ICAEW chart of the week: A rush of capital spending in March

Our #ICAEWchartoftheweek this time is on the subject of public sector net investment. This is the government’s preferred measure of capital spending, including much needed investment in the UK’s economic and social infrastructure.

Over the years, the process for delivering capital expenditure in the public sector in the UK has had a pretty bad reputation. 

The anecdote goes that the first quarter is spent arguing about budgets, in the second everyone goes on holiday, and it is only in the third quarter that programmes finally get up and running, before everything stops for the Christmas break. The final quarter is then a mad rush to spend the remaining budget before the end of the financial year.

Unfortunately, there does appear to be some support for this conjecture when we take a look at the actual numbers.

According to the provisional financial results for the year released last week, around 41% of public sector net investment in 2018-19 was incurred in the last quarter. £8.2bn or 19% was reported in the last month alone!

Brexit has been an added complication in this particular financial year, with the government’s no-deal preparations in the run up to the end of March involving additional capital spending. Despite this, March was the peak month last year, as it has been over the years.

This is a stubbornly consistent feature of the public finances in the UK, even after numerous attempts within government to improve capital budgeting and delivery processes. For example, departments are now able to carry over some of their capital budgets to future years, which in theory should reduce the incentive to spend every last penny of their allocation in-year. In practice, a great deal of activity seems to take place in March, while April and May appear to be much quieter.

Of course, it is possible that our concerns about the quality of government’s investment delivery process are not fully justified. There could after all be some very good reasons as to why the winter months are the best time for carrying out public capital works!

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