Planned spending on public services not enough to improve quality, IfG warns

Public sector pay cap key to "efficiencies" in services, think tank says

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By Beckie Smith

11 Nov 2019

The government will need to spend billions more than planned to improve critical services like hospitals, schools and social care over the next five years, the Institute for Government has warned.

The think tank said in its annual Performance Tracker report, published today, that while recent budget boosts for public services may account for demand and costs at 2019-20 levels, they likely will not be enough to cover rising costs in may services.

The IfG found that decisions made by under Theresa May have meant that the government spent £9.4bn more in 2019-20 than originally set out in 2015. The current Johnson government has gone further by pledging extra cash for policing, schools and prisons and halting cuts to departmental budgets for the upcoming year.


However, it found that even these increases “may not be enough for the government to meet its own objectives for service improvement or expansion, such as better care for cancer patients and reduced levels of violence and self-harm in prisons”.

Meanwhile, many services are set to see a huge increase in demand. The IfG estimated that in social care alone, any future government would need to spend an additional £700m by 2023/24 just to keep pace with the increase in the number of people who will need publicly funded care.

More than half of the nine services the IfG looked at – prisons, schools, GP services, hospitals, adult social care, children’s social care, neighbourhood services, courts and police – will see demand rise faster than population growth.

The report noted it had used a “conservative estimate” of the funding that would be needed to meet this demand. The analysis does not account for any policy changes that could either increase demand or cost pressures above inflation, for example.

“The cost of public services could easily rise faster than prices in the economy overall,” it said, citing the lifting of the 1% pay cap in some public services 2017-18, and the increase in national minimum wage, which is pushing up the price of social care. Both the Conservative and Labour parties have pledged to increase the minimum wage further, meaning that the cost of these services will rise again following the December general election.

Meanwhile, increases in demand are likely to put strain on courts and prisons services, the IfG warned. The report follows a warning by the Public Accounts Committee last week that it was “far from clear” that the HM Courts and Tribunals Service would be able to cope with a “potentially huge spike in demand” that is likely to follow the prime minister’s announcement of plans to recruit 10,000 police officers.

The Johnson government has set itself a borrowing cap of 2% of GDP, and therefore faces difficult trade-offs for 2020-21 between reducing the quality or scope of services; increasing how much people pay for services; cutting other services; or raising taxes, the report said.

It said that “most public services apart from prisons and children’s social care” have become more efficient since the onset of austerity in 2010 – so that it now costs less in real terms to deliver services of the same quality. The public-sector pay cap contributed to this  and was the “key contributor to efficiency gains in most services”, it said.

And despite these efficiency gains, the report found that all services had seen a decline in performance, both in scope and quality – with waiting times for both A&E and GP services rising and a greater reliance on informal social care from family and friends rather than state provision.

This decline in performance – which has arisen because efficiencies “have not been enough to bridge the growing gap between spending and demand” in most services – has been “less substantial than might be expected”, the report said.

However, the IfG said the same approach would not be sustainable in the years to come. “Public services will struggle to keep providing services as efficiently as they do now – that is, delivering the same scope and quality of service on their current level of spending.”

And it added: “There might be more scope for further efficiencies. But public services will struggle to make them through the same methods – holding down pay and asking staff to work harder – as they have over the last nine years.

“Past experience of reforms to transform services shows that while they may improve services, they do not always save money.”

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