Most political events – however apparently dramatic at the time – soon fade. The after shocks are limited. By contrast, announcements about public spending have a longer impact. Of course, the plans will be reviewed at some stage but they will form the framework for the public sector for at least the next two to three years.
Much of the discussion of the November 25 review has focused on the big changes to the revenue forecasts by the Office for Budget Responsibility and the consequent easing of the severity of the planned spending reductions. In the July Budget, the fiscal plans implied average cuts of more than a quarter in the day to day spending of departments up to 2020 other than protected programmes on health, schools, international development and defence. The Spending Review implies cuts of under a fifth over the five years, one-third less. Moreover, the profile has changed with a smaller squeeze in the early years.
The easing of the short-term pressures does not, however, amount to the end of austerity. The Spending Review is still very tight overall. Total spending is due to fall from nearly 41% of national income in 2014-15 to 36.5% in 2019-20. Police and the Foreign Office may have got off more lightly than feared, but many other departments face a substantial real-terms squeeze. And as some civil servants have understandably pointed out, they still face a 1% cap on increases in the pay bill for the rest of the parliament following earlier tight squeezes. At one level, this will reduce the need for job losses, though there will clearly be big reductions in staff numbers in some areas. There will also be pressures for greater flexibility within the pay cap to allow for the recruitment and retention of key staff.
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The implication is that much of Whitehall will face fundamental changes in the way it operates. Of course, it is easy to be cynical about often-heard terms like “shared services” and “transformation”. As repeated Institute for Government work has shown, it is important to get behind these terms to understand what is happening, or, at least, is being tried.
John Manzoni, the civil service chief executive, has told MPs that the Department for Work and Pensions will have to shut large numbers of offices, back offices, data and call centres and move to new buildings. New technologies will be introduced to allow a digital channel. That will also involve changes in working and shift patterns. Similarly, HMRC will close many smaller offices and concentrate its work in a reduced number of regional centres, also underpinned by the extensive introduction of digital services.
The government is putting a lot of weight on digital transformation where £450m is being allocated to the Government Digital Service. The GDS will provide support and design some services. The government’s strategy here is still not entirely clear, however.
Ministers have emphasised the importance of strengthening the UK’s infrastructure. But the Major Projects Authority is already overseeing an ambitious, possibly over-ambitious, group of programmes, which were increased in the Autumn Statement. The IfG has argued that the existing portfolio is probably too large to be managed effectively and the number of big projects should be reduced (this is also the view of many businessmen working in government), while new ones should be subject to much greater pre-announcement scrutiny.
Many of the key tests will come away from the centre, in local government, both as a result of cutbacks in Whitehall support of around a half over the five years and with the transfer of more powers to English local authorities.
The impact will depend on the relative financial strengths of local authorities, in particular the level of business rates paid in their area. Those already in a strong position, or in areas of development potential, will benefit from the shift to full retention of business rates and, in limited circumstances, greater scope to raise council tax and to spend the proceeds of asset sales. But the cutbacks will affect social care, public health and transport. At present, moreover, the pattern of decentralisation is too often a confusing patchwork, with lack of clarity on the criteria governing devolution deals.
The November 25 announcement is just stage one. The second will follow this month with the publication of the Single Departmental Plans. These will consist of two elements: first the manifesto commitments and milestones on the way to the delivery of them; and, second, the plans for how departments will run themselves within the spending targets, covering their continuing business as well as new developments – in short, the implementation plans which will be developed over the next few months. For the civil service, that will be the real guide as to how working lives will be affected for the rest of the decade – until the next Spending Review in a few years’ time.