John O’Connell is the Chief Executive of the Taxpayers’ Alliance.
Although the Comprehensive Spending Review will only set out plans for one year, rather than three, it’s still an important moment for the Government. It was of course elected on a Conservative manifesto pledging to spend more money, so no one should be surprised by a big overall boost on Wednesday. All eyes will be on exactly what the Chancellor spends more money on, and where the benefits will accrue.
While there will be a deluge of important data, it will be quite difficult for taxpayers to gauge whether the relationship between spending and outcomes is as efficient as it could be. In one sense, that seems like an unfair barb – after all, spending data is pretty transparent these days. But one thing is missing: government spending plans are not robustly scrutinised for economy and efficiency. That’s why the TaxPayers’ Alliance supports the creation of a new Parliamentary Budget Committee. Parliament could and should play a greater role in focusing government attention on efficient spending.
The detailed reports of the OBR allow taxpayers to assess the big picture. The Treasury Select Committee also does admirable work scrutinising public sector spending in terms of fiscal aggregates. So for example, it may flag up the dire long-term spending implications of continued low productivity growth in the NHS, but it does not scrutinise the causes, or compare performance with alternative healthcare models. It has neither the mandate nor the expertise to conduct such scrutiny. Departmental select committees are preoccupied. The fantastic Public Accounts Committee only looks at spending after it happens, not before.
Far better than stretching the remits and resources of these bodies, we should instead accept the central recommendations of the Leigh-Pugh report and implement a dedicated committee focused on scrutinising the economy, effectiveness and efficiency aspects of future spending plans. Australia and New Zealand already have similar models to examine and take lessons from.
There is always a difficulty in measuring the value of public service outputs provided free at the point of use. But much work has already been done both within Whitehall and outside (for example the Office for National Statistics’ work on public sector productivity). And the committee’s key purpose would be less about coming up with a definitive single measure of overall efficiency, than focussing departmental attention on improving efficiency as part of the routine planning and budgeting process – with a long-term view, in place whoever is in government.
Getting maximum value for every pound of taxpayers’ money is always important, in and of itself. But the imperative is perhaps even greater now. Even before Covid, the pressure on public spending was intensifying. An ageing population meant that spending forecasts were already gloomy. The 2017 Fiscal Sustainability Report from the Office for Budget Responsibility forecast that spending on healthcare would be £88 billion higher, in real terms, by 2066. The same report found that annual spending on the state pension would be 6.9 per cent of GDP by 2070.
Add to that the Conservatives’ manifesto pledges, such as 50,000 more nurses, maintenance of the pension triple lock and 250,000 extra childcare places, which will not come cheap. Then, pile on the enormous sums of money spent in response to the pandemic – the latest OBR estimate is that spending decisions will amount to almost £180 billion. It’s not hard to conclude that we face a serious fiscal crunch.
There is also a dangerous narrative developing, at least in Westminster and media circles. The culture of Covid seems to dictate that enormous sums of money are actually just “rounding errors”.
Well, as for these rounding errors, it was recently reported that the Government may reduce foreign aid spending such that it is 0.5 per cent of national income, down from 0.7 per cent. In pounds and pence, that is a saving of £4 billion. It was called a rounding error by some – but £4 billion is close to the equivalent of a 1p increase or decrease in the basic rate of tax; it is more than a quarter of the police budget; it’s 10 per cent of the tax hikes that the Resolution Foundation seems to have convinced the Government we must have
In other words, it’s a lot of money. What’s more, the logic suggests that we approve every single pet project or scheme that gets enough retweets – what does it matter, they’re all rounding errors.
We know Rishi Sunak is going to spend more money, Covid or no Covid. But for the long-term health of the public finances, our system must ensure that we work to get value for every single pound before it is spent. A Parliamentary Budget Committee can help root out waste before it happens.