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end of the year. Poor value for money was inevitable in these circumstances that rushed end of year
spending.

Figure 1 - Evidence of rushed Q4 spending

Average Real Expenditure 1970-2001

70000

71000

72000

73000

74000

75000

76000

77000

Q1 Q2 Q3 Q4

£ billions

Before 1997, the control of inputs into public expenditure was seen as the defining factor. Little effort
was made to define measurable outcomes that the public could expect public spending to yield. This led
to a lack of focus on what outcomes public expenditure was expected to achieve and encouraged a
political debate around public spending which focussed on winners and losers in input terms rather than
holding the Government to account for its achievements against measurable objectives.

Another flaw with the system of public expenditure was that spending was planned on an entirely
departmental basis. This was despite widespread acceptance that many policy issues required a
coordinated response from public agencies. So departments were encouraged to maximise their own
resources without regard for the impact of their programmes on common objectives across Government.

2.2. The New Public Spending Framework

In 1997 a new spending framework was implemented with the objectives of improving the
quality and cost-effectiveness of public services while ensuring sound public finances. The
framework would aim to deliver:

• consistency with a long-term, prudent and transparent regime for managing the public finances as
  a whole;


• measurements of success by policy outcomes rather than resource inputs;


• strong incentives for departments and their partners to plan over several years and plan together
  where necessary; and


• the proper costing and management of capital assets to provide the right incentives for public
  investment.

The new public expenditure framework was underpinned by the Government’s fiscal policy framework.
The fiscal policy framework is based on the five key principles set out in the Code for Fiscal Stability –
transparency, stability, responsibility, fairness and efficiency. Based on these principals the Government
has set two fiscal policy objectives: