Saturday, December 09, 2006

Spend, spend, spend? Or a slow squeeze on public services?

The future levels of public expenditure seemed to be rather overlooked in the media coverage about the Pre Budget Report.

Sometimes the analysis was just wrong - like Kevin Maguire's comments in the Daily Mirror on Gordon Brown's strategy: "His masterplan is to spend, spend, spend on public services then force the Tories into a corner as the party of cuts."

The real story - not just of the PBR but before too - is that the time of (relative) famine for the public sector is arriving. It might not seem like it to many in the public sector but we've had the years of plenty - and they are coming to an end.

The most considered analysis can be found from the independent Institute of Fiscal Studies. Their immediate review of the PBR stated:

"The weakness of the underlying public finance forecasts suggests there will be no let up in Mr Brown's tough spending negotiations with Whitehall departments. In addition to sticking with his Budget assumption that public spending (excluding investment) will grow by just 1.9 percent a year on top of inflation over the three years of the forthcoming comprehensive spending review, the Chancellor pencilled in another year of spending growth at the same rate in 2011/12. This suggests that Mr Brown is ready to fight the next election presiding over a steady fall in public spending as a share of national income. This did not stop him from attacking the Conservatives for proposing the same thing as a long-term goal.

Real increases of 1.9% sound impressive - but in recent years real increases have been about twice that!

On the IFS website there are several Powerpoint slides on issues around the PBR including one on public spending.

The IFS's expert suggests:

"Spending plans could prove incompatible with aspirations. Plans could be subsequently topped up, but would require additional finance"

What can be done by those managing public services caught between the rock of tightening resources and the hard place of government targets and aspirations? One approach can be seen in the NHS with training budgets being cut. That may not be too healthy in the long term.

As well as the efforts to trim administration and save on procurement, perhaps more thought should be given to streamlining processes so that they focus more better on delivering customer satisfaction and outcomes. Research by the ODPM shows how effective this can be the field of housing.


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