The chancellor must shift spending towards early action prevention in his Autumn Statement. Even in these straitened times it makes economic sense
The Autumn Statement is just around the corner. All the focus will be on how the chancellor measures up to his fiscal rules and how he might adjust things in order to hit them.
Crucial to that will be decisions on the balance of public spending. Speculation and advice on this will be rife. I know; I have been there and done that on a number of occasions in former lives. It is stressful but in a way sort of fun.
But the trouble with all this, especially given the tough fiscal climate we find ourselves in, is that the balance of our spending has been and is continuing to be all wrong. Far too much goes on acute spending – dealing with the consequence of social distress, picking up the pieces, providing the ‘ambulances’.
Instead we need to shift public spending so that a higher proportion goes towards trying to stop these acute incidences ever happening.
And that is not just because a life transformed though early preventative action is a life worth living, but because doing so saves us money. For society to function well with lower volumes of spend over the next decade and beyond, we have no alternative.
Many would agree with this analysis, including ministers and senior civil servants, yet it just does not happen. While preaching therefore has its place, we need to get to grips with uncovering why the Treasury and the government machine seem incapable of making a shift that we all know makes sense.
In a new report, The Deciding Time, written by a team that includes former senior Whitehall hands like myself, we come up with a number of proposals to move us forward. Some are about the nitty gritty – the plumbing of government systems if you like. Others pitch towards how we decide what works.
First, early action will only seem sensible to the government machine if we are taking a long term view since the pay-offs to such action don’t happen quickly. Better early years development should lead to fewer children who are NEETs or in prison, but the consequent financial savings won’t happen for a long time.
Three year spending reviews are a great improvement on the old annual ones but still do not do the trick. So we need 10 year spending plans to be the core of the process, revised every two or three years.
Second, the Treasury must stop treating preventative spend that reduces liabilities and so reduces spend, in the same way as it does acute spend. It needs to be classified differently, monitored closely and ‘protected’ in the same way that conventional capital spending is now.
Third, we need the mechanisms of government to seek out and expose decisions that appear to save money in the short run but in fact do so only at the expense of higher costs in the future relative to other choices. The Office for Budget Responsibility should be tasked with reporting on the 10-, 20- and 50- year implications of decisions being made and the ONS must analyse how much is being spent on things likely to reduce spend in the future and others that just store up trouble.
Fourth, the Treasury must develop sanctions and incentives to break down departmental silo working. Where so many benefits from early action go to those who do not fund it – the health and police services that benefit from effective early years action for instance - we will continue to get under-investment in preventative investment. We must crack this issue through ideas like responsibility charging on those departments that create costs for others, early action funds and ‘profit’ sharing where savings are made.
Fifth, we need to boost confidence that early action programmes really deliver – otherwise nobody will use them. That is why at New Philanthropy Capital we argue for improving our evidence base, doing evaluation and impact measurement better and unleashing the power of government data in ways that providers – including charities – can really access.
Finally we may well need an institution within government for keeping the pressure up. A Future Commissioner to hold the government’s feet to the fire on this agenda would be valuable.
None of this can happen that fast, not least because of the need to keep funding acute services until the shift to upstream spend starts to deliver. But if we could get a small percentage shift each year in the balance of spend we could achieve a great deal over a decade or so.
Were the chancellor to take this step in this Autumn Statement he would produce a rare thing; a fiscal event that is worth remembering for good reasons and deserving of a place in history.
Dan Corry is CEO of the charity think tank and consultancy New Philanthropy Capital and a former Treasury and Downing Street adviser
