Why the Spending Review should herald a new approach to our public finances
The forthcoming Spending Review must focus on outcomes and delivery, and also be the springboard for an honest debate about the very nature of our public sector, argues CIPFA's Rob Whiteman
George Osborne’s forthcoming Spending Review will no doubt generate many column inches and soundbites as politicians from all parties try and convince us of its merits or otherwise. Such vigorous debate is, of course, to be welcomed but without a change of approach it won’t shine a light on the most pressing underlying issue – namely what kind of public sector can we realistically afford over the next 10 to 20 years?
This is at the heart of many of the problems in our national discourse. In continuing to duck the challenges of a more informed conversation and relying on an over simplified narrative of spending and cuts, government and all parties are collectively turning a blind eye to some uncomfortable problems.
So what is the alternative? Rather than only looking for piecemeal reductions and slicing away at different areas of spending that aren’t protected, the government should instead focus on the whole of public services and what is delivered.
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We think the Spending Review should focus on three specific areas:
First, the government needs to consider services and not just money. It really shouldn’t need saying, but outcomes do matter. So the Spending Review must take into account analysis beyond the usual comfort zone, and consider the effectiveness of the whole system where the interconnectedness of public services has never been more important. Cutting housing provision to the bone may affect people’s health or children’s educational achievements more than discrete spending decisions made in those areas. Should we be surprised A&E departments are much busier when social care is cut by more than a third?
Secondly, the Spending Review should encourage departments to break down barriers across Whitehall and improve the integration and efficiency of services and systems. There should be greater integration across the whole of the criminal justice system, for instance, including intelligence-gathering at home and overseas, instead of focusing on individual departmental priorities and budgets.
Similarly, ring-fencing of budgets in health, defence and overseas aid and maintaining the triple lock on pensions, serves only to exacerbate the problems of unprotected departments and stands in the way of evidence-based policymaking. Saving money can improve quality, but it is intellectually weak to only apply this culture to a few areas, while promising protection to the rest. This fuels the culture that more money is needed to improve things and solve all of our problems. Protection is the surest way to stifle innovation and defer indefinitely the transformation which some of these sacred cows must necessarily undergo if we are to achieve better societal outcomes and coherent public finances.
Thirdly, the government should focus on medium-term financial planning, early intervention and prevention instead of limiting financial targets to electoral cycles. The Treasury has a depressing recent track record after it targeted public health budgets in June because of an underspend in 2013-2014 caused by transition, prompting much well-founded criticism from the local government and health sectors. Not only has this highlighted the government’s reluctance to let go of the reins and empower budget holders to plan across years, but it also calls into question their commitment to prevention in the health system rather than fire-fighting acute pressures.
In summary, the Spending Review should be a springboard towards an honest and informed debate. It should be focused on service outcomes and delivery and not simply spending. It should break down the silos of Whitehall to promote a whole-system approach, empowering departments to genuinely transform, invest for the future and plan for the medium term.
If the government can pull off this ambitious task and sell it to parliament and the country, perhaps the UK will get the Spending Review it needs.
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