Charlotte Alldritt is Chief Executive of the Centre for Progressive Policy.
Last month’s autumn statement was a masterclass in expectation management. A fiscal black hole would need to be filled and fast; tough choices would need to be made.
In the event, many of those choices will be forced upon the next government, and Jeremy Hunt brought a bit of cheer through education and health spending increases, as well as a sizeable uplift to the national living wage.
But despite the flashes of good policy, the economic outlook is not encouraging, and a long-term plan for growth remains absent.
The Chancellor acknowledged the extent to which public services power growth – equipping people with the means to participate in a more productive and prosperous economy. At the Centre for Progressive Policy (CPP) we maintain that investment in, and reform of, public services is critical for boosting productivity and spreading economic opportunity more fairly between people and places across the UK.
We argue that this approach to generating economic growth – what we call inclusive growth – is the only credible way of boosting productivity, improving living standards and ensuring long term fiscal sustainability.
In Hunt’s quest for fiscal credibility today, he failed to set out an ambitious plan for growth tomorrow. We do not need to choose between a strong economy and good public services, has he rightly told us. But the means through which we achieve both of these was left in question – more so, given the state of UK’s finances.
At CPP we have a set of answers, drawing on the growing body of evidence about the economic and fiscal returns on investment in public services.
Earlier this year, CPP published research indicating that if women were able to access adequate childcare services and thus work the hours they wanted, earnings would increase by between £7.6bn and 10.9bn per year. Elsewhere, CPP analysis finds that if the stubborn 15 per cent education attainment gap between the least and most deprived places in England were bridged, annual earnings would be boosted by £14.4bn per year.
Educational inequality was thrown into the spotlight during the pandemic. Much of the progress made in narrowing the attainment gap over the preceding decade was wiped out during the first lockdown, and the impact on children’s learning and attainment continued into this year.
Boris Johnson missed an open goal on levelling up by choosing not to implement the recommendations of his catch-up Tsar, Sir Kevan Collins, in full. Yes, the price tag was high, but we’ll be paying the price of lost opportunities, investment, and earnings for the next decade at least.
Already since the pandemic, half a million more people are now economically inactive due to long-term sickness. It is all too clear that poor health has a direct impact on the size and productivity of the UK’s labour force.
Not only does ill health put a brake on national growth, but it also inflicts most damage in our poorest places – pushing people out of jobs, dissuading investors and leaving communities vulnerable to the low-skilled, low-paid, precarious work trap; itself a recipe for worsening health.
Much of the NHS budget will be focused on clearing the pandemic backlog and dealing with the ever-pressing demand for acute services. Meanwhile general practice is buckling, and mental health services are wholly insufficient for the scale of rising need, particularly amongst 18-24 year olds.
While more investment is part of the solution, reform is imperative. Primary care, for example, needs a radical overhaul to take the pressure off GPs and make care more accessible via a range of trained health professionals. The call for expanding community pharmacy is well-versed, and ever relevant.
Meanwhile a new, digital-first point of access via the NHS app for mental health services – the equivalent of 111 for mental health – could revolutionise the way we deliver care, especially for young people, for whom the prevalence of poor mental health has increased markedly and for whom digital tools are often second nature.
But let’s be honest. Reform costs money and the state has got a poor track record when it comes to delivering value for money on IT projects, whether delivered in-house or in the private sector. While we’re being honest, let’s also be clear that there are public services in which spending does not yield direct productivity returns. The economic case for community or youth services will inevitably rely on the wider benefits that such publicly funded services bring.
But cuts here erode the quality of our social infrastructure, making places less attractive to residents, investors, highly-skilled graduates, or businesses choosing where to locate their premises and their people.
In 2020, CPP found that found that per-head spending on services vital for supporting community relationships and social cohesion, including libraries, open spaces, recreation and sports, Sure Start, and services for young people across local authorities, fell by 60 per cent in the decade leading up to the pandemic – double the 30 per cent cut to total local authority spend over the same period.
This hollowed out much of our community resilience, compounding issues of poor productivity and economic disadvantage: the North East saw the biggest drop in spending (from £154 per head in 2010-11 to £51 per head in 2018-19) and the West Midlands, the region with the lowest per-head community spending, went on to experience some of the highest Covid-related deaths.
Decline breeds decline, fraying the social fabric of our communities. Recent polling by Ipsos for CPP found that 59 per cent of people in the UK expect conditions in their local economy to get worse over the next five years, with those in the North of England most pessimistic. Rishi Sunak doesn’t need me to tell him the political risk he faces in former Red Wall seats.
Making the case for public spending in a cold economic climate is hard, even when the case for investment is strong. Productivity-enhancing public services should be prioritised, but policymakers should be mindful that these might not always be where they expect.
Devolution to local leaders allows for a more intelligent approach to allocating resources, including deciding what to cut. By pooling budgets across services where outcomes are co-dependent, further devolution to combined authority mayors would enable places to align investment and spending, deliver efficiency savings, and manage risks more effectively still.
The Tories grasped the potential for devolution to unlock economic growth under George Osborne, inspired by work I led through the City Growth Commission with Lord O’Neill. This sparked the Northern Powerhouse and catalysed the creation of combined authorities across England. Labour has picked up the baton this week in a comprehensive fashion, with Gordon Brown’s constitutional review putting economic growth at the centre of its case for more devolution at every level of British democracy.
However well individual Tory mayors like Ben Houchen and Andy Street may be doing, there is now a sense that the Conservative Party is running out of steam on the devolution agenda.
Finally, and as the Autumn Statement revealed, the Treasury is also running out of ideas. While recent events showed the wisdom of orthodoxy, there must also be space for policy innovation and creative thinking. That includes how we account – responsibly and credibly – for investment in human capital development, such as early years, skills and public health.
Officials will argue it is a slippery slope. But unless we get a grip on how to push our long-term productivity rate up, the only way is down.