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Three things the Government can do to make better public spending decisions

Our latest Performance Tracker report finds government trapped in a costly ‘crisis, cash, repeat’ cycle of spending decisions. Dr Alice Lilly says there are three ways it can break out of this cycle —and there are signs of steps in the right direction.

Our Performance Tracker project with the Chartered Institute of Public Finance and Accountancy (CIPFA) focuses not just on what is spent on public services but on how well it is spent. Chief Secretary to the Treasury Liz Truss echoed this emphasis in a speech to the Social Market Foundation (SMF) today - a sign that the Government is serious about improving the quality of its spending decisions.

But there are three concrete things that the Government should now do:    

1. Face up to the need for reform in major public services

Performance Tracker does the kind of analysis Liz Truss is calling for, linking up spending with data on the scope and quality of services. It finds services such as adult social care and prisons are relying on emergency cash as sticking plasters to keep services going, with little sense of what will happen when the plasters are pulled off.

At the launch event for our report, Dr Emily Andrews and Gillian Fawcett of CIPFA expressed concern about the lack of clear or innovative plans for the adult social care system - and a continued reliance on short-term planning and policy decisions that risk perpetuating the reactive spending cycle.

Nicky Morgan MP, Chair of the Treasury Select Committee, also speaking at the launch event, highlighted the difficulties of reform in the context of a lack of a “grown-up” debate about major changes to services. While agreeing that the time is ripe for the Government to consider major public service reforms, Morgan also called on others outside of government to help open up and encourage honest debate about long-term options and choices. 

2. Ensure that the right information is available - and use it

Data can help shed light on the state of public services and the pressures they are facing.  As Truss emphasised in her speech this morning, it is important to measure outputs from a service, as well as inputs in the form of spending. Doing so offers the Government a chance to understand how services are performing and spot emerging challenges that need an urgent response. Using the data properly also offers a way to measure the scope for greater efficiency within a specific service.

Government does collect a significant amount of data, which Performance Tracker makes use of. But there are still problems finding basic data on key services, such as the number of GP consultations conducted across the country.

Simply having the data in place is not enough - the Government also needs to make good use of it. Reflecting on her time as a minister, Nicky Morgan noted that ministers are sometimes unaware of requests for data and of what data is and is not available. Getting good data from departments, and ensuring that it is interpreted well, is vital. Helpfully, this morning Truss emphasised the importance of both good data and having a culture that routinely makes use of it in decision making. 

3. Subject spending decisions to greater external scrutiny

When making spending decisions, small defensible assumptions about specific services can mount up, building into something that quickly becomes unrealistic, if well-intentioned. Submitting decisions, and the assumptions that underpin them, to greater scrutiny by an independent organisation would help avoid this problem.

This is not about removing the politics from decisions, as Truss and the panellists at our launch event recognised. Politics is intrinsically part of spending decisions, but independent scrutiny may help the politics to work better.

At the launch event, there was a lot of interest about the form this scrutiny may take. It could be conducted by an entirely new body - an ‘OBR for public spending’, as we recommend - or, as Fawcett suggested, by expanding the current remit of the OBR.

Performance Tracker will continue tracking the Government’s performance in managing key public services, with the next edition due for publication in autumn 2018. The signs from Liz Truss this morning about focusing on the value, rather than simply the level, of spending, are welcome - and the forthcoming Barber Review on efficiency offers a real opportunity for Government to build on this. 

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