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'Crisis, cash, repeat': The folly of austerity government

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LGC’s essential daily commentary 

In the wake of this June’s general election and the devastating Grenfell Tower fire just a week later there were high hopes for an end to austerity.

Four months on and there has been some piecemeal relief for certain parts of the public sector: police and prison officers are to get a pay rise that exceeds the 1% public sector pay cap, albeit marginally, and an extra £1.3bn has been found to prevent any school from losing out under the new funding formula.

But rather than these cash injections flowing from a considered analysis of how best to spend money, they are a result of what the Institute for Government has described as a process of “crisis, cash, repeat”.

In its latest Performance Tracker report, published today, the institute calculates the government is already set to spend £10bn on responding to various crises in public services over this parliament.

A chunk of this is the £2bn announced for adult social care in the spring Budget, which the institute says is having a “stabilising effect” with some reversal of the cuts to spending that have been made since 2010. However, long term it has done little more than buy the government some time “to begin the wider public conversation about social care funding,” the report says. It adds: “A choice to delay the promised green paper would therefore ultimately signal a return to the crisis, cash, repeat cycle further down the road.” Unfortunately, as outspoken Conservative Commons health committee chair Sarah Wollaston warns today, that looks like exactly what is going to happen.

The Performance Tracker does find there have been genuine efficiencies in some parts of the public sector, including hospitals, at least in the early years of austerity. However, throughout the period cuts in spending on adult social care have been driven by “reductions in quality and scope”.

The tracker also considers what the report describes as neighbourhood services, such as waste collection, libraries and roads maintenance. While noting that the data is too weak to allow a detailed assessment of efficiency gains, the report suggests the large falls in spending coupled with maintained levels of public satisfaction means there have been some genuine productivity improvements, although it also notes that recent deterioration in council reserves “may suggest a turning point is being reached”.

In addition, as councils have prioritised “visible and critical services” this could mean a mounting backlog of repairs and quality issues that will ultimately become more expensive to deal with – or bring another crisis situation for the government to reactively throw money at.

The institute notes that these crises may be practical, such as the rising levels of violence in prisons, which exposed in stark terms that staff reductions have gone too far, or they may be more political, such as the furore around the impact of planned changes to schools funding. Essentially, the decision making seems to boil down to whether the government acts when it is warned of impending disaster or takes a chance and hopes that the threatened disaster never materialises. Most likely this comes down to the political currency of the doom-mongers.

The institute concludes that with hindsight the “early years of austerity look like a missed opportunity to successfully implement radical reforms” and implores the Treasury to revise its approach to spending decisions. 

The need for a radical approach has not gone away. The government must agree a long-term vision for public services and fund the transformation, even if that means a planned let up in austerity in the short-term to pay for reforms. 

Continuing to bounce from crisis to crisis, digging up bits of money for specific problems here and there, is bad government - not to mention an irresponsible use of tax payers’ money - which other parts of the public sector would not be allowed to get away with.


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