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

Professor Nancy Devlin , with colleagues from the Office of Health Economics in London and Brunel University London, published a new paper that explores the evidence currently being used to allocate budgets between public sector activities in the UK and its limitations. The paper argues that there is much that can and should be done to improve the evidence base to inform the allocation of public sector budgets across portfolios. This paper proposes a pragamatic approach to measure and value disparate public sector outputs in a commensurate manner.

Discrete choice experiments could be used to generate evidence of the relative importance placed on these different aspects of public sector outcomes by members of the general public. The proposed approach could be used to produce evidence on the relative effectiveness of different public sector activities in improving outcomes, and evidence on the relative value of these outcomes that would facilitate comparisons of value for money across government departments.  An advantage of adopting such an approach is its ability to go beyond a sector-specific focus to evaluate options that generate disparate outcomes spanning multiple sectors, the importance of which has been amply demonstrated by COVID-19 and measures to contain the pandemic.

The lack of progress toward improving the evidence basis for public sector spending is worrying, given how much is at stake in these decisions.Greater public good could potentially be achieved from existing budgets just by reallocating those budgets toward those public sector activities with higher value to society. The authors recognise that government budget allocation decisions will correctly remain a political decision, which will necessarily reflect a variety of considerations and judgements that will go beyond even the broad set of outcomes that would form the basis of our proposed approach: even when developed fully it would be a decision aid, to inform and illuminate a complex process. However, the authors would contend that the efficiency of public spending could be significantly improved and the transparency of political choices improved by the availability of an comparative evidence base.

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