Andrew Haldenby is the co-founder of HW, a public services consultancy.
The politics of tax-and-spend are reasserting themselves. Several commentators, including the Editor of this site, have pointed out that the Government wants to square three circles: spending more, taxing less and yet keeping borrowing and debt under control.
Something has to give. Paul Johnson of the IFS has said that extra spending inevitably means higher taxes. Others have rightly noted out that the tax burden is already at its highest since England won the football World Cup. As a result, the smart money seems to be on a relaxation of the borrowing limits.
But there is another option, hinted at by Dominic Cummings in his Policy Unit recruitment blog. He said that successful recruits would find “trillion dollar bills lying on the street”. He is on the right track. There is more money locked up in poorly-performing public services, hiding in plain sight, than the receipts of just about any tax rise available.
This applies even to public services that faced budget cuts in the austerity years. Earlier this month, the police inspectorate reported its annual efficiency ratings for the 43 forces. 12 of them, accounting for over £4 billion of spending, “required improvement” or were “inadequate”.
The inspectorate concluded that arguably the most important manifesto pledge, of 20,000 extra officers, could be just a sticking plaster: “gaining more officers will only mask poorer performance if forces fail to solve long-standing problems”.
On the same day, the National Audit Office found that the Prison and Probation Service, which spends £2 billion a year, cannot be relied on to provide prison places of the right quantity and type. In 2016, it promised to deliver 10,000 new places by 2020. By last year, the aspiration was down to 3,600 places by 2023-24. Because the estate has not been reorganised as planned, some serious offenders “live in low-security environments relative to their higher risks”. Without a different approach, the Government can’t be confident that its new pledge of 10,000 extra places will be delivered.
On the bigger budgets, the NAO has warned that the NHS, which will spend £150 billion a year by the end of this Parliament, hasn’t shifted to the modern model of care that was planned in 2014. The Office has also consistently questioned the ability of government to get value from the £280 billion spent on private companies each year. The £20 billion spent on defence procurement is a particular example, thankfully in Cummings’ sights.
Across the piece, we are spending £10 but only getting £6 or £8 back. What is needed is a Government that relentlessly asks the difficult questions about what public services cost, what they should achieve and whether they are doing it – in other words, how to put cash to value.
This would be a new departure for Whitehall and Westminster, appropriate for this new Government.
It would surprise a lot of voters that the Treasury, for example, isn’t very interested in how well the money is spent. Michael Barber’s must-read 2017 Review nailed it: “The Treasury too has historically placed greater emphasis on inputs rather than outcomes. Of course, it is necessary and right that the Treasury should count the pennies – someone has to – but that should surely not be its only focus, even in hard times. There have been a variety of attempts in the last forty years to broaden the focus beyond inputs but these have tended to be temporary and separate initiatives rather than irreversible changes in either the core processes or the culture.”
Some may say that the opinion polls have shifted since the austerity era, and voters now want to see higher spending. That is true and certainly Johnson is a post-austerity Prime Minister. But voters want higher spending not as an end in itself but as a means to make services better. If they pay higher taxes for services that don’t improve, they won’t be delighted. In addition, with net debt at over 80 per cent of GDP, the Osborne roof has not been fixed, regardless of the weather. The economy is vulnerable to whatever is coming around the corner.
Most importantly, ignoring the search for value in public spending would be to miss out on the wonderful prospect of a Cummings revolution. The country is now led by a set of politicians that are ready to shake the government up if it is not delivering for people. They want a new approach to science and to the English regions that drives up tax receipts due to higher growth, not higher rates. This is a precious moment that didn’t exist in (say) 2010. Let us not waste it.
Step forward an empowered Number 10-Number 11 Policy Unit, with the data scientists able to discover exactly which services and budgets are making a difference? Would it be even better to embed such an approach across Whitehall? Should we change the role of accounting officers so that government departments work together rather than for themselves? These are great questions for the Budget, rather than waiting for a Spending Review later in the year.