By Gillian Fawcett, Head of Governments, CIPFA (with additional commentary by Jane Payling)
The UK faces a combination of failing public services and breached spending controls unless urgent action is taken, warns this report by the Institute for Government (IfG) and CIPFA. The report was launched on 28 February 2017 at a high-profile event attended by 80-plus participants.
This report found that until recently the government managed to maintain the quality of public services while controlling spending across five key policy areas – hospitals, adult social care, schools, police and prisons. The government’s own data clearly showed its original approach had run out of steam by 2015.
The recent budget announcement of additional funding for social care across the next three years was good news, particularly given the report’s findings. However, the chancellor’s plan for government departments to outline spending cuts of up to 6% with the aim of saving up to £3.5bn by 2020 has the potential to exacerbate existing pressures on key public services as highlighted in the report – because of this it is even more important that future decisions about spending are based on a realistic assessment of the performance of public services that can survive public scrutiny.
The performance tracker uses government data to examine performance in the five key services. It highlighted that the government now risks bouncing from spending crisis to crisis, against the backdrop of contentious Brexit negotiations.
The 2010 Spending Review
The performance tracker suggests the 2010 Spending Review was largely successful in terms of achievement of the government’s stated objectives. Originally viewed as a one-off period of pain following the 2008 financial crisis, before an economic recovery led to a return of business-as-usual, the 2010-15 spending reductions took place after several years of investment and growth. At first, government succeeded in enhancing the performance of a range of services, maintaining their scope and quality while sharply cutting or controlling spending:
In schools and hospitals, where spending growth was constrained rather than reduced the data suggests modest improvements in efficiency occurred, with services absorbing rising pupil and patient numbers respectively.
The police service successfully implemented large spending reductions between 2010-2015. Despite fewer police officers on the ground and signs of stress in the workforce, public confidence in the service grew.
Violence in prisons remained level up to 2013, despite an 18% reduction in spending and a 14% reduction in frontline staff.
The 2015 Spending Review
However, the government is struggling to successfully implement the 2015 Spending Review. Even before the 2015 Review, there were clear signs of mounting pressures in public services.
Patients had been routinely waiting longer for critical hospital services such as accident and emergency (A&E) and cancer treatments since 2013, and whilst clinical standards within hospitals were holding up (looking at indicators such as infection rates), increases in activity were resulting in record levels of financial deficits.
Delayed transfers of care from hospital to home or social care had also risen sharply since 2014, up by 40% in two years.
Violence in prisons had been rising sharply since 2014, with assaults on staff up by 61% in two years.
Since the Spending Review, carried out in November 2015, these trends have intensified, pushing services such as adult social care and hospitals towards breaking point, and in the case of prisons beyond that point. Governments of all shades have long promised to transform public services by reducing demand, making better use of technology and finding new ways of working.
Government decision making... or not?
The facts established by the data do not appear to be feeding into decision-making. Instead the pattern in this parliament has been one of the government:
- Failing to develop alternative strategies despite the clear warning signs in the data
- Continuing to pursue approaches that are no longer working
- Being forced into emergency actions in response to public concern
- Providing emergency funding to bail out deeply troubled services.
The report goes onto make several recommendations, including that assumptions behind spending decisions should be subject to independent scrutiny. Governments of all shades have long promised to transform public services, but these ambitions have never truly been realised. To counter this, the report suggests that government should consider creating an 'Office for Budget Responsibility (OBR) for public spending', to help embed efficiency within public sector decision-making.
Reflections from Richard Douglas Non-Executive Director NHS Improvement; former DG Finance at the Department of Health and joint author of the review
Speaking at CIPFA’s public sector leaders retreat, Richard Douglas took time to consider two questions: how did it happen, and was the outcome predictable?
He described the spending review process which, like most budget setting rounds, starts well with a high degree of evidence being used and healthy risk adjusted scepticism about achievability. However, when the figures fail to reach the required total, a series of discussions and tweaking of the assumptions moves the resulting budget from one which is likely to be achieved to something which would require more than a fair wind and a bit of fairy dust to deliver (sound familiar anyone?). At this stage, all contingencies are wiped out and although the spreadsheet adds up, the end position is one which ‘might’ work rather than is likely to work.
The context in which the spending reviews were reached is also important to consider. SR2010 followed the ‘glory years’ for public spending, and most thought that things would be tight for less than 5 years. The response was therefore to tighten belts and push the savings requirements down to local level, with some national support such as pay restraint and curbing central DH spending.
With hindsight what was needed was national political support to deal with transformation but instead the arguments were oversimplified. Then, as now, we needed a public debate about the balance of cuts v achievable efficiencies.
In conclusion, Richard felt that a greater degree of transparency regarding the underlying assumptions and accountability for their delivery would help guard against this.