the Treasury select committee I witnessed several attempts to get the Treasury to run a more open and participative process this time around. Far from doing this, it has been just as secretive as ever - not even, for example, being prepared to formally tell the committee that the CSR announcement had been pushed back from July to October when the decision had clearly already been taken.

Crucial battleground

So as an academic community we at Manchester decided to throw our own thoughts into the debate by publishing an alternative review.

Of course, we have not addressed every issue but we have covered most departments and major policy areas. We have had no 'party line' other than asking our contributors to provide thought-provoking analyses.

If the government reverts to previous practice, the next spending review will be in two years. At the moment it would probably be more of the same - ie a stand-still or even marginal 'cut' in public spending. But with the Conservatives already signed up to keeping within the envelope for public spending in the 2007 CSR, it is just possible that CSR 2009 could become a crucial political battleground. If the next general election is pencilled in for autumn 2009, that means New Labour proposing increases in public spending and the Conservatives further cuts.

That may be Mr Brown's game plan - to open up clear pink water between the parties on public spending.

But whatever the politics, if we are to start revitalising democracy and the public domain, one good place to start would be by having the 2009 comprehensive spending review as a really open, much more consultative and engaging process than any of its predecessors have been.

Our own Department for International Development encourages developing countries to introduce participatory budgeting - maybe it should direct some of their energies towards Number 11 first?