Public services and benefit payments absorb the bulk of government spending. In 2015/16, they represented nearly 87% (£654bn) out of a total of £753bn.* In the 2010 Spending Review, the Coalition Government set out plans to control spending, cutting it in many areas and constraining its growth in others.
The current Government is committed to implementing the cuts set out in the 2015 Spending Review, while maintaining – or, in some cases, increasing – the scope and quality of key services: for example, creating a seven-day NHS and closing the attainment gap between school pupils from different backgrounds.
The extent to which spending has changed across 18 different areas of public spending varies significantly and is illustrated in the heat map below – the darker the shade of blue, the higher the increase, and the darker the shade of pink, the higher the decrease. In 2015/16, there was significant growth for foreign aid and transport (although they take a comparatively lower share of total government spending), and a small increase for welfare and health (which take the lion’s share of spending). At the other end of the scale are tertiary education, agriculture, and immigration and citizenship. In the middle sit education and personal social services for older people and adults with disabilities.
Government has clearly succeeded in controlling spending over the past six years, but levels of spending are only part of the story. They tell us little about the cost and demand pressures facing the service (for example, the National Living Wage has increased staff costs in adult social care, while an ageing population means that more and more people require the service). Differences between changes in spending and changes in pressure on services must be met by making economies (for example, holding down staff pay), improving productivity (for example, using technology to enable staff) or reducing scope or quality (for example, rationing access to certain services).
To understand how government has performed, we need to dig deeper to examine what it has actually delivered for the money it has spent.
Tracking performance of key public services
Given the varying scale of the issues faced by different public services, how have they performed? Have they risen to the challenge of filling the spending ‘gap’ by finding economies and raising productivity? Or have they reduced their scope or allowed a diminution in quality? Put crudely, who is right: those that have argued that this is an efficiency agenda or those that argue it is all about cuts? And what does this tell us about what will happen going forward?
This report is a first attempt to answer these questions across a range of services. Performance Tracker uses publicly available data to identify where both the Coalition and current Conservative Governments succeeded in achieving their ambitions to control spending and maintain scope and quality. It also shows where the current Government faces the greatest pressure – where it is overspending or seeing services deteriorate, and where it risks doing both at the same time. This analysis sheds light on the heated, but opaque, debate about whether our public services are at breaking point or whether there is room for more efficiency.
The aim of this independent analysis is to prompt better financial planning in government, which will improve the oversight of essential public services. It is striking that this kind of exercise is not performed systematically in the Treasury or elsewhere in government. We want this publication to encourage the Treasury, in conjunction with Whitehall’s finance and analytic professionals, to fill that gap and produce its own version of Performance Tracker.
This Performance Tracker focuses on five public services: hospitals, adult social care and schools (in England), prisons and the police (covering England and Wales). These were selected to provide variety in terms of the scale of the spending challenge (ranging from a real-terms reduction of 21% in prisons to an increase of 15% for hospitals), but consistency in terms of the importance of the service to the public.
The following five chapters show what has happened to spending, scope and quality in the five public services over the past six years, drawing on publicly available information and data on different indicators. In particular, we focus on:
- CASH: What has happened to spending in individual services since 2010?
- PEOPLE: How has the workforce changed since 2010 in terms of size and morale?
- DEMAND: How much has the need for the service changed?
- SCOPE: What has happened to the volume of activity?
- QUALITY: What has happened to standards and people’s experience of services?
We maintain a tight focus on ‘inputs’ (money and staff that go into a service) and ‘outputs’ (what they produce – such as operations and exam results), rather than the wider ‘outcomes’ they might be effecting (the changes they create in the world – such as improved public health and a reduction in crime).
By looking across the public sector – rather than at one service in depth – Performance Tracker provides an insight into how government is faring in the round. Chapter 7 pulls together the analysis to identify common themes and trends. We then use this to look at the relative pressures facing the Chancellor in the forthcoming Budget, and outline in Chapter 8 how he might go about addressing them.
* Note that the remaining £99bn in 2015/16 consisted of public debt transactions of £36.7bn (central government, local government, public corporations and Bank of England), net total transactions to the European Union of £7.6bn, and accounting adjustments valued at £54.8bn.