The great funding challenge

The Government is very good at telling us how much funding it is allocating to different services. But it is less good at focusing on how well these services are doing. The Performance Tracker, published by the Institute for Government and the Chartered Institute of Public Finance and Accountancy (CIPFA) bridges this gap. And its findings are far from reassuring.

Drawing on detailed analysis of over one hundred sources of data, the report sets out an objective assessment of how efficient our public services are, how well they are performing and what the future holds for them if current trends continue.

PerfTracker

It identifies that public services have achieved significant financial savings, primarily through several years of below-inflation pay increases (or, indeed, no pay increases). This means that they have delivered services at a lower cost in real terms since the introduction of austerity measures in 2010.

Public services have also generated substantial efficiency savings, though these have been achieved mainly by increasing staff workloads. This has, inevitably, had a negative impact on staff morale and has resulted in high staff turnover and difficulty in recruiting to vacant posts.

Furthermore, most of the changes that have been introduced to cut costs and to improve efficiency have been incremental, rather than truly transformational.

With the pay cap now lifted, the report explains that public services are in future going to need to focus much more on productivity gains, i.e. achieving more with each unit of resource. This is likely to be significantly more challenging, as it will require organisations to find more efficient ways of doing things, rather than just making their people work longer hours.

The report also highlights that government is – very quietly – passing on the cost of public services to individuals, such as through the removal of legal aid in certain circumstances and the introduction of charges for garden waste collection.

Perhaps surprisingly (but to the infinite credit of public servants across the land), the report finds that austerity has not led to a lowering of quality in most services, despite increases in demand. The exceptions here, though, are prisons, adult social care and neighbourhood services (e.g. refuse collection, libraries), where it considers current funding levels to be unsustainable in the longer term.

The report also suggests that, while they have been protected from the worst of the cuts so far, schools could be next in line for pressure on funding. And this at a time when many teachers and schools feel (quite rightly, in my view) that the level of funding available to them is already woefully inadequate.

Nationally, says the report, the need to spend ever more money on the NHS is crowding out the needs of other services. At the local level, however, it is the funding demands of adult social care that mean that other services do not get a look in. This could, warns the report, lead to local resentment, as an ever greater proportion of council tax income is spent providing services to a minority of local people.

Essentially, the current cost and scope of public services are not consistent with current levels of taxation. Indeed, we have long had Scandinavian-style public services with US-style taxation policies, and it is now coming to bite us in the behind. But this trade-off between what we pay and what we get is one of the most under-discussed aspects of modern politics.

In 50 years, total tax receipts will cover projected spending on healthcare, long-term care, pensions and pensioner benefits. But nothing else.

So, as the report argues, we are going to need to (a) make significant changes to the nature or scope of the public services that we provide, (b) change the degree to which individuals pay directly for services, and/or (c) have significantly higher levels of taxation.

These are big issues. And they are issues that we need to start talking about if we are to secure the long-term future of our public services. But we need robust data. And the CIPFA/IfG Performance Tracker is a great place to start. Read the full report or watch the launch event online.

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