Week in Public Services: 25th September 2024
This week: Darzi’s diagnosis; changes to Ofsted’s grades; and increases to magistrates’ sentencing powers.
General
Conference season is in full swing, but we at the IfG have far more nerdy concerns. Chief among them is the newest version of the OBR’s fiscal risks and sustainability report. It contains a striking chart showing public spending as a percent of GDP skyrocketing between 2030 and the mid-2070s, while government revenue gradually declines. They argue that pressures from changing demographics (particularly an ageing population with multiple chronic conditions), the impact of climate change, and a continued low productivity trajectory will put upward pressure on spending while depressing tax receipts. The resulting chart is definitely shocking, with public spending rising to 60% of GDP by the 2070s, from ~42% by the end of this decade and government revenue falling from 41% to just under 40%. The stuff of fiscal nightmares.
Not everyone was convinced by the OBR’s work. Dan Davies called it “the worst chart crime in British public life” (come on Dan, haven’t you seen the 3D pie charts from budgets in the late 90s?). He does have a point though. Government revenue and spending are converging for the period of the OBR forecast (though it is admittedly debateable how realistic those spending plans are) before diverging sharply from the 2030s onwards. If your projection is based on assumptions that run counter to all policy up until the start of the period you’re forecasting, then maybe the assumptions need to be re-evaluated?
In other news, it will be interesting to see how the Treasury handles the reported pressure from ministers to fund lots of preventative projects. It is often said that policy makers’ preference for a strong evidence base precludes a shift to prevention. We have previously argued that evidence is not the critical factor in the majority of spending decisions; instead it is political will and strong leadership that tend to drive policies (or hold them back). If ministers are piling onto the preventative bandwagon as reporting suggests, we could see the power of this political will in action.
Health and social care
Ara Darzi gave his view of the challenges facing the NHS. The former health minister’s independent review of NHS performance was published this week and landed with a splash — read our full thoughts in this comment piece. In short, Darzi’s diagnosis that underinvestment in capital, poor management, and underuse of community services has hurt the NHS is pretty bang on, and one that we and others have been talking about for a while. One notable breath of fresh air is the review’s avoidance of referring to AI as a panacea. To help the NHS, AI would need to access large volumes of patient data. But with outdated IT systems, inconsistent data formats, a lack of unique identifiers to link data across patients, and disparate siloes, the NHS has a fair bit of ‘plumbing’ work to do before it can unleash AI. Read Dr Jessica Morley’s guest blog post for the Nuffield Trust for more words of caution.
With the NHS overwhelmed, there are concerns that patients are increasingly resorting to private healthcare for treatment. The Health Foundation’s latest report finds these concerns largely unsubstantiated. While privately funded inpatient procedures — whether paid for by insurance or out-of-pocket — occurred 10% more in 2022/23 than in 2019/20, they still account for roughly similar proportions of total elective care activity, 7.4% in 2019/20 and 8.3% in 2022/23. It would be interesting, however, to see this split out by kind of payment — insurance versus out-of-pocket. Analysis from the Nuffield Trust suggests that elective procedures funded by out-of-pocket payments are increasing much faster (a 20% rise between September 2019 and 2023) than those covered by private health insurance (a rise closer to 5%). Even while the proportion of total elective care activity that is privately funded remains stable, the composition of the private healthcare market could be undergoing some interesting changes.
Children and young people
To oversimplify the big headline of the last few weeks: Ofsted, the inspectorate for children’s educational services, has decided to make itself a little less judgemental. After criticism that headline grades such as ‘outstanding’ or ‘good’ are reductive, inspectors of state schools and children’s services will instead issue a report card.
It’s unclear, however, whether a less judgemental inspectorate is a better one. Simple judgements are often exactly what time-strapped parents need to make informed decisions between educational settings. As FFT Education Datalab points out, schools graded as requiring improvement are relatively variable in quality, making the headline grade an unhelpful heuristic. But for the 91% of schools graded good or better, the one-word verdicts are good summaries of their performance in inspection. As a comparison, single-word judgements are popular among social care providers and professionals.
A better focus for the government than cutting the number of words on an Ofsted report would be increasing the number of children in school. A new report by IPPR and The Difference finds that 32 million days of learning were lost in 2022/23 due to unauthorised absence or suspension, up 72% from 19 million in pre-pandemic 2018/19. Children from low-income backgrounds, and those with special educational or mental health needs are the most likely to miss learning. Pupils who receive free school meals, for example, are nearly five times more likely to be permanently excluded than their peers, according to the report.
The result of this for local authority school spend is growing deficits. Early intervention services have been cut in favour of acute services, which will only add to the demand for acute services down the line. What’s more, local authorities are increasingly relying on privately run — and unsurprisingly, more expensive — alternative provision to meet demand. And to top it all off, pupil numbers are falling slower than previously expected, meaning there’s less space for the government to save money on schools than initially thought.
Now to children’s social care for a game of spot the pattern. Research from Pro Bono Economics finds that since 2010/11, councils’ spend on early intervention almost halved, but spending on ‘late intervention’ services rose by 57%. In 2022/23, residential care spending alone outstripped early intervention spending. And as with schools, over the last decade local authorities have increasingly turned to private providers to fill the shortfall in their supply of children’s homes. Recent figures show that the number of council-run children’s homes increased by nearly a third in 2023/24 — this might seem like a cause for optimism. Unfortunately, this only represents a shift from 12% of children’s homes being council-run to 13%, so we can’t get too carried away.
Criminal justice
We reached the end of August with less than 100 spaces left in adult men’s prisons. The government has since implemented its early release scheme to kick the can down the road a little. To really solve the issue though, we need to start thinking of the capacity crisis as a result of system-wide problems.
One of the key drivers of the growing prison population is a rise in the number of people being recalled to prison. In light of this, it’s important that there are enough experienced prison staff to best prepare prisoners for their release, and experienced probation staff to support them after it. But HMPPS’s recent quarterly workforce statistics show that the number of FTE band 5 senior probation officers has increased by just 1% over the last year and barely at all over the last quarter, despite the additional workload that the early release scheme brings. And the same statistics show a 13% rate of leavers among senior bands of prison officers.
On the flip side, a recent MoJ evaluation of Newham’s new young adult probation hub attributes part of the services’ success to its experienced and continuous workforce. The hub is a new model bringing together services under one roof, enabling quick referrals and a more child-centred approach to probation. Islington’s youth justice service was recently rated ‘outstanding’ by inspectors for similar reasons. It’s great to see the evidence base developing for these community-centred models.
An old policy chestnut has found its way back into the headlines: increasing magistrates’ court sentencing powers. This is an idea that’s been floated several times and was actually implemented in 2022 during Dominic Raab’s time as justice secretary, before being reversed just a year later. The justification, now as then, is that it would help address the crown court backlog by letting magistrates’ courts hear more cases, reducing delays and the number of people held in prison awaiting trial or sentencing.
There are arguments on both sides here. Lawyers and judges tend to argue that if it successfully reduces the case backlog, that will make things worse rather than better in prisons as more people are sentenced to custody. It’s extremely hard to work out if this is actually true in the current situation: the reasons why are complicated, but you would effectively need a complete stock and flow model of defendants and prisoners, and a whole lot more data, to figure it out. I’m not holding my breath on this one.
Lots of people also argue that magistrates’ courts will hand down longer sentences, making things even worse in prisons while not actually helping things in the crown court much, because defendants will appeal or choose to exercise their right to a jury. But again, we don’t have a lot of evidence on this.
The counter-argument is that it could really speed up the passage of cases through the courts. Magistrates’ court trials are much quicker and the backlog is smaller relative to cases processed through the courts (though bigger in absolute terms). In the context of people spending months on remand — potentially significantly longer than the maximum sentence they could receive if convicted — and rising rates of people failing to attend court hearings, there are strong reasons to do whatever we can to process cases faster. Of course, all of this is subject to magistrates’ courts being able to process cases faster…and with the latest available data (from December 2023) showing the magistrates’ court backlog rising rather than falling, that is also in doubt.
Local government
The housing crisis has predictably continued to rear its ugly head, this time in the form of local authority expenditure on homelessness services. While real-terms spending on all services grew by 2.4% in 2023/24, real-terms spending on homelessness services was up by 27.2%, largely driven by record spend on temporary accommodation. Councils have relied heavily on hostels and bed and breakfasts — the more expensive forms of accommodation — to cover additional demand. Unfortunately for any consultants hoping to make a quick buck, the solution isn’t as simple as housing families more cheaply. Soaring private rents and a lack of housing stock makes that pretty difficult.
Real-terms spend on children’s and adult social care grew by £2.3 billion over the last year, making it the biggest driver of the 2.4% rise in local authority services expenditure (in terms of absolute increases). In adults’ services, the greatest spending increases came from older people’s physical needs and working-age adults’ learning disabilities; in children’s, the pressure came from services for looked-after children. Even though spending increases were accompanied by growth in government funding, the cost of placements for children in care is still expected to have put councils in a deficit for children’s services.
If you’ve read this far through the blog, it shouldn’t come as a surprise to you that deficits abound beyond children’s services. Seven local authorities in the West Midlands have warned the new government that there is a “real risk of the whole region declaring itself as financially unsustainable”. Forecasts suggest a collective funding gap of over £200 million, driven by the trio of services we’ve just discussed: adult social care, children’s services and homelessness support. Similar is true of councils in London. Notably, council leaders also identified these as the three biggest financial pressures in a recent survey by the Key Cities network.
What’s to be done? Well, the same Key Cities survey found that three in five city leaders considered service redesign and utilising financial reserves their highest priority over the next year. 40% also looked to selling off council assets and reducing non-statutory services.
From a central government perspective, there’s a lot of room for improvement in funding allocations, something we have long pointed out and the IFS argue in their recent report. Annual assessments of local authority funding needs were last carried out in 2013, and funding has since been set according to these levels. And central government cut the most deprived local authorities’ funding more than other councils’ during the 2010s. The result is that the “most deprived fifth of councils receive a share of funding 10% below their share of assessed needs”. This matches up with the BBC’s recent finding that more deprived communities are four times more likely than the richest to have lost a public library since 2016.
And finally, in a move that will shock no one — but please every local authority — the new minister for local government Jim McMahon is reviewing the Office for Local Government’s (Oflog’s) “long-term role and short-term remit”. That’s government-speak for “this organisation is due some heavy reform”. Most excitingly for the sector, Oflog will immediately stop its ‘early warning conversations’ with local authorities. I think this makes sense. Oflog was always an imperfect, hastily established body. While there are some things it could do well, its current constitution and approach are antithetical to constructive relationships with local authorities, as we’ve previously argued.
