A major new study reveals that the notorious “iron grip” of the UK Treasury on public spending is a myth. The existing arrangements contribute to inefficiencies. Cash control from the centre does not translate into effective service delivery locally, with short term fixes and little evaluation of outcomes.
Research, published in a new report and book – The Myth of Treasury Control – and funded by the Nuffield Foundation, found the Treasury had little understanding of how money was spent and managed across vast swathes of state spending. This is especially so in complex, demand-led areas with the most entrenched problems, including the study’s three case study areas: homelessness, prisons and special educational needs. Interviewees repeatedly told researchers that the Treasury often acts only “when the wheels have fallen off”.
The top academics from the universities of Cambridge, Manchester, Bristol and York call for devolution of significant areas of spending to reset the fractured system of public spending control. They also propose the Treasury should be split into an “economic department” responsible for taxation and macro-economic policy (including setting the ‘envelope’ of total managed expenditure) and a ‘budget department’ responsible for public spending allocation and overseeing departmental performance.
Prof Dave Richards from the University of Manchester and lead author of the accompanying report, says: “Our findings provide a strong evidence base for many of the reforms that the new Burnham Government is pursuing. In particular, we show that incremental adjustments cannot fix a structurally incoherent system. The UK cannot improve outcomes, invest strategically, or achieve value for money until its spending system is redesigned to reflect how public services are actually delivered.”
The report reveals a stark imbalance at the heart of the UK’s public spending system. It finds substantial over-control in the way Treasury spending teams plan and approve expenditure, with highly interventionist and restrictive processes that slow decision‑making and constrain innovation. Yet, at the same time, large areas of public spending remain under-controlled at the point of delivery. How money is used on the ground is often poorly understood, inconsistently managed and vulnerable to crisis, particularly in the complex, cross-cutting public services examined in the study.
The findings highlight a system where central oversight is tight on paper but weak in practice, exposing a critical gap between Treasury‑driven control and the realities of frontline delivery.
Relatedly, fragmented responsibilities across Whitehall, local government and public agencies create incentives to cost-shunt between departments and organisations instead of working towards shared outcomes. Illustratively, welfare reforms designed to reduce central government spending have shunted costs onto local authorities, increasing homelessness pressures and reducing resources for prevention.
Government too often fails to turn strong, analytical evidence into effective policy, because it is disconnected from frontline realities or overridden by political priorities. At the same time, the Treasury often priorities controlling spending inputs rather than improving outcomes for citizens. This narrow focus leaves performance weakly connected to funding decisions and accountability for results increasingly unclear.
Former Treasury economist and co-author of the report, Prof Diane Coyle, from the University of Cambridge, says: “Our suggested reforms are intended to align the management of public spending with the realities of a modern, place-based state built on collaboration rather than central control.
“The evidence points to the need for greater devolution, underpinned by clearer responsibilities, stronger local accountability and a funding framework that supports long-term decision-making rather than short-term budget cycles. The relationship between central and local government needs to be reset through greater cooperation and co-design, simpler governance arrangements and constitutional protection for local government.”
The study breaks new ground by starting at the frontline, capturing the views of practitioners across local government, education, prisons and the third sector before turning to Whitehall. Researchers conducted 154 interviews, including former chancellors, Treasury officials and senior civil servants, and traced spending programmes from Treasury sign‑off through to delivery by reviewing government papers and audit reports.
When the researchers interviewed Andy Burnham in 2024 for their book – The Myth of Treasury Control (OUP, 2026) – his critique of the Westminster system – and the Treasury’s role within it – closely matched the evidence emerging from the research.
His vision to scale up ‘Manchesterism’ as a new national model for reform speaks directly to the structural weaknesses and challenges identified in this report.
Gavin Kelly, CEO of Nuffield Foundation says: “It is never guaranteed that a long-term research project will reach its conclusions at an opportune time. This one does. Its findings provide timely insight on how the Treasury – the pinnacle of the UK’s centralised system of governance – needs to be reformed to reflect the shift towards greater devolution, a place-based approach to public services and the urgent need for a long-term perspective on how to revive our communities and the public realm.”
Read the report: The Myth of Treasury Control: Understanding the UK’s Public Spending System (and How to Fix It)
Read the book: The Myth of Treasury Control: Public Spending in an Incoherent State
The views and opinions expressed in this post are those of the author(s) and not necessarily those of the Bennett School of Public Policy.
