The chancellor presented a much more upbeat summary of the state of the nation that may have been expected in this week’s Autumn Budget Statement, saying that the economy is proving “more resilient than we expected in the face of higher energy prices, inflation and interest rates”.
In the run up to a general election we would expect a ‘give away’ budget with a strong focus on growth. There were certainly signs of this in the Statement but very much at the expense of the public sector.
The reduction in National Insurance contributions of 2% was an unexpected bonus for workers, but effectively signals the demise of the adult social care reforms, which were due to be funded by the previous increase in NI contributions. The reforms, although controversial, would have dealt with a number of inequities in the market and for people receiving care. There is no doubt that the issue of having to sell a home to pay for care costs will raise its head again, unless it is resolved. In the meantime the market will respond by continuing to deal with inflationary pressures by raiding costs.
There were other strong signals that the public sector will continue to face a squeeze. A cap on the size of the civil service along with a focus on public sector productivity are bound to have ramifications across the sector. It will be interesting to see how the productivity conundrum is addressed. Whilst this was focused on NHS services in the statement, it may have unintended consequences across all parts of the sector with government departments having to prove/demonstrate efficiency of their services. It will certainly be interesting to see what impact this has on the development of Oflog as the main repository for performance data across local government. I predict a flexing of Oflog’s muscles over the coming months.
The extension of financial incentives for investment zones, continuing incentives for business investment and further devolution deal are all markers that growth and a buoyant private sector are prioritised over additional public sector spending. The implications of this must not be underestimated. With inflation rates remaining stubbornly high and wage inflation equally high, public sector will need to absorb additional costs without compensatory funding which may push more organisations towards a dangerous financial precipice. Eleven ‘Section 114′ notices have already been issued by local authorities since 2018, compared to two in the preceding 18 years, a worrying trend that this budget will do nothing to reverse.
It seems as though the Chancellor is placing all his cards on improving performance as the answer to the problem but this in itself will require serious capital funding in order to be successful. One thing is certain – the outlook for the public sector has not improved as a result of this weeks announcements. Children’s and Adults’ services are currently absorbing the majority of budgets and also experiencing the highest demand and cost pressures. So what does the future hold? A radical rethink of service models along with automation, use of AI, plus the dreaded productivity focus are inevitable to sustain the minimum levels of statutory service.