At the first multiyear spending review since 2015, Rishi Sunak splashed some of his windfall from improved economic forecasts on public services. Day-to-day government spending will increase by 3.3 per cent in real terms in each year of the review, with above-average increases for the Department for Health and Social Care and the Ministry of Justice.
The vital question, however, is not how much money is going in, but how these services perform, and how they will feel to voters.
Our new Institute for Government analysis finds that general practice, hospitals, schools, local government, police, courts, and prisons should now have enough money to meet demand and maintain standards — keeping the quality and accessibility of services at pre-pandemic levels — over the rest of the spending review period.
NHS England’s budget will increase on average by 3.1 per cent each year in real-terms between 2019/20 and 2024/25 — above expected increases in demand for primary care (1.4 per cent) and acute care (2.1 per cent). In schools, the settlement agreed in 2019 will return per-pupil spending to 2010 levels by 2024/25.
Even in prisons, where the government expects there will be 14.5 per cent more prisoners in 2024/25 than in 2019/20 as a result of its plans to recruit more police officers, spending per prisoner will be only slightly lower at the end of the review than it was pre-pandemic.
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Most services are unlikely to suffer the kinds of big declines in performance that were seen during the second half of the austerity years, although there is little money left over for pay rises or improvements.
Councils, however, will continue to feel particularly squeezed. Excluding funding earmarked to implement the government’s social care reforms, councils’ spending power — the amount of money councils have to spend from government grants, council tax, and business rates — is set to rise just less than 1.9 per cent in real terms each year between 2019/20 and 2024/25.
Most of this increase will come from locally-raised taxes — notably council tax. The Office for Budget Responsibility projects that council tax receipts will be 10.8 per cent higher in 2024/25 than in 2019/20. The government has effectively devolved responsibility for tax rises to local authorities, allowing them to increase council tax by an additional 1 per cent to pay for adult social care without holding a referendum.
Moreover, spending on adult social care will have to increase faster than councils’ spending power just to provide care to the growing number of people eligible for the existing system. Adult social care will continue to eat up a larger share of council spending even with accounting for council tax increases.
While there is enough to maintain standards in public services, the government will struggle to address Covid backlogs. Reducing long waits for elective operations and court cases and addressing the in-person teaching pupils missed in school will be trickier. While in theory there is enough money to address the elective care backlog in the NHS, as well as the backlog of cases waiting to be heard in the courts, there are real world constraints.
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The NHS will struggle to recruit the staff to increase elective activity and courts will struggle to find enough judges and barristers to work on criminal cases to clear the court backlog quickly. In schools, the £4.9 billion allocated to address lost learning is unlikely to be enough. It is substantially below the £13.2 billion we estimate is required to address lost learning, and other independent estimates of between £13.5 billion and £15 billion.
The government’s spending plans should ensure public services can maintain standards: but it will not lead to vast improvements in public services, nor will money alone be enough to address backlogs.
Graham Atkins is associate director of the Institute for Government