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Jeremy Hunt’s spring budget 2024 did little to address long-term problems in public services

With the dust settled on the budget, Nick Davies looks at what it means for public services.

A police officer
The criminal justice system will have to manage real-term cuts after 2025 under the government's current plans.

In our most recent Performance Tracker – produced in partnership with CIPFA – we identified historic and relative underinvestment in capital as key driver of performance problems across public services. While Hunt’s budget made some moves towards addressing this, the bigger picture is far less encouraging.

The budget appeared to recognise this investment gap, pledging £3.4bn of additional CDEL (capital departmental expenditure limit) to boost NHS productivity, and a further £0.8bn for other public services, both to be spent from 2025. This is welcome and comes on top of the already substantial increases in capital budgets enjoyed by the health and justice departments in recent years, with investment in both substantially higher in real terms than at any time in the past two decades. But that does not tell the full story.

There is less to the chancellor’s investment plans than meets the eye

The extra investment in recent years only partially compensates for a decade in which investment has not been enough to maintain the quality of hospital, court and prison estates. Hospitals alone have a maintenance backlog of £10.2bn, compared to a total DHSC capital budget of around £11bn this year. In criminal courts and prisons, the combined backlog is £2.4bn, nearly 60% more than MoJ will spend on capital in 2023/24. And capital spending in the departments responsible for critical public services such as the police, schools and local government remains well below the level those seen in 2006/07. 

Furthermore, this additional funding comes on top of a baseline that assumes cuts to capital spending over the next few years. In real terms, total departmental capital spending is slated to fall by over 2% per year in real terms from 2025/26 onwards.

Government investment plans are unlikely to be delivered

It is also important to be realistic about the benefits of greater investment. The budget says that the £3.4bn of additional capital spending will help unlock £35bn of cumulative savings by 2029/30. It is not possible to fully interrogate that claim as no detailed breakdown of the savings has been provided, but there is good reason to think that it is very optimistic. 10  Even where major efficiencies are made, it is more likely that these will be realised as improvements in service rather than cashable savings. Indeed, Victoria Atkins, the health secretary, said last week that health providers could be allowed to “retain the surpluses generated through productivity”. 11   

Finally, pledging extra investment is quite different to actually delivering it. The additional funding for the NHS was pledged for 2025/26 to 2027/28, and conveniently therefore had no impact on the chancellor’s ability to either provide a pre-election tax cut or to meet the government’s fiscal rule, which only requires government debt to fall as a percentage of GDP in 2028/29 (the fifth year of the forecast). 

The government also has a habit of underspending capital budgets and raiding what’s left to cover shortfalls in day-to-day spending. These capital to resource transfers had declined in recent years, but have picked up again as of this year: recently published supplementary estimates of departmental spending showed that MoJ had switched nearly £200m from capital to resource to “alleviate budgetary pressures”, 12  while DfE had transferred £250m, and DHSC nearly £1bn. There will no doubt be pressures to switch some of this newly pledged capital spending to deal with acute frontline pressures in future years too. 

Spending plans from April 2025 are an insult to the electorate’s intelligence

Under normal circumstances, the government would be conducting a spending review this year to set budgets for April 2025 onwards but the Treasury has confirmed that this will be postponed until after the election. On one level, that makes sense given the current polling and the likelihood that Labour will be in power before the end of 2024/25. But it also hands the chancellor a real advantage in freeing him from having to set out the implications for individual departments of his plans. As such, he can stand up at the despatch box and sustain the fiscal fiction that they are deliverable

In the absence of this detail, it is necessary to make educated assumptions about how much the government will spend on the NHS, schools, defence, international aid and childcare. Doing so leaves ‘unprotected’ areas of public spending facing completely implausible cuts of 2.3% per year to their day-to-day spending between 2025/26 and 2027/28. That is slightly tighter even than the plans set out in the 2015 spending review, which proved undeliverable due to the poor performance of public services. 

Cuts of that size would be even harder to implement now. First, because performance of most services has declined further in the intervening years. Second, because demand is projected to increase quite rapidly in some cases. The situation is particularly stark in the criminal justice system, where annual demand for the police, criminal courts and prisons outstrips the funding implied by the budget by 3.2%, 3.5% and 5.6% respectively. Would a future Conservative chancellor really unwind their party’s flagship criminal justice achievement of increasing the number of police officers by 20,000? It seems improbable. 

The reality is that whoever forms the next government will likely to be forced to spend more and it is insulting to the intelligence of the electorate for both the Conservatives – and Labour, which has committed to the plans should they be voted in – to pretend otherwise. 

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