The markets, we are told, do not like uncertainty. Neither do public sector finance directors. That’s why, as the pound plunged this week, in response to speculation over a hung Parliament, those in charge of public service budgets were still preparing for the worst.
City traders might be having jitters about post-election delays in tackling the £178bn deficit. But public service managers are assuming that departmental spending cuts will come soon and are planning accordingly.
This is clear from a number of surveys of projected local authority spending cuts in England (see page 6). Significant reductions to adult social care, environmental and other services are planned for 2010/11, according to CIPFA, while a BBC survey found that at least 25,000 council jobs are under threat.
A ‘perfect storm’ of falling council revenues and higher demand is building up, says the Local Government Association, and budget-holders are applying the precautionary principle to spending plans.
This is also the case in relatively ‘protected’ service areas such as health. Thousands of job cuts and bed closures are predicted at NHS trusts (see cover feature on pages 20–23). The British Medical Association claims there are plans to close or downgrade 13 hospitals in London alone.
While some of these measures might reflect deficit problems, or be part of wider service restructuring, they are mainly a direct response to the spending famine to come.
Communities Secretary John Denham insists that councils can protect frontline services by adopting the government’s new ten-step approach to efficiency reform. And health minister Mike O’Brien has told Public Finance he will ‘name and shame those who make 1980s-style cuts’.
But the level of savings from Total Place-style measures is being over-hyped – and comes nowhere near the figure the chancellor will be forced to announce in this month’s Budget to steady investors’ nerves.
Every finance professional from the Treasury downwards knows this. So why pretend otherwise?
As public administration select committee chair Tony Wright pointed out last week, ‘the public want to know what is going to happen to public services’, but neither the government nor Opposition will tell them. Citing forecasts published in PF, he accused politicians of ‘cheating the electorate’.
He has a point. Hiding behind economic uncertainties to avoid spelling out the shape of the next Spending Review – or emergency Budget – will not wash, just weeks away from an election. And it risks selling the public services short.
Judy Hirst is the deputy editor of Public Finance
