Fixing public services: Cross-cutting problems

Policy and funding are short term and inconsistent

Funding for front-line services is short term

Almost all front-line services, like local authorities, receive single-year financial settlements. This is despite their sponsor departments being given multi-year settlements, at spending reviews, to allow them to plan their spending over a longer time period. On top of this, providers are given limited guarantees on what funding they will receive in future years, which means that budgets for the services they oversee can only be set for a year. Even in neighbourhood services and policing, where councils and police and crime commissioners have some of their own revenue-raising powers through council tax and the policing precept, the amount they can increase these annually is limited by central government, reducing certainty about future budgets.

In recent years, governments have repeatedly found it necessary to top up single- year budgets in response to poor performance. In hospitals and adult social care, repeated emergency cash injections have proved necessary to manage predictable (and in reality, annual) winter crises. Likewise, the Sunak government expanded the use of ‘exceptional financial support’, allowing 18 local authorities to use their capital resources to cover shortfalls in day-to-day spending in 2024/25.

These short-term budgets make it harder for services to plan or work efficiently. In particular, they restrict investment in long-term preventative programmes, which often need sustained delivery and funding to be effective.

Policy making is inconsistent and rarely considers the wider system

There is similarly a lack of long-term thinking behind many policy decisions. Integrated care boards (ICBs) provide a particularly damning example: the government put ICBs on a statutory footing in July 2022 only to slash their management budgets by 30% less than a year later. As a result, ICB leaders found themselves having to cut programmes they had just launched rather than focusing on the substantive work of improving performance in their areas.

Changes in the political and economic outlook result in programmes and reforms being scrapped or focus shifting, exacerbated by high levels of churn among ministers and officials. Incoming ministers also often layer new priorities on top of old ones, leading to a proliferation of poorly aligned targets. All this creates confusion for the front line. In policing, since 2018 key priorities have included serious violence, ⁷¹ HM Government, Serious Violence Strategy, April 2018, https://assets.publishing.service.gov.uk/media/5acb21d140f0b64fed0afd55/serious-violence-strategy.pdf  rape, ⁷² National Police Chiefs’ Council, ‘Operation Soteria – Transforming the Investigation of Rape’ (no date), retrieved 8 July 2024, www.npcc.police.uk/our-work/violence-against-women-and-girls/operation-soteria  serious acquisitive crime, ⁷³ National Police Chiefs’ Council, ‘Police now attending scene of every home burglary’, 8 June 2023, https://news.npcc.police.uk/releases/police-now-attending-scene-of-every-home-burglary ^{, 74} HM Government, Beating Crime Plan, October 2021, www.gov.uk/government/publications/beating-crime-plan/beating-crime-plan  knife crime, ⁷⁵ HM Government, Beating Crime Plan, October 2021, www.gov.uk/government/publications/beating-crime-plan/beating-crime-plan  violence against women and girls ⁷⁶ HM Government, Beating Crime Plan, October 2021, www.gov.uk/government/publications/beating-crime-plan/beating-crime-plan , anti-social behaviour ⁷⁷ Department for Levelling Up, Housing and Communities, and Home Office, ‘Anti-Social Behaviour Action Plan’, March 2024, retrieved 8 July 2024, www.gov.uk/government/publications/anti-social-behaviour-action-plan/anti-social-behaviour-action-plan  and shoplifting. ⁷⁸ Home Office and Philp C, ‘Action plan to tackle shoplifting launched’, October 2023, www.gov.uk/government/news/action-plan-to-tackle-shoplifting-launched  Health has similarly had a proliferation of recovery plans, without clear prioritisation among them.

Policy makers also rarely take a system-wide approach to policy. For example, the 20,000 police officer ‘uplift’ launched in 2019 was expected to result in increased charges and prosecutions over time, but there was no accompanying move to expand capacity in the rest of the criminal justice system (at least until after the backlog in criminal courts ballooned to dramatic levels during the pandemic). Sentencing policy is another, connected example. The court backlog and declining probation performance have amplified pressure on prisons, but governments have continued to increase sentence lengths, with obvious knock-on effects for the prison population.

Services have high leaving rates, inexperienced staff and key skills gaps

Workforce challenges are universal across the public services we cover. Some have large staff shortages; in particular, adult social care and probation. Others are missing staff in key roles, whether that is detectives in the police, legal advocates in the criminal courts, managers in the NHS or teachers of subjects such as physics and maths in schools. These gaps harm both performance and productivity.

In health and adult social care, services are increasingly reliant on immigration to fill workforce gaps. There can be benefits to bringing in international recruits, who may provide new perspectives and ideas, but there are also drawbacks – perhaps most importantly, political. Labour committed in its manifesto to reduce net migration, ⁷⁹ Labour Party, Change: Labour Party Manifesto 2024, 13 June 2024, p. 41, https://labour.org.uk/wp-content/uploads/2024/06/Labour-Party-manifesto-2024.pdf  meaning there is a risk that this recruitment channel could be squeezed or cut off by the new government, possibly at short notice.

Retention problems and inexperience harm productivity

Staff inexperience and poor retention pose big problems across services. Some turnover helps the workforce stay dynamic and can bring in new skills, but high turnover as seen in recent years is a drag on performance, leading to lost expertise and institutional memory, and increasing the burden on other staff to train up new entrants. High leaving rates can also drive high vacancy rates, because of the time it takes to replace staff.

After a temporary reduction in leavers during the first year of the pandemic, many services saw leaving rates rise again from around 2021/22. This has since settled, but leaving rates remain high in many services: 8% of probation officers and 12.8% of operational band 3–5 prison officers left the service in 2023/24, and 15.9% of children and families social workers left in the 12 months to September 2023. The situation is arguably most severe in adult social care, where more than a third of care workers (35.6%) left the service in 2022/23.

Inexperienced staff tend to be less effective and can also be a short-term drain on the productivity of experienced colleagues. ⁸⁰ Fright M, Davies N and Richards G, Retention in public services, Institute for Government, October 2023, www.instituteforgovernment.org.uk/publication/staff-retention-public-services  In 2022/23, around a third of police officers (36%) ⁸¹ Home Office, ‘Police workforce, England and Wales: 31 March 2023 (second edition)’, March 2024, retrieved 9 July 2024, www.gov.uk/government/statistics/police-workforce-england-and-wales-31-march-2023/police-workforce-england-and-wales-31-march-2023  and over half (51%) ⁸² HM Prison and Probation Service and Ministry of Justice, ‘HM Prison and Probation Service workforce quarterly: March 2023’, retrieved 8 July 2024, www.gov.uk/government/statistics/hm-prison-and-probation-service-workforce-quarterly-march-2023  of prison officers had less than five years’ experience. This is a substantial change since 2015/16, when the figures were 14% ⁸³ Home Office, ’Police workforce, England and Wales, 31 March 2016’, retrieved 8 July 2024, www.gov.uk/government/statistics/police-workforce-england-and-wales-31-march-2016  and 15% respectively. Likewise, in September 2023, almost three in every 10 nurses (27%) had less than five years’ experience, up from two in 10 in September 2017.

The root causes vary somewhat across services: police and prisons saw large-scale redundancies during the 2010s; both have had major recruitment drives in recent years to expand their workforces, as did hospitals; and all services have had high levels of turnover. The lack of experienced staff results in limited support and mentorship for new hires, meaning it can take longer for them to gain skills and become more productive and making them less likely to remain in the service long term, exacerbating retention problems. The requirement to train new staff – either formally or informally – also means that experienced staff spend less time on their own work and are therefore less productive.

Pay is a key driver of both recruitment and retention problems. ⁸⁴ Home Office, ’Police workforce, England and Wales, 31 March 2016’, retrieved 8 July 2024, www.gov.uk/government/statistics/police-workforce-england-and-wales-31-march-2016  Over the long term, pay for public service workers has dropped both in real terms and relative to the private sector, while high inflation in recent years has further eroded the value of settlements agreed in recent pay deals. Perceived low pay damages morale and staff goodwill, which is very low in many services, and has driven broad industrial action. Adult social care, children’s social care and prisons all have limited pay progression, which discourages workers from staying long term and building up experience.

Poor working conditions and low morale also harm retention. Workloads in these services have always been high, but seem to have increased following the pandemic, and are commonly cited by staff as their main reason for wanting to leave their job. Working patterns can also be unsociable and inflexible, particularly in the NHS, police and prisons, and this contrasts sharply with changing societal norms around flexible working arrangements in other sectors. Staff morale and goodwill is declining, and this is exacerbated by incidents of poor leadership, bullying and discrimination – 28% of NHS staff and 12% of teachers reported experiencing bullying or harassment in the last 12 months. All together, these factors make it increasingly hard for public service employers to compete for and retain staff.

Under-investment in capital

Governments have under-invested in public service capital for decades

Capital investment in equipment and in the public sector estate* is crucial if public services are to run effectively and reliably. Governments have long under-invested in these, however: between 1970 and 2010 there were only two years (2007 and 2009) that the UK exceeded the OECD average for capital investment in health. 

Even by that low standard, governments of the 2010s consistently deprioritised capital spending. As part of its austerity programme, the coalition government cut capital budgets substantially across all the departments that we look at. Cuts were deepest in the Ministry of Justice, where capital spending was on average only 43.3% of its 2007/08 level between 2010/11 and 2019/20. Between 2011/12 and 2018/19, not one of the departments we examine exceeded its 2007/08 total for capital spending. Capital budgets in DHSC and MoJ have increased substantially in recent years, but it will take time to address historic underinvestment.
 

^{*Capital spending funds the construction of new buildings, the maintenance of existing ones, the purchase of equipment and investment in IT services, among other things.}

Services have used capital to plug day-to-day deficits

Not only did the government provide insufficient capital funding to services throughout the 2010s, it also granted them permission to shift funding from what capital budgets they did receive to their resource (or day-to-day) budgets. Nowhere was this more apparent than in DHSC (whose budget is almost entirely spent on the NHS), where the government reallocated £5.6 billion worth of capital budgets between 2013/14 and 2017/18. Despite claiming that this practice had ended, the government then allowed the NHS to reallocate a further £500 million from its capital budget in November 2023. ⁸⁶ Hoddinott S, ‘Forcing the NHS to reallocate capital spending is a false economy’, Institute for Government, 9 November 2023, www.instituteforgovernment.org.uk/comment/nhs-capital-spending-false-economy

However, perhaps paradoxically, many services also consistently underspend their capital budgets. For example, between 2010/11 and 2022/23, DHSC underspent 7.9% of its CDEL (capital) budget, DfE 4.9% and MoJ 6.8%. ⁹⁹ Pope T, Tetlow G and Pattison J, Capital spending in public services, Institute for Government, June 2024, p.18, www.instituteforgovernment.org.uk/publication/capital-spending-public-services  Such underspends are largely due to service leaders’ caution, because departments are heavily punished for overspending their budgets – the incentives not to underspend are much weaker.

The government allocates CDEL in a variety of ways, including multi-year settlements for some major projects, but too often uses single-year capital budgets, with a substantial amount of volatility year to year. This makes it hard for services to plan their spending effectively. With single-year, unpredictable capital settlements, services cannot commit to more than 12 months’ worth of spending, creating a cliff edge at the end of the financial year. This creates uncertainty for services and suppliers, in response to which suppliers often charge more. There is commonly also a ‘hockey stick’ effect with spending where services rush to spend capital budgets at the end of the year before they lose them. This can represent poor value for money.

The estate is crumbling and staff lack equipment

Under-investment means that the public sector estate is now crumbling across many public services. There is a record maintenance backlog in hospitals, with some trusts forced to close wards and operating theatres due to things such as sewage leaks and collapsing ceilings. ¹⁰⁰ Woodhead L, Bradshaw P and Hattenstone A, ‘NHS crisis: Sewage, floods and rats underscore NHS repair task’, BBC News, 21 February 2024, www.bbc.co.uk/news/uk-england-68214879  The government has failed to expand prison capacity in line with demand and the estate that does exist is often not fit for purpose: less than a quarter of prison officers believe their working conditions are adequate ¹⁰¹ House of Commons Justice Select Committee, ‘Prison operational workforce survey (PRI0066) Survey results’, (no date), retrieved 8 July 2024, p.16, https://committees.parliament.uk/writtenevidence/122073/default  and more than 2,700 (gross) prison spaces have been lost to dilapidation since 2019. ¹⁰² Argar E, ‘Future prison population and estate capacity inquiry session: follow-up’, 1 May 2024, https://committees.parliament.uk/publications/44647/documents/221863/default  Days before the start of the school year in 2023, the government was forced to close more than 100 schools found to be at risk of imminent collapse because they were built using RAAC.* ¹⁰³ ‘RAAC: 100 schools at risk of collapse ordered to close’, Schools Week, 31 August 2023, https://schoolsweek.co.uk/raac-100-schools-at-risk-of-collapse-ordered-to-close

Some of the estate is more straightforwardly unsuited to a modern state. Almost a quarter of the general practice estate was built before the NHS was established in 1948, and much of it is cramped and ill-equipped to meet the needs of a modern health system. ¹⁰⁴ Hoddinott S, Delivering a general practice estate that is fit for purpose, Institute for Government, June 2024, www.instituteforgovernment.org.uk/publication/general-practice-estate

Staff in public services are often forced to work with either insufficient or worn-out equipment and IT systems. UK hospitals have less than half the number of CT scanners per head of population compared to the OECD average (10.0 per million people vs 20.1). ¹⁰⁵ Hoddinott S and Davies N, Performance Tracker 2023, ‘Hospitals’, Institute for Government, October 2023, www.instituteforgovernment.org.uk/publication/performance-tracker-2023/hospitals  IT systems are out of date and often cannot communicate between different parts of the NHS – in June, IT failures in the NHS in Cornwall ¹⁰⁶ Young L, ‘Hospital IT systems ‘coming back online’’, BBC News, 11 June 2024, www.bbc.co.uk/news/articles/cg338y4gvq8o  brought the system to a grinding halt, with staff forced to reschedule appointments. In the courts, poor quality IT and Wi-Fi continue to interfere with remote hearings; despite significant improvements in the last few years, 35% of barristers still said they experienced technical problems with video platforms in 2023. ¹⁰⁷ The Bar Council, A lens on justice: the move to remote justice 2020–2024, May 2024, www.barcouncil.org.uk/static/0146c40d-2520-47b9-af0d056d3e6078ee/Remote-justice-report-May-2024.pdf

These factors make public services far less effective and reduce the value for money from investing in additional staff. Nowhere is this more evident than in hospitals, where performance remains stubbornly poor despite large recent increases in the number of doctors and nurses. ¹⁰⁸ Freedman S and Wolf R, The NHS productivity puzzle, Institute for Government, June 2023, p.22, www.instituteforgovernment.org.uk/publication/nhs-productivity  However well trained and motivated staff are, they will find it much harder to do their jobs well if they are operating out of leaking buildings, working on computers that take 20 minutes to turn on, and without access to the latest equipment.

^{*Reinforced autoclaved aerated concrete.}

Increasing acute demand

Rising acute demand is overwhelming some services

While spending has increased in recent years for several services, there is good evidence that for the most part it has not kept pace with demand.

In local authorities, demand is rising fastest for children’s residential care, homelessness services, special educational needs and disabilities (SEND) services and for adult social care for working-age adults. As discussed in the local government chapter, those pressures are due to a mixture of factors including: increasing prevalence of disability among working-age adults; more mental health and developmental issues among children; rising levels of child poverty; insecure and increasingly expensive housing; and cuts to preventative services, among others.

Recently expanded police forces are starting to charge more people, meaning that more cases will need to be heard in criminal courts, where there is already a record backlog. This will in turn put additional pressure on a prison system which – due to lengthier sentences, a growing remand population and extremely high levels of recall to custody among parolees – is already at capacity. ¹⁰⁹ Richards G and Davies N, Performance Tracker 2023, ‘Prisons’, October 2023, www.instituteforgovernment.org.uk/publication/performance-tracker-2023/prisons#the-prison-population-has-grown-rapidly-in-2023  Attempts to deal with the crisis in prisons are likely to result in further demand being shifted on to probation, which is already struggling to cope.

GPs and other practice staff are delivering more appointments than ever, but despite that patient satisfaction with the service and with appointment times continues to decline. In 2023, only 52.8% of patients were satisfied with the appointment times available to them, down from 65.9% in 2018, suggesting substantial unmet need.

An ageing and increasingly ill population requires more adult social care. Despite that, the trend since at least 2015/16 is that fewer and fewer people are receiving publicly funded care. That leads to poor outcomes for individuals who are thus not supported to live as independently as they might otherwise. But it also puts pressure on other parts of the health and care system. People who cannot access care may present more frequently to their GP or to A&E, and their condition may deteriorate further, requiring more expensive and intensive care in the future. These pressures also go beyond the health and care system, with local authorities cutting other services (including leisure and cultural services, as well as preventative services) in response to the funding needs of the rising demand for care.

Demand is less of a problem in hospitals and schools

Unlike in other parts of the health and care system, the story in hospitals since the pandemic has been a surprising lack of demand. Two of the prime indicators of hospital demand – A&E attendances and additions to the elective waiting list – are only slightly above pre-pandemic levels and behind where we would expect them to be if they had grown in line with pre-pandemic trends. Although there appear to be fewer people than expected coming forward for hospital care, there is evidence that those who do present have more complex needs. A study of A&E attendees carried out by NHS England (NHSE) found that only 4% were presenting with low acuity compared to NHSE’s expectation, based on national and international experience, that it would be somewhere between 20% and 40%. ¹¹⁰ Discombe M, ‘A&Es not being overwhelmed by ‘low acuity’ patients, NHSE review’, HSJ, 13 May 2024, www.hsj.co.uk/emergency-care/aandes-not-being-overwhelmed-by-low-acuity-patients-nhse-reviewfinds/7037101.article

The number of pupils in schools is set to decline over the next decade as lower birth rates translate into lower pupil enrolments. By 2028, there will be approximately 206,000 fewer children in state-funded primary schools and only 29,000 more children in state-funded secondary schools compared to 2024 – a decline of 4.5% and a rise of 0.9% respectively.
 

As the government plans to hold per-pupil spending flat in real terms, declining pupil numbers will provide some helpful additional headroom for other spending. However, most costs will not decrease in a straight line with pupil numbers, and realising the majority of savings will require staffing cuts or schools closures. In short, schools will struggle if the government sees this as cash that can be easily reallocated elsewhere.

Cuts to preventative services have contributed to rising acute demand

Across a range of services including the NHS, children’s services, housing services, adult social care, and the criminal justice system, governments of the past 14 years have prioritised spending on acute services at the expense of more preventative services.

In a fiscal environment with falling budgets – as was the case in the 2010s – services have an incentive to prioritise the more immediate pressures of acute demand: these are the most visible to voters and are least easily cut. Protecting the spend on ambulances, for instance, seems more important than protecting the spending on vaccination and other public health programmes. There are also more statutory duties, particularly on local government, to meet acute needs, necessitating cuts elsewhere.

But it was also the way that the government carried out austerity that incentivised cuts to prevention. The government generally ‘salami-sliced’ services’ budgets while requiring them to deliver the same quality of service and relying on ‘efficiency savings’ to make up the difference. While some services did find efficiencies in the early years of the 2010s, those were quickly exhausted and services were then forced to start paring back discretionary spending. This was generally on more preventative services.

Many factors have driven an increase in demand for services since 2010. Cuts to the welfare system, compounded since 2022 by the cost of living crisis, have contributed to higher rates of poverty. Insecure and increasingly expensive housing has contributed to a spike in homelessness and likely worsened people’s health. While difficult to prove directly, cuts to preventative services have also likely increased demand for more expensive acute services. ¹¹² Hoddinott S, Davies N and Kim D, A preventative approach to public services, Institute for Government, 22 May 2024, www.instituteforgovernment.org.uk/publication/preventative-approach-public-services