Fiscal reality dictates a radical new approach to spending reviews post-2015. This means the Treasury devolving much more funding to localities, five-year budget allocations and less Whitehall ringfencing
Regardless of who forms the next government, there are certain to be more spending cuts, and probably tax rises too. In a major new report, The Condition of Britain, the IPPR argues that, as a country, we should not allow these fiscal realities to weaken our aspirations for social reform. Instead, we need to adapt the institutions and strategies of government to the task of building a stronger society with little new money. Crucially, this requires a credible plan for devolving power and resources, driven by a different kind of spending review.
Over the last 18 months, we have travelled around Britain to hear about the pressures that people are facing, from the cost of childcare, to the uncertain prospects for young people, to older people’s concerns about how they will be cared for. In each of these areas, reform of public services is vital. In an era of limited budgets, this will require a radically different approach to the strategies and statecraft of government.
We argue that public services driven by local priorities and relationships rather than central direction have greater potential to foster innovation and collaboration. These are the essential ingredients for driving high-quality, responsive service that engage citizens and practitioners while making the best use of public money. Successive governments have come to power promising to devolve power, but have failed to meaningfully do so once in office. Overcoming this pattern in the next parliament will require a practical plan that sets out where specific powers and resources should lie, with political buy-in from the top.
We propose that combined authorities have more powers to help address unemployment and, in time, control over housing expenditure in order to build more homes and reduce reliance on housing benefit. Councils should have responsibility for expanding universal, affordable childcare, reducing reoffending among young adults, supporting people who face deep social exclusion, and helping older people to remain active and overcome isolation. In each area, these new responsibilities must be matched with greater control over the relevant chunks of public spending.
For these proposals to stand any chance of success, we need to build a more decentralised state that connects power and responsibility at the scale and in the places where the biggest difference can be made. Critically, this requires a different kind of spending review after the 2015 general election. Given the fiscal constraints that Britain faces, a ‘business-as-usual’ spending review will fail to create the conditions for joined-up public services focused on early action and drawing on the capacities of those they serve.
If the next spending review were to follow the patterns established during the current parliament, it would give the NHS and schools relative protection, and make significant cuts in every other area. The Treasury would continue to hold the purse strings, parcelling out spending reductions to departments to be passed on to local services. The consequences would be predictable: the same balance of services but with their quality progressively diminished. It would avoid strategic decisions about which services and investments should be prioritised and which should be scaled back. The balance of power and responsibility across tiers of government would not be substantially reconfigured.
Instead, we argue for a spending review that devolves power and resources to towns, cities and counties, rather than ringfencing Whitehall departments. This would be accompanied by longer-term financial settlements for local areas, with the flexibility to pool budgets across geographic and service boundaries. In several services, including social care, housing and social exclusion, we propose five-year budget allocations so that local areas have financial incentives to invest upfront in order to reduce need and generate savings in later years. Instead of being passive recipients of central government cuts, these moves would enable local areas to better cope with (and actively contribute to) deficit reduction in the next parliament.
Kayte Lawton leads the Condition of Britain programme at IPPR
