Public Sector Focus

12.10.18

IfG: Unpopular funding reform decisions ahead as easiest council cuts have already been made

The easiest savings across the public sector have already been made and choices of where to cut corners are getting increasingly harder, meaning the government will soon have to face tough decisions on the future of public service financing.

In this year’s Performance Tracker report, the Institute for Government (IfG) argued that governments can no longer continue to provide the same services “by simply muddling through, with dollops of emergency cash.”

Instead, they will soon have to decide on the future sustainability of local government – whether that is through tax increases, lower expectations of services, more individual contributions, or radical service changes.

Worryingly, data from the OBR shows that if current taxation levels stay the same, in 50 years the state will only be able to fund retirement pensions and health services. Rob Whiteman, chief executive of CIPFA, argued that the government must therefore be willing to “fashion a new sustainable funding model,” backed by “bolder, braver and perhaps politically-unpopular decisions.”

On a local level, the IfG determined that the public have not been made explicitly aware of “important choices and trade-offs between spending and performance” in order to keep core services afloat and stay within budget.

The Performance Tracker takes an in-depth look at nine public services, providing a ‘concern rating’ for each – similar to an idea previously floated by CIPFA, which contributed to today’s report.

It raised particular concern about prisons, neighbourhood services and adult social care, with the latter “crowding out other spending” locally. Schools, on the other hand, have faced the smallest overall financial drop since 2010, but their budgets have started to be squeezed more tightly over the past couple of years and could be the government’s next target when seeking future cuts.

Overall, public services are more efficient than they were eight years ago, a phenomenon partly helped by the public sector pay cap. But this productivity has improved mostly by doing “more of the same” rather than through reform, and savings haven’t been enough to “bridge the widening gap between spending and demand.”

“One way the government has tried to save money and avoid the need for tax increases is by asking members of the public to contribute more in other ways – from volunteers running libraries to people paying a greater share of the cost of defending themselves in court,” Dr Emily Andrews, associate director at the IfG, explained.

In fact, where government can shift the costs of services onto individuals, it is “increasingly doing so,” the report claimed.

Andrews’ colleague Gemma Tetlow, chief economist, added: “The prime minister and chancellor must start making explicit the realities facing the country about what public services cost and how that money can be raised. They need to begin telling people clearly that they face a national choice.”

Responding to the tracker, LGA Resources Board chairman Cllr Richard Watts said councils have embraced efficiency and innovation “in a way that is not being replicated anywhere else in the public sector,” but funding remains unsustainable.

 

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   18/10/2018 at 07:44

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