Chancellor Phillip Hammond has been warned not to ignore “mounting pressure in public services” ahead of next week's Budget, as the Treasury asked departments to spell out their contributions to an ongoing £3.5bn cuts drive.
A new report by the Institute for Government (IfG) and the Chartered Institute of Public Finance and Accountancy (CIPFA), warns that government could face “a disastrous combination of failing public services and breached spending controls" just as the UK prepares for Brexit in 2019.
The authors urge Hammond to push for meaningful public service reforms and major changes to the way spending decisions are made in Whitehall.
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The report, which uses government data to examine spending and performance in five public services says: “In the upcoming Budget, the chancellor cannot choose to simply ‘tough it out’ as he did in the Autumn Statement, largely eschewing reference to the mounting pressures in public services.
“He must lead the government in a hard-headed assessment of where it is, and what it needs to do to get its plans back on track.”
The IfG and CIPFA's analysis examines spending and performance data for hospitals, adult social care, police, prisons and schools.
It looks at performance against stated ambitions of both coalition and Conservative governments to maintain or expand the scope and quality of public services while cutting public spending.
But while the report finds that the government initially managed to reduce spending without impacting services, it says these savings were made largely through cuts and rationing, rather than through meaningful reforms or efficiencies.
This meant that, by 2013, some services – in particular prisons, hospitals and adult social care – were starting to show signs of falling performance.
“It is clear that not enough action was taken during this period to fundamentally change the way public services were delivered – for example, by reducing demand, making better use of IT, or integrating services,” says the report.
By the end of the Coalition administration, the authors conclude: “Government was increasingly relying on unsustainable factors, including falling quality, explicit rationing and increased queueing, in prisons, adult social care and hospitals respectively.
“Looking back from 2017, with further spending reductions tabled and economic uncertainty ahead, the early years of austerity look like a missed opportunity.”
However, the IfG and CIPFA say that these signs of pressure on public services did not inform the 2015 Spending Review, meaning that the government is now “bouncing from crisis to crisis” – forced to announce extra funding or emergency measures for struggling services.
The authors urge the government to report on the progress of its current efficiency review – a commitment made by George Osborne and re-iterated by Philip Hammond to make £3.5bn of efficiency savings by 2019/20.
The Treasury announced on Tuesday that, as part of that review, departments had been asked to begin drawing up proposals to cut spending by 3-6% by 2019/20, with an update against this aim due in autumn 2017.
Hammond said at last year's Autumn Statement that he would allow £1bn of the £3.5bn to be reinvested in "priority areas", and while the Treasury's latest release provides no further detail on what that means, it suggests that the pressure on the adult social care system will not be one of them, saying it will be addressed by "efficiencies found within local government".
The IfG and CIPFA said the efficiency review should be used to “embed a culture where incremental improvements in the efficiency of public services are made year on year”.
“The government needs this to be a serious, data-driven exercise,” the report sats, as it calls for the efficiency drive to be closely linked to recent work to improve Whitehall’s finance function.
Launching the report, Julian McCrae, IfG deputy director, said: “As we’ve seen with prisons, social care and now potentially hospitals, the government risks getting into a cycle of crisis, cash, repeat.
"This report is not a call for more money. It is a call for better financial planning and reforms that are robust enough to survive public scrutiny.”
Rob Whiteman, CIPFA chief executive, said: “We know that for some parts of the public sector resources are stretched and that those working to deliver services are up against it. What is crucial is that we make the best possible use of the funds available.
“This means having a thorough understanding of how organisations are run and services are provided, using this information to think strategically and creatively about improving policy decision making, which will ultimately improve service delivery.”