Allocating Public Spending Efficiently: Is There a Need for a Better Mechanism to Inform Decisions in the UK and Elsewhere?

In the UK few if any regular processes explicitly address comparisons of value for money between spending in different government departments, despite the existence of mechanisms that could in principle achieve that. This leaves a very important gap in evidence and means that decisions about public spending allocations are likely to miss opportunities to improve social welfare from existing budgets. Greater attention to the development of methods and evidence to better inform the allocation of public sector spending between departments is therefore urgently needed. We identify a number of possible approaches to this—some of which are being used in different countries—and highlight their strengths and weaknesses. We propose a new, pragmatic approach that incorporates a generic descriptive system to measure the disparate outcomes produced by public sector activities in a commensurate manner. Discrete-choice experiments could be used to generate evidence of the relative importance placed on different aspects of public sector outcomes by members of the general public. The proposed approach would produce evidence on value for money across departments, and the generation of evidence on public preferences to support that.