Our politics has been dominated by Brexit since 24 June, but it will not have escaped the notice of anyone working in Whitehall that there are other longer-standing and increasingly urgent challenges facing Theresa May’s government. Chief among these is how to cut day-to-day spending while maintaining the quality of services.
While the government has made clear that it is prepared to borrow more than planned should the economy deteriorate, Theresa May has also committed herself to continuing George Osborne’s cuts to day-to-day spending. As she said in her speech announcing her candidacy, “it is absolutely vital that the government continues with its intention to reduce public spending”.
Implementing these cuts will be challenging, as we discuss in detail in the Institute for Government’s new paper The Spending Challenge: how to cut spending while maintaining quality.
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This financial year, 2016/17, is the year of relative plenty. For the NHS, spending per person in England is actually rising. It will be frozen next year and then fall in both 2018/19 and 2019/20. Similarly, departments like the Ministry of Justice, HM Revenue & Customs, the Department for Work and Pensions, Department for the Environment, Food and Rural Affairs and the old Department for Business, Innovation and Skills all had nominal increases in 2016/17, but they will be more than reversed by 2019/20.
At the same time, existing government policy is often about increasing the scope of services, with pledges like the seven-day NHS. However while the rhetoric is about improvement, the data is about pressures.
In the NHS, basic service standards are being routinely missed. For example, prior to 2012/13, the government’s target of seeing 95% of A&E patients within four hours was mostly met. It is now being missed not just in winter, when the NHS is under most stress, but throughout the year. Similarly there are obvious pressures in services as diverse as prisons, social care and schools.
Can the government prioritise?
So how can the government approach squaring its cuts/quality circle? First, it should not allow itself to become distracted from this core challenge. This will be difficult in a context dominated by Brexit. But it should at least try to avoid self-inflicted wounds. Whether it was on tax credit cuts, disability benefit reform or forced academisation of schools, Cameron’s government got into the habit of biting off more than it could politically chew.
Most people have been baffled by the politics around Theresa May’s decision to push for an expansion of grammar schools. Whatever you think about the idea, to get it through is bound to involve a lot of political capital and prime-ministerial time. Both are scarce commodities with a slim majority and Brexit to negotiate.
The next question facing the government is whether it should shift some of the cuts around. Saving money from EU contributions, reducing pension benefits and cutting overseas aid are all likely to be considered. But the basic truth is that shifting budgets from one area to another will only alter the shape of the spending challenge – there is no way to eliminate it.
"May’s government can show the public that it is different – focused on delivering on the big issues rather than making the big announcements"
So the main issue facing the government is to establish a strategy for cutting day-to-day spending while maintaining, or indeed improving, the quality of public services. Theresa May needs to set this out and, unlike David Cameron, invest the energy in actually making it happen. There are three key things to watch for in the coming months.
First, can the government prioritise? With over 500 commitments in the Conservative manifesto, it is simply not credible to claim that they are all equal priorities. The public cares about the big issues, and government needs to be realistic about what it can achieve.
Second, can the government build on what is already in place? It simply does not have the time to start again. For example, ambitions to use digital technology to improve public services are right, but progress has been patchy.
Similarly, decentralising power across England is essential to joining up services, making them more efficient and responsive. Here the government needs to avoid ambiguous statements about the future, which risk destabilising progress to date.
And the government needs to continue building the capability of the civil service itself. Over the last five years, there has been a welcome focus on developing people’s skills, improving the effectiveness of leaders and making Whitehall more open and inclusive. These reforms need political backing, and the prime minister should send a clear and early statement of intent.
Third, can the government bring the public with it? Service improvement involves highly unpopular things, like the closure of hospital services. The government needs to find ways to engage citizens and make better decisions that accurately reflect the complicated preferences of the public. This will not be easy, but without such buy-in history is clear that any reforms will definitely fail.
If it can achieve all these things, then Theresa May’s government can show the public that it is different – a government focused on delivering on the big issues rather than making the big announcements.