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Spending money now can lead to benefits in the future. This is a simple, obvious idea and we have a simple word for it: investment.
But every time the government wants to save money, investment is the first neck to feel the chancellor’s axe. To give a very recent example, in the latest Budget, public investment will be frozen in cash terms from 2025, but this is not new: according to the Resolution Foundation think-tank in each of the five post-recession fiscal consolidations since the 1970s, UK public investment has fallen by an average of nearly 20%.
This is politically probably the easiest cut to make, because the public will not notice the effect from one day to the next. But it has terrible consequences for growth, leaving public services and the wider economy left without the infrastructure they need.
The Resolution Foundation said recently that low investment, combined with the fact that the government frequently changes its plans, means many planned investments never end up happening at all. About £1 in every £6 of planned investment is never spent.
PF has just published a piece from the deputy chief executive at NHS Providers, Saffron Cordery, explaining how desperately the health service estate needs investment.
Staff, dealing with huge demands, are left having to work around crumbling infrastructure – working hard but inefficiently, through no fault of their own – as backlogs continue to cast a shadow over the health service.
Take also the example of public transport infrastructure, which needs investment desperately (see our recent coverage of the TUC’s estimates of the potential benefits).
The ballooning costs of HS2 are becoming difficult to defend for a government that so often relies on ‘excessive costs’ as a defence for inaction.
This shows just how badly a change in mindset is needed. Investment is necessary, but if we repeatedly talk about ‘fiscal responsibility’ (which tends to entail short-term cuts rather than acknowledging that sometimes the short term is exactly when money needs to be spent) then major projects do not make sense.
Without getting into the pros and cons of HS2 in particular, when transformative programmes encounter unexpected costs, the government needs to be able to defend them. Only by facing the future with honesty will it be able to do so in a coherent way.
And who can say how great the need for such programmes will become in the coming years, as the effects of climate change set in? Transforming the economy will not be cheap.
The government’s approach is not just evident in terms of capital spending, but also in day-to-day spending that would save money.
Read our interview with Clink charity chief executive Yvonne Thomas, in which she wonders why services that have been shown to save money are not supported.
The Clink supports prisoners to achieve hospitality qualifications, and demonstrably reduces reoffending – reducing costs across the criminal justice system, as well as making invaluable differences to people’s lives. But the charity risks running out of money.
Is it political? Perhaps a government desperate to be seen as being tough on crime (and completely uninterested in also being, to borrow a phrase, tough on the causes of crime) would prefer not to fund programmes that help incarcerated people, despite the benefits.
Another example is public health; the Local Government Association recently warned that public health services, which reduce pressure on the health system, face cuts if budgets are not increased to cover pay rises.
Funding for council-commissioned sexual health services has already fallen by 17% in the past decade, despite a 36% rise in clinic visits, the association said.
CIPFA and the Institute for Government’s latest Performance Tracker report demonstrated that the government is far away from returning performance in public services to pre-pandemic levels (and even further away from returning them to 2010 levels). Yet any attempt at reform has so far ended up, at best, papering over the cracks.
Or is it pragmatism? The severe market disruption caused by last autumn’s mini-budget should warrant some pause, perhaps, for those of us who advocate against fixating on the deficit in the short term.
But that was in response to unfunded tax cuts. Borrowing now to improve public services in the long term – especially given in many cases future savings, or at least wider economic benefits, are likely to result – need not elicit the same reaction, if the government is honest and transparent about its intentions.
Clearly, sorting out the entire public sector in this way would be an undertaking almost too huge to comprehend – so many and various are the problems – but we have to start somewhere. Be it transport, social care, dentistry, the criminal justice system (or take your pick of a myriad other concerns), the next major reform programme needs to approach the problem from the root.
As contributors to PF have highlighted over recent months, we are at an inflection point. There’s a general election looming. Ukraine is reshaping the political agenda. We have net zero and AI on the agenda.
The old approaches are not going to meet these huge challenges.
Deciding where to focus will be a difficult decision, for sure, but how positive a change it would represent for us to use that phrase – difficult decisions – not as a euphemism for cuts, but as a herald of progress?
