THE CUTTING EDGE
(Definition of “expenditure-based planning” principles
relating “bottom up” aspirations to financial controls)
Built Environment Quarterly, March 1978
In the December issue of “Built Environment” I showed how town and country planning had developed with precious little regard for financial controls, for the realities of management in central and local government and for the political process itself. Beyond the notorious uncertainty surrounding planning roles, the result has been a physical land-use planning system full of pretensions as to its real influence but unmatched by any coherent machinery for implementation. Now that most of our hospitals, universities and other major public programmes have been built, planners can no longer pretend that such artefacts add up to a planned approach. All action still depends on spending but the new economic climate forces us into a much keener appreciation of the real nature of financial controls as we fashion a more finely tuned response to environmental problems. This short article emphasises the importance of expenditure-based planning. As a major innovation in the financial system it may do much to bring more reality to the planned approach. Certainly one task for the next decade will be to improve and extend expenditure-based planning and relate this to our physical planning system.
A prerequisite is to see the two forms of planning as complementary but separate. We must call a spade a spade and recognise the limitations of the whole Development Plan System. Warts and all, the latter is a fairly successful physical planning system – and practitioner generally do a good job operating it. As a comprehensive system for the control of development, inevitably it is regulatory and can appear “negative” or “reactive”. Certainly the actual development decision lies elsewhere. And it will remain elsewhere because there is simply no way of integrating such land use controls into the evolving pattern of financial controls. This should be obvious enough in terms of the private sector but it is none the less true for the public sector as well.
The very size of this public sector as a proportion of national product (together with new financial stringencies) has led to new demands for expenditure-based planning. So far this is only beginning to appear in certain programme areas: notably in transport and in housing. Nevertheless, there is some progress and it is an evolving concept of great practical importance to public planning and with profound implications also for the private sector and the construction industry. There are implications too for more open government, for accountability and for planning as a real participatory process. The political definition in expenditure-based planning points directly at the level of choice that can be exercised. by local government and , perhaps also, the amount of control that can be enjoyed by Parliament and Select Committees of the House of Commons in their constitutional battles with the Executive.
Housing Investment Plans (HIPs) and Transport Policies and Programmes (TPPs) are pioneers of expenditure-based planning and are still in their infancy. Like all major innovations they have appeared somewhat fortuitously as a result of complex but very real pressures. They still lack some general context for their operation and control: it could be said that the one authority in the UK that does not have an HIP is the central government – and likewise for TPPs. But all this is to play for. Firstly, one must recognise the potential for such expenditure-based planning as a vehicle directly relating environmental change to financial controls: a completely new generation of plans!
Since 1972 governments have been moving rather haphazardly, but fairly inexorably, in this direction. Necessarily it is an entirely new “ball game” radically different from town and country planning concepts and, as an embryonic form of financial planning, very different from the concept of the old Department of Economic Affairs. In both cases concern for long range planning and “comprehensiveness” was a recipe for impotence and, of course, DEA never came within miles of thinking about urban renewal or the physical environment. As a more central aberration DEA was never properly constituted and had to fail as frontal “attack” in Treasury controls. The prognosis for local government structure planning, Regional Reports and that kind of matter is a bit more hopeful: they are likely to be developed as useful background information on local objectives and trends: information that may yet influence a new generation of expenditure-based plans whose bids for resources is directly related to resource decisions.
The Importance of Spending
Whether we like or not, if planners are to realise the potential of expenditure-based planning they will have to develop a smell for the political process, a taste for battling with our rather arbitrary style of government and a thorough appreciation of financial controls. Because what is clear in this discussion, what emerged beyond any doubt, is that the man with his hands on the money makes most of the decisions. Why then has the development of planning thought over two decades understated – or even ignored – the importance of spending? Who, for example, could disagree with Wildavsky when he wrote; “Money talks: It speaks to the purposes of men and nations … Surely little the State does – short of war – is more important than constantly using so much of the nation’s work and wealth. The hidden politics of public spending is a unique window into the reality of British political administration”. All this is increasingly self evident.
But the importance of financial controls was not the apparent in the spending sixties. Under the banner of “you’ve never had it so good”, large development programmes and private sector sprees obscured both the reality of arbitrary controls and our arbitrary style of government. Even now some may have reason to doubt the possibility of planning more than a few limited and clear objectives in our sort of society. Then it was not so clear – and the same obscurity protected and advanced the dominant myth of a planned approach to the urban fabric.
For example, the construction industry is inherently disorganised. Because, among other things, it has never enjoyed a “known demand” it has remained disorganised. But while orders flowed and while the big spending lasted, the industry prospered well enough. So also the big spending Ministers – and councillors – saw planners as their natural allies when dealing with financial controllers. Paper plans were paraded to give the semblance of planning strategies that, in fact, hardly existed. For the mass of people, and for many planners and sociologists too, it was possible to imagine that mechanisms of strategic planning were evolving: that urban society was renewing itself in accordance with some explicit governmental plan. All this was a stimulating illusion. But it was only an illusion.
Planners played their own part in providing a “halo effect” for often fairly mindless spending. Finally with the indiscriminate expenditure cuts of 1974, the express train of public expenditure ran “full tilt” into the buffers. The driver was almost killed, the engine wrecked. The construction industry reeled and has not recovered. Tony Crosland had already given the final comment on this make-believe era: “The party”, he said, “is over!”
He at least was aware that we had no planning machinery relevant to Treasury controls and also – I think – the difficulty of saying so. The wider aspirations of town and country planning became only a memory for civil servants and local government officers continuing the academic rituals of strategic planning. Nothing would be quite the same again.
With retrenchment both central and local government was forced into a new assessment of financial controls. The Treasury in its concern for the management of the economy and levels of aggregate expenditure introduced “cash limits” to bring public expenditure back into control. Some Members of the House of Commons Expenditure Committee believed that the Treasury’s Public Expenditure Survey System (PESC) was entirely discredited. But it was not. Cash limits worked and the Treasury regained sufficient control to ward off mounting pressure by the Expenditure Committee for a more “positive” planning system. Both the present Government and the Treasury believe that PESC is complicated enough without experimenting with more “elaborate” planning controls and the hard fact is that neither the Expenditure Committee or planning experts have so far come up with immediate practical suggestions for a more objective-orientated PESC system with a clearer sense of priorities.
But the battle is on as the pressure for greater political accountability grows. What Lord Hailsham has called “an elected dictatorship” is under attack and the veil of ignorance surrounding government spending is becoming an issue for parliamentary government. Within these central difficulties it is increasingly clear that the financial controls of government are incredibly crude and there is really no coherent relationship between the management of the economy and the tasks of urban and regional regeneration of any level of application. Sophisticated planning techniques at local government and other levels have been developed out of phase with the essentially pragmatic nature of the political process.
The lesson is that planning must adjust to a more realistic appreciation of public controls. Certainly any attempt to produce an overall analysis on the basis of all categories and client groups with which governments are concerned would lead to total incomprehensibility. It is essential to begin presenting information on the distributional and spatial effects of public expenditure in a broad and simple way readily comprehensible to policy makers. The strength of new initiatives in expenditure-based planning is that proposals originate from a very local, and therefore less complex, assessment of problems. How this “bottom up” approach will match the “top down” decisions is the matter of the moment and something that will give Select Committees something sensible to cut their teeth on. We now need to look more closely at the precedents in housing and transport.
Expenditure-based Plans in Housing and Transport
In January 1978, the Department of the Environment (DoE) announced regional allocations totalling £2,432 million for local authority capital expenditure on housing in 1978/79. This represented an increase of nearly £100 million at 1977 survey prices over the total allocation for 1977/78. Details were also given of allocations for each housing authority, the DoE having “taken careful account of” the new system of Housing Investment Plans and strategic statements submitted by local authorities.
So far outside commentators have had little chance to assess the way these bids have, in fact, reflected housing needs and, more importantly, the way government has assessed them in the regional and individual allocation. The DoE announcement is unfortunately unrevealing in this respect but notes that the new system is evolutionary and will be developed by a Sub-group of the Housing Consultative Council. The House of Commons Expenditure Committee has also asked for a new standard reporting system on local housing needs and this has been approved by DoE. The allocation of resources may not bear too much scrutiny on this first run but the principle is established for providing a framework within which central government can allocate resources as a direct response to local government expenditure-based plans. It is certain also that the rationale of the governmental response will be scrutinised by the Expenditure Committee and others.
Perhaps the real precedent came in the Budget Debate of 1972. Under the rubric of “a total approach to the urban problem” Peter Walker (the then Environmental Secretary) used the debate to introduce new ideas for expenditure-based planning in transport. The variety of local grants were to be merged, he said, and the new counties would have to provide comprehensive plans to justify their expenditure. These plans were to become “Transport Policies and Programmes” (TPPs), originally the rationale for “Transport Supplementary Grant” (TSG).
It remains unclear to what extent the then Government saw these TPPs as a “Trojan Horse” for more general expenditure-based planning. Ministers were concerned with the need for more effective resource planning with local government and, as always, the problem of balancing greater local freedom against the need for authorities to conform with both the main objectives of government policy and certain standards of service throughout the country. The potential of expenditure-based planning as a new financial dialogue that would resolve this classical dilemma was not seriously considered at the time. The transport innovation was probably seen more as a temporary device to meet lumpy expenditure outside the multiple-regression-derived formula that Whitehall and many Ministers prefer. Indeed, while TPPs have proved too popular for reassimilation into the Rate Support Grant formula, the resistance of Ministers and Whitehall to being put in a position of having to take a view about individual authorities’ needs, limits the development of diagnostic skills at central government level for the assessment of expenditure-based plans.
Consequently, in later years. Transport Supplementary Grant has tended to move back to per capita and formula allocations and, in spite of current Government aspirations to the contrary, this could be the fate of Housing Investment Planning and, indeed, the new general unitary grant proposed in the 1977 Green Paper on Local Government Finance.
Certainly in 1972 Whitehall was remarkably indisposed to the whole idea of expenditure-based planning and Ministers were advised that it would take many years to extend the principle to housing let alone to the more general urban fabric. If, after all, housing investment plans are allowed to develop and make us more sensitive to the potential of expenditure-based planning then, with TPPs, it will become possible to extend the principle to other services.
These are some of the broad issues that the prospect of expenditure-based planning opens up. Recently a senior civil servant claimed that progress with HIPs and TPPs together with the proposed Unitary Grant and other suggestions in the 1977 Green Paper on Local Government Finance was a move towards “the co-ordination of public expenditure planning”. Clearly this is still exceedingly speculative. But if these new plans are successful for local government and other environmental agencies and if the same principle can be extended to other services, the way is clear for the definition of regional funding where priority expenditures and their objectives could be expressed within PESC.
Town and country planners’ claims about planning as a participatory process are always bogus. People can only participate in real events and these events have got to be shaped and ordered by bureaucracies – and paid for. There were always some doubts about planners deceiving people in the massive exercises in public participation. It seems more likely that planners were deceiving themselves because town and country planning had little to do with spending and therefore little to do with choice. To spend is to choose; the rest is relatively rhetorical. And yet we still involve the public in these rituals at a time when councillors have enjoyed little real opportunity of participating in a better future for whole cities and when the inadequacy of Parliamentary supervision of Government policies and expenditures has become notorious. Participation is the political process and our job is to make it work.
Expenditure-based plans are initiated by the agencies that have to operate them. They still need a clear framework in which issues are discussed by the Consultative Councils and Select Committees, and finally expressed as a “Pesc” system in central controls. Only this could be called a participatory planning process. It will take time. But at least the Government professes to be gradually moving in this direction and so it does seem that there may yet be major opportunities to be grasped in advancing a more planned approach.
 DoE Press Notice; 4 January 1978: “More Cash for Housing Allocations”. Initial arrangements for HIPs were set out in DoE Circular 63/77 “Housing Strategies and Investment Programmes: Arrangements for 1978/79, (and in Scotland, SDD Circular 6/77 “Preparation of Housing Plans 1977”).
 Heclo & Wildavsky; “The Private Government of Public Money”. London: Macmillan; Berkeley: University of California Press. 1974
 First Report from the Expenditure Committee: 1975/76: “The Financing of Public Expenditure”. Recommendations and Reply by the Government
 DoE Press Notice; 4 January 1978: “More Cash for Housing Allocations”. Initial arrangements for HIPs were set out in DoE Circular 63/77 “Housing Strategies and Investment Programmes: Arrangements for 1978/79 (and in Scotland, SDD Circular 6/77 “Preparation of Housing Plans 1977”).
 Chapter 3: Housing: Ninth Report from the Expenditure Committee 1976/77; 30 June 1977, and pp 3 & 4; Reply by the Government.
 Parliamentary Debates (Hansard) House of Commons Official Report, Session 1971/72, 23 March 1972, Cols. 319-20
 Local Government Act 1974. DoE Circular 22/74 “Transport Supplementary Grant – More Details of the New System”. Circular 60/74 “Transport Supplementry Grant – Submissions for 1975/76”; and subsequent Circulars.
Local Government Finance: Cmnd. 6813, HMSO, May 1977
World Bank Reaction (Washington, 22 June, 1978)
"No other government has been so successful in keeping functional and territorial choices distinct, which may be the major weakness of center-local policy-making in Britain". Douglas E. Ashford, "Policy and Politics in Britain", Basil Blackwell Oxford, 1981.
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