CIPFA/SOLACE: AFTER THE DOWNTURN
HOUSE OF COMMONS, 3 DECEMBER 2009
Speech excerpts
Steve Freer
We all know and acknowledge that there will be cuts in public services after the election but how deep will they be and how long will they run for? Will their scale feel familiar – like earlier squeezes on spending in say the 1980s and 1990s - or are we dealing with a challenge here which is beyond our previous experience? And how can the cuts best be managed, whatever their scale, to implement them in an effective way which minimises impact in the most critical service areas and for the most vulnerable service users.
Let me cut to the chase and give you some of our answers. In the three year spending round following the election we have rehearsed two levels of headline cuts in current public spending, 7.5% and 15%. The former, 7.5% over three years or 2.5% per annum, is based on fairly straightforward interpretation of Government’s own figures. The second, 15% or 5% per annum, factors in more cautious assumptions on a number of downside risks: the recession may be longer and deeper than originally anticipated. Recovery may be slower. Interest rates may rise – and because of our high levels of debt that is a very important exposure. Finally there are political choices in play here too. Different parties will take different views about the amount of pain which should be taken in the short as opposed to the medium and long term.
I describe these two scenarios as headline cuts because they illustrate the position before politicians, nationally and locally, have made interventions to protect specific services. If the Cabinet of the day decides not to cut say NHS or schools spending – or perhaps both! – rather obviously the challenge for other ‘unprotected services’ becomes that much greater. Similarly if the local authority says we absolutely cannot or must not cut children’s services or economic development services, the same amplified challenge hits other services.
We have modelled some of the possible impacts here and believe that a 2.5% pa headline cuts may mean anything between 0 and 7.5% per annum for individual services. And a 5% per annum headline cut may mean anything between 0 and 10%. It is when we begin to conjure with these sorts of figures, and imagine them operating on a cumulative basis for a number of years, that the scale of this challenge begins to look extremely daunting.
Incidentally I mentioned earlier previous eras of restraint. We have looked at the 1990s, the last recession; the 1980s, the Thatcher reforms, and the 1970s, the engagement with the IMF. In each of those decades public spending grew. Yes there were brief periods within the decades when it held steady or even reduced marginally year to year. But in the 1970s, for example, spending grew by nearly 30% over the course of the decade. So I’m afraid we are dealing with challenges here which threaten to be beyond our previous experience.
What are the positive steps we can take to manage this well and mitigate the damage it may herald for individuals, families and communities.
We have looked at three main areas.
First, reviewing and to an extent redefining the relationship between the individual and the State, reverting to a world in which we do more for ourselves and each other and look less frequently to the State as the provider of first resort.
Secondly, devolving more decisions to be taken by local bodies with minimal oversight. That means working hard to remove or minimise some of the costs currently tied up in national oversight, inspection, target setting etc. It means trusting councils and other local bodies to make the right judgements for their local communities. It also means rebuilding local accountability.
Thirdly, better horizontal joining up across the Government and the public services. We have seen lots of emphasis over recent years on the efficiency of individual organisations and rightly so. But now we need to get to grips with whole system efficiency, sorting out the duplications and the blockages which are so costly and so frustrating to citizens.
In our early work I think we tended to see these three areas as alternative solutions. But as our thinking as developed we have become more and more seized by the whole package – the combination option: to localise (with removal of redundant oversight costs); to emphasise whole system efficiency through local collaboration initiatives like Total Place; and to create more flexibility around the relationship between the individual and the State so that local bodies can exercise real judgements about the priorities of their communities.
As I said earlier our report will be out shortly after the PBR. I hope I have said enough to whet your appetites and that you will look out for your copy.
