Summary and conclusions

In this report we show that public services have become distinctly more efficient since the Government’s drive to reduce the deficit began in 2010. Much of this is due to the cap on annual public sector pay rises.

But we now have serious concerns about the quality of prisons, adult social care and neighbourhood services (such as bin collections and libraries). There are also problems in the recruitment and retention of staff, often due to rising workloads. The Government has now lifted the pay cap. While this will add to costs, it may not solve staffing problems.

In local areas, the costs of social care are crowding out spending on other services. Nationally, spending on health care is crowding out other public spending. Under these pressures, the Government and local authorities are quietly transferring the costs of services to people where they can, such as by removing legal aid or introducing charges for garden waste collection.

Our analysis also shows that there are many important gaps in official data. We call on the Government to improve these. Doing so would improve the Government’s ability to manage its own spending and navigate the difficult choices facing the UK and it would improve people’s ability to hold the Government to account.

1. Public sector efficiency has risen since 2010, helped by the public sector pay cap.

Public services have become more efficient since the Coalition Government in 2010 began its ‘austerity’ drive to reduce the deficit. That is, public services are managing to deliver services at lower cost in real terms than they did eight years ago. Sometimes there has been a reduction in quality, but in almost every case it has not been on the scale that might have been expected given that the money allocated to the services has not matched the growth in demand. Prisons are the exception, where there has been a marked fall in quality.

A large part of the improvement in efficiency has been due to the public sector pay cap, which kept the wage bill down. This year the Government has loosened the cap, announcing pay rises of between 1.5% and 3.5% for the police, prison officers, doctors, nurses and teachers. That means that it will have to focus on productivity alone to keep up quality while keeping budgets tight. That is, public service managers will have to work out how to get more out of each member of staff employed and every other input used – from school buildings and courtrooms to drugs, machines and other technology – rather than just keeping the cost of these inputs down.

2. Productivity has gone up by doing ‘more of the same’ rather than through reform.

Public services have become more productive since 2010. In a few cases, this has been the result of changes to working practices, such as introducing telephone consultations with general practitioners (GPs), or digitising processes in criminal courts (to reduce the amount of clerical input needed and to avoid duplication).

But these reforms have been the exception. Mainly, the aim has been to try to get staff to do ‘more of the same’ without reforms to reduce the burden of the extra work that reforms would involve.

3. Loosening the pay cap may not solve the problems of staff recruitment and retention.

Schools and hospitals are facing increasing challenges in recruiting staff; staff leaving rates in schools and prisons suggest problems with retention too. There are growing vacancy rates in adult social care, children’s social care and hospitals. The number of GPs is falling despite the Government’s desire for a big increase.

Evidence suggests that rising workloads are playing a big part in this. Teachers are leaving the profession for lower-paid work, and the number of NHS leavers citing ‘work–life balance’ as the reason for their departure has doubled since 2010/11.

This means that further attempts to get more out of staff without changing the way they work are likely to add to, rather than solve, performance problems.

4. We have serious concerns about prisons, adult social care and neighbourhood services.

Of the nine public services we have analysed for this report, three stand out as of particular concern: prisons, adult social care and neighbourhood services.

There are clear signs that neither prisons nor adult social care can continue to operate at their current level of efficiency. Any attempt to try to maintain or increase the level of output without increasing spending is likely to lead to a further deterioration in service quality.

Neighbourhood services have sustained the deepest cuts to spending of all the nine services we have considered. It is impossible to say whether local authorities can keep operating them at their current level of efficiency, as there is not enough data

available on the consequences of the spending cuts so far. Given the lack of data to judge the state of these services, if the Government gives local authorities a very tight financial settlement in the next spending review, it risks a serious deterioration of quality – and a call then to inject emergency, unplanned cash.

Schools have seen the smallest overall squeeze since 2010, but their budgets have started to be squeezed more tightly over the past three years and may be a target for future savings. GPs, conversely, faced serious financial constraint throughout most of this period, but have been boosted by new investment in recent years.

This year, our report contains a new ‘concern rating’ (Chapter 5) summarising the levels of pressure that the different services face.

5. Locally, spending on social care is crowding out spending on other public services, such as environmental services. Nationally, it is spending on health care that is crowding out spending on other public services.

Social care – for both children and adults – is the most costly element of local government activity. As demand for both has risen, spending on other services that local government runs – such as libraries, waste collection and trading standards – has been consistently squeezed. Non-social care spending now makes up only 46% of all local government spending, down from 55% in 2010/11.

This creates obvious potential for public resentment. People paying local taxes think that they are paying for services available to everyone in the area, such as waste collection and libraries. But those universal services are being squeezed by social care, used only by a minority.

Nationally, the Government’s commitment to increase health care spending while maintaining targets for reducing the deficit is crowding out other public spending. Many have pointed out that the Prime Minister’s present to the NHS on its 70th anniversary – £20 billion a year by 2023 – was not matched by clarity on social care. A green paper on social care has been much delayed. The danger is that without more spending on social care, the new money for the NHS will be lost through, for instance, keeping older people in hospital because they lack adequate care if they go home. We would like to see this green paper published at the time of the Autumn Budget and for the Government to make clear its preferred options for the long-term funding of both health and social care.

6. No government can maintain public services of the current scope and nature without a large rise in tax.

Projections from the Office for Budget Responsibility published in July 2018 show that if current spending and tax take were simply projected forward, spending on health, long-term care and pensions and pensioner benefits alone (along with debt interest payments) would equal tax receipts within 50 years. That is, if the Government chose to keep those commitments on health, long-term care and payments to pensioners, it would have nothing left for any other form of public spending.

There might be more scope for reform than has yet been explored. But experience of big government transformation programmes shows that while they can improve the nature of services, they do not always deliver big savings.

It is clear that demographic pressures and other trends (such as the cost of new medical treatments) will prove unsustainable without a significant change in the scope or nature of public services, a change in the degree to which people pay directly for those services, or a much higher level of taxation.

7. The Government is quietly shifting costs onto individuals.

Nationally and locally, where government can get people to pay directly for services, it is often doing so. Local authorities are introducing new charges for garden waste collection, while using more volunteers and community groups to run services such as libraries.

Cuts to legal aid mean that more defendants now have to pay for their own defence – or defend themselves, adding to judges’ frustrations. Less obviously, court closures mean longer distances to travel for many involved in criminal trials.

There are signs of increased reliance on informal care for adults with care needs. State-funded social care within care homes is often cross-subsidised by fees from private clients – essentially pushing some of the cost of state-funded social care onto those people.

These moves represent political choices – the trade-offs that any government must make. But they have not been prominently discussed, nor has the broader question of the line between public and individual responsibilities and costs.

8. The Government should gather and publish better data.

We have noted throughout this report the questions we cannot answer because of the lack of official data or analysis. For instance, there is no data on staffing in private prisons. Data on contracted-out services is very poor, making it hard for us – or the Government – to judge productivity. Data that would reveal more about the quality of justice is lacking, including information on the number of unrepresented defendants in magistrates’ courts and a thorough evaluation of the impact of being unrepresented on verdicts reached and sentences received. Local government figures – particularly on the cost and quantity of neighbourhood services – are very patchy. The same is true of data on GPs and the police.

Some of this data may be held in pockets of government. Contract managers, for example, may know how many staff that a private prison employs. Each local authority will know exactly how much street cleaning takes place in its area. But the figures are not aggregated and analysed nationally and in many cases locally collected data will not be directly comparable.

The Government should focus more on the performance of services, not just their cost.

The Government should construct its own performance tracker, making clear the targets and plans that lie behind its decisions on where to spend public money and keeping track of the results. Without this, it cannot know how much more efficient austerity has made public services, whether there is more room for improvement, or whether services are now at risk of a sharp deterioration in quality.

The Government should produce detailed plans for the way that services will spend the money allocated to them. We expect to see the publication of a new NHS plan this autumn, to accompany the funding settlement announced in June, as well as more clarity on local government finances.

This report shows that governments cannot continue for long to provide the same services by simply muddling through, with dollops of emergency cash. Tough decisions will have to be made: whether tax increases, or lower expectations of services, or more individual contributions, or radical service changes. The Government needs to openly address the big-picture questions about the future of public services.

The Prime Minister and the Chancellor must start making explicit the realities facing the country in terms of what public services cost and how that money can be raised. They need to begin telling people clearly that they face a national choice.

Our assessment of public service performance

In Table 0.1, we have summarised our analysis into a ‘concern rating’ for each of the nine public services analysed in this report (see Chapter 5 for a full explanation of these ratings).

Table 0.1: Concern ratings for nine public services