Chancellor Creates PDEL, a New Ringfenced Budget for Prevention

Chancellor John Healey's debut budget created a third public spending category, PDEL, and gave preventive policy its own ringfenced line in the Treasury's accounts.

The name is unwieldy: Preventative Departmental Expenditure Limit. It sits alongside RDEL, which covers day-to-day departmental spending, and CDEL, which covers investment. The change sounds technical. It is technical. But the way spending is categorised changes how it is debated, funded and defended.

The timing matters. The Institute for Fiscal Studies has warned of a "brutal" spending review next year. The chancellor made clear the Treasury is prepared to protect preventive budgets even as departments elsewhere face cuts, based on the figures Healey set out in the budget.

Where did PDEL come from?

The idea came partly from No 10. Andy Burnham wants to tackle rough sleeping, and knows the argument requires spending more upfront to save the state money later.

The intellectual case comes from Demos. The thinktank introduced PDEL in a 2023 paper that identified £22bn of costs to government it claimed could have been averted by preventive programmes.

"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," said Demos chief executive Polly Curtis.

How does the mechanism work?

The Treasury's spending review process rewards departments that cut their own budgets. Prevention breaks that logic. Spending on Family Hubs, for example, may show savings years later and in other departments entirely — the welfare bill, the health budget, even the criminal justice system.

Demos argues some day-to-day spending is not "investment" in strict accounting terms, but deserves protection because scrapping it brings short-term cash savings and net costs over time.

Does categorisation really change behaviour?

There is precedent. Before Labour took power in 1997, day-to-day spending and investment were not formally separated in the public finances. Gordon Brown split them, which allowed his "golden rule": government could borrow to invest, but current spending had to be covered by taxation.

The split did not stop the Tories raiding capital budgets repeatedly during the austerity years. Whitehall departments have just been asked to cut future capital budgets to fund the Defence Investment Plan. But separation created scrutiny, and a new kind of conversation about priorities.

Why now?

Gavin Kelly, chief executive of the Nuffield Foundation, which funds social research, says the shift makes sense because policymakers now have better data.

He points to a series of IFS studies, funded by Nuffield, showing Labour's Sure Start centres boosted children's education performance, increased future wages and reduced hospital admissions.

"Over the last decade, we've become more able to forensically link datasets across different aspects of services, illuminating how decisions in one public service can go on to impact other services and outcomes. That wasn't possible in the same way in the past. The agility of decision-making about how and where we spend has not kept up with some of these data advances," Kelly said.

What counts as preventive spending?

Healey gave few details. The Treasury says departments must argue case by case for projects to qualify. Rough sleeping is one highlighted area. Alan Milburn's soon-to-be-published review of young people not in education, employment or training is expected to argue that spending now on employment support saves future costs on welfare, health and housing. Demos also highlights early mental health support and obesity prevention.

One further possibility: if defined tightly, preventive spending could be classed as "investment" under the fiscal rules, letting the government borrow today for projects it believes save money tomorrow — the logic used for bridges and roads, with a social slant. The Treasury says that is not the plan.

Can PDEL survive the spending review?

The backdrop is grim. Next year's review, which could come as late as autumn, faces what the IFS reckons is £27bn of spending pressures. No accounting tweak ringfences a way out of that. Whether PDEL plays a starring role or a bit part, it may at least force longer-term thinking into a process built for short-term cuts.

By Daniel Okafor