The Spending Review – why transparency matters

Nov 24, 2015

Over the last Parliament, the Government introduced a massive £98 billion in discretionary fiscal consolidation. Day to day spending in unprotected departments shrank on average by around a quarter, and while some departments like Health saw small increases this came in the context of having grown used to a 4% year on year real increases. Total public spending is set to be basically flat for a decade – only the experience of the 1980s comes anywhere close to this period of spending control in the post-war era.

Despite the scale of the challenge, so far it seems like the public services have overall done remarkably well at finding many of these savings from smarter working and greater efficiency. After thirteen years of stagnating, total public sector productivity grew 2.5% in 2011 and 1.2% in 2012. Opinion surveys show most people think that public services haven’t worsened, while at the very big picture level, crime is fallinggrades are improving and patient experience scores in the NHS show no sign of deteriorating. It seems likely that the hard constraints of spending restraint spurred many parts of the public sector to finally undertake some long postponed reforms.
That doesn’t mean we should be complacent, and no cut is entirely painless.  Waiting times have been creeping up in the NHS, and 88% of acute trusts are now forecasting a deficit by the end of 2015-16. Local government has been finding it increasingly hard to support social care, a challenge that is only going to get harder with the increased costs of the National Living Wage. Some worry that surveys of the public at large don’t capture the experience of the most vulnerable service users, or that the true impact of cuts will only become visible in the long term.

The best way to simultaneously protect the front line of public services and avoid a hike in the cost of living from new taxes is to keep improving the productivity of the public sector. Over the last Parliament, the NHS saw an £8 billion real increase in its funding – but even more important was the Quality Innovation Productivity Programme  which sought an extra £15 to £20 billion in efficiency savings. At the same time, across central government the Cabinet Office led a drive to increase efficiency by around an extra £5 billion each year, largely through better management of property, procurement, contracts and workforce. Unlike previous efficiency drives, which saw widespread scepticism over claimed savings , most people broadly accept the Cabinet Office’s numbers, independently reviewed by the National Audit Office.

Undoubtedly, finding the next set of savings in Wednesday’s Spending Review will be much harder – but it would be overly pessimistic to say there are no more savings to be found whatsoever. Despite receiving much of the attention, actual cashable savings from digital transformation have been relatively limited so far. The Government’s push on devolution offers the potential to take better advantage of local knowledge and joined up working, and there is still more that can be done to improve the management of property and procurement.

Nevertheless, people will always assume efficiency to be a euphemism for cuts if no details are given over how savings are to be found.

Every spending decision is ultimately a matter of judgment, from the big picture of which deficit to target or department to ring-fence, to the relative minutiae of individual policies. That doesn’t mean there isn’t a virtue to being open about your plans and assumptions. This is one of the lessons of many of the institutional reforms of the last Parliament, from the creation of the OBR to the recent NHS Five Year Funding Outlook.

Greater transparency gives confidence that the Government can combine value for money and protect the quality of public services. It stops the lazy assumption that the amount of spending is the same as the outcomes achieved. It makes it easier for more people to feed into the policy process, and creates clarity over our end goals.

In our new paper out today, Budgeting for Balance, we suggest some ideas for how the Government could build on tomorrow’s Spending Review going forward to increase the transparency of its decisions making:

  • How many cuts did the Conservatives promise to make at the last election? How about Labour? More importantly, do you have any idea where those numbers came from or whether they are at all comparable? All political parties are infamous for choosing the most favourable baseline, switching and changing their methodology or the year when cuts are supposed to be made by. We argue that the OBR should set out a standard baseline for fiscal consolidation, against which parties could lay out their plans – this would achieve many of the benefits of allowing the OBR to audit opposition policies with far fewer harmful side effects.
  • Why are we making all these cuts anyway? Government should be more open about what level of debt they believe is sensible in the long run, and their assumptions over why they think their target deficit will achieve it.
  • The Government is already creating new Single Departmental Plans, “bringing together efficiency, spending round and activity plans”. But we argue that these plans should include explicit efficiency assumptions, as in the NHS Five Year Forward View, allowing the OBR to make crude bottom up spending forecasts and give a better idea of what overall spending plans mean for different departments in the future. The Single Departmental Plans should feed much more directly into the Parliamentary process, updated and examined annually by Select Committees, rather than get buried away on government websites.
  • The best judge of public service quality is the people who use them, the public. The Government is already obligating every new digital service to measure user satisfaction and take feed-back through its Performance Platform and 85% of NHS trusts believe the new Friends and Family Test has been helpful in improving patient experience. We should build on the precedent of these two, ensuring that every consumer facing part of the public sector has a standardised feedback page – and holding monthly opinion polls of core stakeholder groups. It should be as easy for the public to judge the performance of a job centre as a hotel on Trip Advisor, or for ministers to rapidly detect an increase in user concerns by a sea of metrics turning red.
  • Local government could issue their own standardised annual tax statement, showing performance against regional and national averages. And with greater transparency in place, Government could loosen up some of the current restriction on tax or ring-fenced budgets, allowed councils to make more of their own decisions.

Author

Jonathan Dupont

Jonathan Dupont
Economic & Social Policy Research Fellow Read Full Bio

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