No meaningful fat to cut from public service budgets, report warns

Performance tracker slams “lost decade for public services” amid predicted department budget cuts
Hospital spending is not enough to unwind appointment backlogs, the report said. Photo: Adobe Stock

By Tevye Markson

17 Oct 2022

There is "no meaningful fat to cut" from underfunded public service budgets, the government has been warned.

A report from the Institute for Government and the Chartered Institute of Public Finance and Accountancy has raised concerns about the “fragile” state public services are in amid government plans to slash departments' funding.

Public services will not have returned to pre-pandemic performances in the next two years under current settlements, the organisations’ annual performance tracker warned ahead of new chancellor Jeremy Hunt's announcement of fiscal measures to help fill a £60bn hole in the government's finances.

This year's tracker shows "services simply do not have the funding they need to get them back to pre-pandemic performance levels", CIPFA chief economist Jeffrey Matsusaid said.

Although the report assessed the state of public services in the context of recovering from Covid, it said “interconnected structural failures” pre-date the pandemic, slamming a “lost decade” for public services.

Most services were already performing more poorly immediately before the pandemic than when the Conservatives came into power in 2010 in most services, according to the report.

“Governments since 2010 may have been seeking efficiency over resilience but achieved neither,” it said.

As the government looks for ways to settle the markets and halt interest rate hikes following the failed Kwasi Kwarteng budget, the report has sent a warning that public services need billions of pounds of extra funding just to be stabilised. Tangible improvements will require even more, the report said.

The IFS has warned that departments could face 15% cuts to their budgets. Meanwhile, projected spending increases for departments of around 3.4% per year in the 2021 Spending Review have already dropped to 1.5% due to soaring inflation and higher-than-anticipated pay rises, according to the report.

For most services, this increase is unlikely to be enough to meet growing demand and enable a recovery from Covid, according to the IfG and CIPFA.

On top of this, staff shortages are set to worsen due to below-inflation pay rises and the cost-of-living crisis, with organisations calling on the prime minister to publish plans for how workforce shortages will be addressed.

The performance tracker reviewed the state of nine public services – general practice, hospitals, adult social care, children’s social care, neighbourhood services, schools, police, criminal courts and prisons – following the pandemic.

It found that spending increases in schools are not enough to recover learning lost during lockdowns, hospital spending is not enough to unwind appointment backlogs and demand in prison and courts is set to exceed budgets.

Meanwhile, the spending settlement for local government is no longer sufficient to meet demand in adult social care, children’s social care and neighbourhood services and the NHS will need to make cuts to fund a £2bn rise in staff wages next year.

IfG programme director Nick Davies said: “Public services are in a fragile state with little prospect of improvement before the next election.

“These are not isolated problems in specific services, but interconnected structural failures. In many cases, there are too few staff, with excessive workloads, working on outdated equipment, in rundown buildings.

“The pandemic exacerbated these problems but they are not new. This has been a lost decade for public services, with performance worse now than it was in 2010.”

The report has called on the government to focus spending on achieving priority outcomes and to use cross-departmental outcome delivery plans to increase collaboration between departments and avoid duplication.

Departments should also publish updated plans for how each service will tackle their backlogs, and improve the range and quality of the data they collect on public services, the report added.

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