As the dust settles on the first multi-year spending review since 2015, CSW explores the known knowns and the known unknowns
We know... Public spending is up, and every department is getting more money
With an unexpectedly positive growth forecast for 2021 from the Office for Budget Responsibility, chancellor Rishi Sunak chose to increase total spending by around £150bn. This means that, on average, departmental spending will rise in real terms by 3.8% a year over the Spending Review period – namely 2022-23 to 2024-25. The biggest rises are in years one and two, with spending staying flat in the final year. Speaking at a Civil Service World webinar, run in partnership with Oracle to explore the impact of the Spending Review, Institute for Government economist Gemma Tetlow said this settlement is not only “far more generous than 2010 and 2015” Spending Reviews but also more generous than 2004 and the 2007 “peak Gordon Brown” Spending Review.
We don’t know... How far that extra money will make up for increased demand
Despite the rapid rate of growth in spending, Tetlow cautioned that departments would still face challenges from Covid and a decade of austerity. Some of the funding increases are specifically earmarked to address backlogs – such as money allocated to reduce court waiting times and complete the Ministry of Justice’s court reform programme.
Nick Jackson, a former civil servant and now Oracle’s strategy leader for finance and supply chain in EMEA, added that departments should be wary of the sting at the end of the Spending Review – the slowing down in funding just as other pressures will be ramping up. The Budget announced that the public sector pay freeze would end, for example, but no extra money was earmarked to fund pay rises.
He advised that leaders “use years one and two wisely, and build a pot to reinvest when there are other pressures – wage commitments and inflation, which will eat into any savings.”
We know... The public sector pay freeze is ending
Sunak announced that public sector workers would see “see fair and affordable pay rises across the whole Spending Review period” as the pay freeze announced in the last budget was lifted, and he promised a return to “the normal, independent pay-setting process” overseen by independent bodies.
We don’t know... If this will mean a real-terms rise for civil servants
The return to a pay process overseen by independent bodies is meaningless for most civil servants – who do not have an independent pay body – and possibly also for senior civil servants, whose pay body has been calling for pay reforms, which have not materialised, for many years. Mike Clancy, general secretary of the Prospect union, said that the hundreds of thousands of civil servants not covered by pay bodies “need government to guarantee a fair pay rise for them”.
“With inflation soaring and pay rising across the private sector, this is an opportunity to reset the job market and make the public sector an attractive a place to work for skilled workers,” he said.
FDA assistant general secretary Lucille Thirlby agreed the pay freeze would not be at an end unless Sunak funded pay rises above the cost of living.
“Our members have seen their pay slashed in real terms since 2009 amid over a decade of pay restraint,” she said.
“High-quality public services are essential to the resilience our economy needs and they can only be delivered with good pay and conditions to attract and keep high-quality staff.
“It’s all well and good for the chancellor to boast at the despatch box about being the “party of public services” but this rhetoric means nothing if not backed up with the funding needed for departments to address historic underfunding of pay and pay systems for the very people delivering those services.”
We know... Non-frontline roles will be cut as part of a 5% efficiency drive
Alongside the increased spending totals, the Budget and Spending Review documents published after Sunak’s speech included plans to save 5% from departments’ day-to-day budgets by 2024-25 that would then be “reinvested into priority areas”. The creation of this target followed a cross-government efficiency and savings review, the document said, and to reach it government would be reducing “non-frontline civil service headcount to 2019-20 levels by 2024-25”. This in turn would help to fund increases in frontline roles, it says, meaning “a more productive and agile civil service, taking advantage of new ways of working to continue to reduce inefficiencies and deliver better outcomes for the public.”
We don’t know... What a non-frontline role is
CSW asked the Treasury what was meant by non-frontline roles and how many might be cut. A spokesperson said there was not yet a definition that could be shared, but that frontline roles were “operational staff” such as prison officers, Department for Work and Pensions work coaches, and court staff.
The spokesperson also said there were no confirmed numbers of non-frontline roles that would be lost, and they highlighted that civil service job numbers had increased during the coronavirus response.
Civil service trade unions reacted angrily to the apparent introduction of a distinction between frontline and non-frontline civil service roles.
PCS general secretary Mark Serwotka told CSW: “The civil service needs more investment and jobs not dishonest and false distinctions between frontline and so-called backroom roles.
“Our members have performed heroically throughout the pandemic and if many are potentially set to have their jobs cut they will be forced to consider an industrial response.”
We also don’t know... If a 5% efficiency drive will lead to real reform
Speaking at the CSW and Oracle webinar, former health department permanent secretary Una O’Brien said the key question about savings was: “Where are the implementation plans?” Analysis will have been done to work out where efficiencies can be made, she said, but this work “so often falls down” when it comes to realising the savings.
The Red Book – released after the chancellor’s speech with full details of his spending and policy plans – has been “very clear about the need for efficiency savings to be realised for investment,” O’Brien said. Funding may be rising but, as Tetlow and Jackson noted, much of this will be taken up to maintain standards and recover from the impact of Covid. Any significant service improvement will require investment, O’Brien noted, so it is vital for these savings to be made to facilitate reform and better outcomes.
But she also questioned whether the 5% target was high enough to “motivate the type of change that realises significant savings”.
“It’s important that we learn from history,” she said. “I worked for three years in what was famously known as the Efficiency Unit in the Cabinet office. Certainly back then, in the 80s and 90s, it was clearly understood that the only way you would get transformational change was to set an efficiency ask of around 20%. The risk with 5% is that people just hold their elbows in, try and skimp by without really doing anything that’s actually needed to realise sufficient resources for investment.”