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The party conferences showed the parties gearing up for the next election. Discipline was largely back. Eye-catching announcements abounded. But, strangely, the issue of how to plan public spending in the next parliament and beyond was rarely mentioned. It is as if a lot of the austerity agenda has disappeared because we have had a bit of an up tick in growth and politicians feel the mood has changed. But the reality is important choices lie ahead. Not only for 2015-20 but over the 10 to 20 years beyond that. I was a member of a Fabian Commission on Future Spending Choices, which has recently reported on this issue. The commission concluded there was room for a bit more spend than currently planned in the next Parliament and, if needed, some small tax rises and a slightly slower path for the reduction of the deficit to a sustainable level would be better than making cuts to spending that current plans envisage. It clearly showed the idea that there is no alternative to current plans is misleading but options are still fairly constrained. Much in any case depends on how the economy evolves over the next year or two – does the recent better news on growth presage a real surge or is it a false dawn? The Fabian review focused on the path of public spending up to 2030. Inevitably there will be pressures from demographics on the pension and health side, and there is a danger this will crowd out spending on things to promote growth. Two particular and linked approaches to avoid this are highlighted: the need to make sure we drive productivity in what public spending buys and the need to move to a bigger share of overall spend on prevention. Neither agenda is easy, and policy makers and politicians will always have tendencies to focus on more immediate hot issues than these longer-term ones but the commission suggested various changes that could in aggregate change incentives on decision-makers in a helpful way. One beneficial side effect of austerity has been a scrapping by councils and other arms of government of lower value services and unnecessary duplications, but this is a bit of a one–off boost to productivity. At local level, some councils are re-envisioning the future and being radical, which will also help. But at Whitehall level not nearly enough is happening. So the commission argued for the creation of an internal think-tank and proselytiser for productivity and innovation in the shape of an Office of Public Performance. In some ways it would be building on the best of the Audit Commission when it analysed differences in cost-effectiveness and performance, but it would push transformation and disruptive innovation hard. The move to early action spending is an even harder ask due to the immediate nature of acute needs. One thing the commission proposes to help address that is a 10-year test on any proposals so as to make it harder for government to embrace policies that look like they save money over the short-term but actually cost more in the longer-term. This would take place in the context of another idea proposed, which is the Government publishing a white paper at the beginning of every Spending Review cycle, explaining its objectives. There are other things that can be done to change the mindset - classifying early action spend differently from acute need spend, introducing a modernised version of the Public Service Agreements approach to focus on outcomes and challenging Treasury theology around switches between up-front money that might save benefit spend in the future. Devolving more to city regions – as the commission suggested – and to decent local enterprise partnerships is also likely to lead to more emphasis on prevention since these areas are closer to the ground and are more likely to get public, private and voluntary resources to join up to achieve outcomes. Perhaps to make all this deliver we need an aim of shifting by, say, 0.5% or 1% each year the balance away from acute and towards early action spend. That may sound very little, but over 20 years that would have moved us a lot. Many of these issues are far less interesting to the media or even the public in a day-to-day way but they are crucial for us to construct a system that gives us a chance of making the right choices over public spending for the future. Dan Corry is chief executive officer of NPC, a think-tank and consultancy on third sector issues. He is a former Treasury and Downing Street economic adviser.

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Spending choices

By Dan Corry | 24 October 2013

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