Twelve months ago the Institute for Government offered its proposals for how to run the Spending Review expected this year. We had no need of Mystic Meg’s assistance to predict that Brexit might affect the process, and our predication that the backdrop to the spending review might be “challenging” would be an understatement. Scarcely could we, or the Treasury, have predicted the extent to which that has turned out in fact. As late as the Spring Statement, the Treasury was predicting a Spending Review that would “confirm the government’s priorities for the years ahead” and, learning lessons from previous reviews, “aim to ensure that policy issues are considered across departmental boundaries, and that performance and outcomes achieved for the money invested in public services are tracked systematically.” Bliss was it in that dawn to be alive.
The Brexit tornado, and the Johnson government’s desperation for quick-win domestic policy announcements, smashed through those plans. Even the name changed. Demoted to a “spending round”, what we have ended up with is a rushed process to cobble together spending plans for (mainly) one year only – and it has turned out to be the worst of both worlds. This has left most public services without the medium-term financial certainty provided by a normal multi-year process, and you could almost hear the clatter as a whole collection of cans – adult social care, a proper financial settlement for local government – were yet again kicked down the road. But by confirming Theresa May’s 2018 health settlement, and promising money for schools, we estimate that something like two-thirds of day-to-day departmental spending is now pre-committed beyond 2020-21, leaving the Treasury with very little room for manoeuvre next year. The government’s intentions for borrowing, tax and spending beyond next year are also completely unclear as public borrowing numbers published on the day of the Supreme Court judgement show a worsening outlook. Whether Sajid Javid, John McDonnell, or someone else ends up presiding over next year’s review, its starting point could scarcely be more difficult.
I am not, however, in complete despair. The announcement shows a recognition that government needs to be strategic. It can’t make everything “a priority”. You can argue their merits, but Brexit, health, schools and the police are clearly being given emphasis. The government has recognised that combatting crime means more money for the courts and prisons, as well as the police. There is a bit more money for important preventive services such as social care, public health and support for children with additional needs. And the Treasury’s newfound commitment to value and impact is reflected in its commitment to define objectively what success looks like for the services which are receiving more investment.
It is, of course, far from certain whether 2020 will turn out to be any less chaotic than 2019. But a proper review, if one is possible, would give whoever is in power an opportunity to orient the government’s spending muscle behind the most important commitments in their programme. Javid has said he would apply a “new focus on the outcomes the government will deliver”, and other would-be chancellors should also commit to this position. We have drawn out other top tips from recent discussion events we have hosted with PWC, Treasury officials and other public service leaders. Firstly, leaders need to make collaboration work by giving incentives for co-operation between departments on transformation projects and improvements to the combined impact of different departments’ investment programmes and public service spending.
Secondly, don’t just allocate budgets to achieve a fixed total. Investment, whether it is in physical and human capital which will grow the local economy, increase revenue and reduce future spending, or in preventive interventions which will reduce demand pressures on services, must be considered.
Finally, the Spending Review needs to stop “just being an event”: the Treasury needs to make sure decisions are put into effect properly. It should also think about the medium to longer term issues to which it will want to return in the next spending review.