Spending Review: Time to unite, time to think bigger

June 1, 2018   By Tony Smith

This is a critical year for local government. The Spending Review, the social care green paper and decisions on funding the NHS are all individually important, but collectively they could be game changing. There is an opportunity to set a new, more sustainable course and to provide much needed clarity on the future role and purpose of local government. Will we take it?

A bold, coherent and long-term approach will only be possible if local government is united and speaking with one clear voice. Government is not likely to engage in this challenge unless we raise our eyes from the details of the finance system and the interests of one type of place or another and look at the funding and governance of our whole system of local public services. We must demonstrate the value of services and how it can be increased by doing things differently.

The fair funding review could be a divisive distraction from this bigger debate, as Adam Lent has already pointed out. The Spending Review needs to go much further to ensure a sustainable future for public services in all parts of the country. The towns v cities agenda is another distraction.

The recent debate about NHS funding, sparked by the report from the Institute for Fiscal Studies and the Health Foundation, provides another illustration of how narrow the focus can become. The report itself looks at the funding of both health and social care, yet the debate was almost exclusively about the NHS. Where is the thinking about how spending on social care, public health or wider local government services can reduce the demands being made of the NHS? Where is the discussion about how we best deploy resources across all our services to meet the outcomes we want to achieve?

The report shows what we already know: resources have been shifted from preventative to acute services in recent years. The relative share of health in public spending has grown. Even within health, resources in primary care have shrunk whilst those in hospitals have grown. As the authors suggest “it is unlikely that this rebalancing away from primary and community care makes sense in the long run”. The report also concludes that spending on social care per capita has fallen by 2.2% per year whilst age adjusted per capita spending on health has risen by 0.1% per year.

The longer we stay on this track, the worse the imbalance will become and the harder it will be to redress it, so action is needed this year. The Spending Review must allocate more strategically based on priority outcomes rather than departmental labels, but also put in place a new approach to funding decisions which includes the vital element of “place”. We have been talking about “total place” and “whole place” for years. Now seems as good a time as any to actually implement it.

This approach should be extended to economic investment. More inclusive growth requires better aligning spending on services and economic investment. Doing this locally means we can also leverage private sector investment and align it not just to economic but to social objectives. We need to start seeing all public spending as investment, rather than speaking of economic “investment” and public service “cost”, enabling local leaders to join up investment plans for their place. This should include creating substantial “invest to save” funds to enable services and places to re-invest in prevention. Such an approach might for example enable us to stop spending billions on housing benefit and instead invest in affordable homes.

There is an emerging new architecture for this devolved, place-based approach. The combined authorities and mayors should be given the powers and finances they need to deliver through a re-energised devolution process. The rest of the country also needs a devolution settlement that enables such collaboration. As Jessica Studdert has said, we also need to engage government in a real debate on fiscal devolution.

Such a transformation cannot be achieved overnight, but we must make a start now. That means uniting and making a strong, evidenced and practical case for change.

Tony Smith is a Policy Executive at Birmingham City Council and also works with the West Midlands Combined Authority on devolution policy.

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