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Spending Review 2019

The views of Public Sector leaders

Every year, Deloitte and Reform interview leaders from across government and the public sector to inform The State of the State. This year, we have interviewed more than 50 senior figures in England, Northern Ireland, Scotland and Wales, including permanent secretaries, senior civil servants, police leaders, university vice-chancellors, NHS chief executives, council chief executives, agency directors, finance chiefs and more. These interviews form the most extensive qualitative research of its kind and allow for an unparalleled view of the public sector’s central challenges from the people who know them best.

The spending outlook means tough choices ahead

Across government and the public services, leaders are looking ahead to Spending Review 2019 and the trajectory it will set for their budgets beyond the known horizon and into the next decade. Many of our interviewees concurred that the Review will be characterised by tough decisions on spending priorities. Several told us that the recent funding boost to the NHS, indications in the media that defence spending was secure and public sector pay rises would put pressure on spending elsewhere in the sector. Some added that sluggish economic growth added to a perfect storm that pointed to very tight spending settlements in the medium term.

Overall, our interviews suggest that Spending Review 2019 will be incredibly difficult for decision makers in government – yet also a massive opportunity to set priorities, budgets and outcomes that could shape the UK’s post-Brexit future.

Several of those we interviewed are wondering whether the review will offer a one, three or five-year plan for public spending – arguing that one-year settlements prevent the public services from the kind of strategic, medium term planning it needs to make the most of its funding.

The NHS and social care leaders we interviewed argued that their current funding models are unsustainable and government faces a choice: either it takes decisive action to create a fair, sustainable funding system for social care or it will be forced into costly reactive measures as a series of crises unfold. One senior figure in healthcare warned those crises would be “brutal”.

NHS, social care and local government leaders also talked about the need to recalibrate citizen expectation towards more realistic provision. Many pointed to the need for greater self-care, perhaps supported by technology, as a crucial means for reducing demand on health and social care services.

A number of officials in Whitehall argued that taxpayers’ money would go further if spending decisions were shaped by the outcomes they sought, rather than by departmental allocations. Some had been exploring the Public Service Value Framework, published by HM Treasury last November, as they thought ahead to the Spending Review. Designed by Sir Michael Barber, the framework aims to improve public sector productivity, in part by connecting public spending more explicitly with what public bodies are trying to achieve for citizens. Many of our interviewees told us that the framework is a powerful tool with profound implications – but were not convinced that it would be deployed with sufficient energy to fundamentally alter Spending Review 2019.

Several interviewees, both in Whitehall and the local public services, talked about the importance of real estate in terms of cost efficiency and regional inclusion over the next decade. Civil servants told us that the government retains its objective for greater regional equality and for officials to relocate to regional hubs as part of that agenda, and some expect relocations to form a substantial part of savings in the next Spending Review. Leaders in the public services are also thinking about their property needs, with some wondering how technological, economic and social trends will affect their future estate needs.

Some interviewees suggested that the private sector’s role in the public sector should continue to grow in the future. They acknowledged recent failures but were clear that companies are improving in their ability to engage in the public services while government and the public services are improving in their ability to engage with companies. One private sector chief executive, interviewed for his perspective as a supplier to the public sector, called on government to deregulate and allow other sectors to operate more extensively across the public services.

In Whitehall, some of the most senior officials are thinking about the future of the centre of government. Their conversations explore whether departments at the heart of the state, currently operating as secretariats, should bring in greater experience in order to provide more drive and direction. Others talk about beefing up functional dimensions with government, so that civil servants associate more firmly with their profession than their department.
 

Explore the views of Public Sector leaders on spending choices:

  • There’s a very British problem…we make life complicated for ourselves and then we try another initiative when something goes wrong. We never, in the context of health, education or the criminal justice system, we never allow anything to settle down for long enough. - Agency Chief Executive
  • The Treasury does its finances in buckets, by departments, and not strategically. - Local Authority Chief Executive
  • We need a long-term funding solution for social care that balances what and the state and the individual should pay. - NHS Trust Chief Executive
  • At some point, we’ve got to think about our HQ – I mean what kind of building will we need in 20 years? - Police and Crime Commissioner
  • All public bodies who own land generally behave the same way – they say ‘we want top dollar and this isn’t the best market’. They have heroic assessments of what the future will deliver. We need to rethink how we account for public land. We should use if for what’s best for the public: homes. - Housing Leader
  • I can tell you where I’d love to get to: we will have a mature public conversation, rebalanced investment into primary care, aligned health and social care, invested heavily in the upstream space like early years and we will have started closing prisons because we’ll have stopped cycles of deprivation. What’s more likely? We’ll be catalysed into making changes, and those catalysts will be brutal. - NHS Trust Chief Executive
  • What we want to know is whether the spending review will cover a year, three years or five years. Planning year-to-year is a crazy way to run a public service and it doesn’t lend itself to any approach on strategy. I’d sooner have a tough settlement for three years than more generous settlements for one. - Policing Leader
  • Having understandably agreed that the NHS is getting extra funding, the key issue is where extra relief should fall. That’s a pressure that can only be solved politically. - Departmental Non-Executive
  • We won’t be much different in ten years. We’ll throw more money in the system just to get by, they’ll be no attempt to change public expectation and the political cycle will keep stopping any change. - NHS Trust Chief Executive
  • We need to move from a culture of dependence, to be clear that we’re not in the business of doling out services. We’re in the business of enabling households and communities to achieve their potential. - Local Authority Chief Executive
  • There’s been some wobbling in the outsourcing sector, but we’re getting better and they’re getting better. The private sector will continue to play a major role and we’re getting progressively better at how to handle it. - Senior Civil Servant
  • How you run a government, and how accountability works, all need to evolve. You need to rebuild the centre of government with much, much more experience rather than it being just a secretariat. - Senior Civil Servant
  • There are only two options: reduce public expectation to a minimum, emergency offer. Or put more money in. - Social Care Director 
  • If there’s a spending review in 2019, there’s a major conversation to be had unlike any the government has had before. There’s no point working out a set of outcomes and not funding them. Our system is going to need to bring the inputs and outputs together or we’ll be in an almighty mess five years from now. - Senior Civil Servant

Qualitative research of this kind explores individual opinions, and the views expressed by our interviewees are very clearly their own. The State of the State reports on their views – it does not endorse them.

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