MV comment on the Spending Review 2021: Grounds for optimism but the outlook remains challenging
Updated: Oct 28, 2021
John Copps explores what the announcements in the Spending Review mean for public services.
Today is perhaps the most important day for the UK public sector since the pandemic up-ended our lives at the start of 2020. A short while ago, the Chancellor finished his announcement to the House of Commons setting out the government’s vision for public services and spending plans for the coming three years.
That in itself is a notable feature of the statement. For the first time in this parliament, we have a multi-year spending commitment and, with it, the chance for government to shape a genuine domestic policy agenda. Greater certainty is welcome and a signal that we are getting back on track after the disruption of the earlier phases of the pandemic. I hope it gives public service leaders more confidence to invest and plan for the future.
Overall, the spending review felt to me like a mixture of high profile investments and spending restraint, and was heavy on capital investment. In terms of investment in public services, the narrative trod a line between optimism whilst acknowledging the unpredictability of Covid, longstanding challenges, and the need for fiscal control.
So what does all this mean for the public sector? For me, some of the key overarching points included:
What the Chancellor billed as ‘a real terms increase in funding for every government department’. In aggregate, this amounts to £150bn more by 2024-25, or what the IFS says is an average of 3.0% increase per year over the parliament. To work out exactly where this is going we will need a look at the small print, but we should expect the Department of Health and Social Care to take a big share.
The news that local government grant funding would be ‘up £4.8bn’, the largest increase in a decade. IFS chief Paul Johnson tweeted that this looks like a ‘big change of direction’, and will be welcome in Town Halls. Curiously, the figure is the same as the Levelling Up Fund – again the small print should give more clarity on this.
Talk of an infrastructure revolution – in roads, railways and broadband – to ‘level up’ the country and widen access to opportunity heralded a theme around capital investment. This included £6.9bn to give mayors in the regions to improve key transport links.
A recognition of the importance of early intervention in services for vulnerable families through £500m investment in family support, including ‘Family Hubs’, to coordinate early help and an integrated approach to early years.
A commitment to ensure the Shared Prosperity Fund, designed to support local areas with regeneration, economic development and targeted projects for vulnerable people, matches that which was provided by the EU. This will be reassuring for areas such Cornwall or the North West that have benefited most from this in the past.
£3bn investment into adult and post-16 education, with ‘skills boot camps’, post-16 technical qualifications, funding for FE colleges and apprenticeships.
Investment in health infrastructure with a £5.9bn package of funding to help tackle NHS backlogs across England, including bed capacity and equipment, technology and diagnostics.
The government appears to continue its penchant for centrally disbursed pots of money, controlled from Whitehall. Announcement of funding for children and families, cultural investment and infrastructure seem sure to follow this example.
Removing the pay freeze will be welcomed across the public sector – but it is unclear where’s the money for any increase going to come from, given the multiple pressures on services.
Nothing is said on devolution, or the prospect of future local government reorganisation. We wait for the upcoming Levelling Up white paper for any steer on this.
No mention of the public health grant - surprising given the pandemic; or social care - perhaps less so after the attention it has had over the last few months.
Of course, with any spending review, the devil is in the detail. The full implications of what the Chancellor have said are not yet clear. It is not entirely clear, for example, how much of the announcement is new money and how much was already committed.
And long-standing challenges will not go away. The crisis in social care – children’s and adults – will still need fixing. Health inequalities remain stark. And as money continues to be tight around local services, will budget holders be able to move from crisis to investing in prevention?
Leaving this aside, we can now see a clearer picture of the priorities and agenda of the coming three years. After more than 18 months of pandemic fatigue, the spending review gives grounds of optimism for public services. As the Chancellor said, it is now about delivery and, in particular, for the government to make good on its promise for public services to help ‘level up’ the country.