Week in Public Services: 2nd August 2024

This week: Reeves’ audit of public finances; GPs vote for industrial action; and solutions for the crisis in prisons

General

We’ve fallen a bit behind updating this blog in the last few months. Hopefully it’s not too late to blame the general election for our dereliction of duty; it’s meant things have been a bit busy round here.

So, the UK has a Labour government. Though if you’re finding that out from reading this blog, I would politely suggest expanding your media intake. Obviously the election was exciting — Ed Davey tried every sport known to man, Rishi Sunak called the election in a rain storm, and Keir Starmer…in fact I can’t remember a single thing Starmer did during the election.

But I know that everyone spent the whole election thinking “but what do these imaginary spending plans mean for public services?”

Luckily, we spent more or less the entire period writing a report that answers that question. We looked at how well services are performing and identified key priorities for each. In short, spending plans are not sufficient to keep pace with demand, particularly in local government and the criminal justice system. There will also be difficult choices to make on how to spend a limited capital budget, with many parts of the public sector crying out for investment.

Rachel Reeves also seems to think that there are massive spending challenges and launched a review of public spending that reported on Monday. That review found that there was a £22bn unfunded in-year deficit. This has obviously caused an immediate row between the parties, with Tories claiming that the review can’t uncover anything that Labour didn’t already know before the election. For their part Labour claim that the Tories left the public finances in a mess.

There’s truth to both arguments. Labour obviously can’t argue that the scale of the challenges were completely unknown — loads of think tanks (including the Institute for Government) have been arguing for months that the current spending plans are a fiction. But there are some genuine in-year pressures (I’m looking at you, unpublished recommendations from pay review bodies) that only the Tories knew about. It is also rich for the Tories to attack Labour for being disingenuous about their fiscal intentions; these spending plans are theirs after all. And if they had won the election, they too would have had to completely reevaluate them. But I suppose it’s too much to hope that political parties will not attack each other on spurious grounds.

Given we haven’t published an edition of Week in Public Services for quite a while, I’m also going to take the opportunity to bump our report on prevention which we launched on the day Sunak called the election. It’s hard to imagine a worse day to publish six months’ worth of work, so I’m now being completely shameless about plugging it. It’s even more relevant given the new government’s commitment to diverting more funding towards prevention. In that report we define what we think prevention should be trying to achieve, explain why so many governments have failed to shift towards prevention, and make recommendations for how this government can do better. Those recommendations include:

1. Making prevention a political priority

2. Adjusting the spending framework to better track and manage preventative spending

3. Embed prevention in the performance framework to track progress

4. Empower local areas to design and deliver services as they see fit

5. Create a more effective accountability and learning system for local areas

There’s lots in there though, so worth going to have a look.

Health and social care

The NAO have a report out about the financial sustainability of the NHS. Overall, the report paints a fairly negative picture of the ability of the NHS to improve performance given expected levels of demand and funding: “we are concerned that the NHS may be working at the limits of a system which might break before it is again able to provide patients with care that meets standards for timeliness and accessibility”. You won’t find much dissent in the IfG. One thing that surprised me in the report is that the financial deficit in 2022/23 was smaller as a proportion of the total NHS budget than it was between 2014/15 and 2019/20. In addition, it looks like the NHS will run a surplus in 2023/24, but only thanks to additional funding from central government, and NHSE using some of its own central funding to plug gaps. The one shortcoming is that I finished the report with little more understanding as to why NHS systems run consistent deficits.

The new government didn’t waste any time when it came to negotiating with the BMA over junior doctor strikes. Streeting met with the union less than a week after the election. That looks to have paid off, with the two sides agreeing an offer this week, which the BMA will now put to its staff. That offer includes a 4% backdated pay for 2023/24 (in addition to the ~9% increase that’s already been decided) and a 6% increase in 2024/25 with a consolidated £1,000 payment. That means their pay will rise by 22% on average between 2022/23 and 2024/25. That’s obviously not quite the 35% that they hoped for. But it may well be enough for members to accept, particularly as the support for each new mandate wanes. Here’s my piece on what the agreement shows about Labour’s approach to workforce relations.

Speaking of strikes, the BMA concluded its ballot of GP partners on Monday and on Thursday announced that partners had voted in favour of industrial action. That will mean that GPs could do things such as limit their patient contacts to 25 per day, declining to discuss referrals with secondary care colleagues, and limiting other services. NHS England is concerned, and sent a letter to ICBs outlining how to handle industrial action. It’s fair to say that this is going to be very disruptive.

The government also announced “emergency measures” this week to allow primary care networks (PCNs) to use additional role reimbursement (ARRS) funding to hire GPs for this financial year. Putting aside the horrible acronym salad, I have mixed feelings on this. It is absurd that until now PCNs and practices have struggled to hire GPs while government has poured in ARRS funding, as we pointed out in our recent report. But this is hardly a sustainable solution; as this article points out, money can only be used this way until March 2025, after which the fate of the newly-hired GPs is up in the air. Further, as Becks Fisher of Nuffield Trust points out here, ARRS funding is not allocated according to deprivation, meaning it does little to address the lack of GPs in some of the most deprived parts of the country. It would still make much more sense to put ARRS funding into the core GP contract and allow practices and PCNs to spend it in whatever way best suits their local needs.

So it seems that Reeves may have punted the Dilnot adult social care reforms into the long grass for the last time (maybe we can retire that metaphor along with the reforms). The reforms may not be fully dead, though. The exact wording in Reeves’ audit is that “the reforms are now impossible to deliver in full to previously announced timeframes”. Irrespective of the exact status, the obituaries came thick and fast on Twitter. What does all this mean? For a start, it is a broken promise form Labour. Streeting committed to implementing the reforms during the election. It also means that the government still does not have a clear plan for social care reform and that years of debating, designing and dithering over the reforms have now been wasted.

I think it is worth saying though that while the Dilnot reforms would have protected some of the most vulnerable people who rely on care from catastrophic costs — something I think is unequivocally a good thing — they would not have done much to address the myriad deep problems in social care and would not really have brought more money into the system, but rather shifted the source of funding.

Regardless of the relative merits of Dilnot’s recommendations, it is clear that the sector is back to square one in terms of reform. There were reports (£) that the government would launch (another) royal commission on adult social reform. But even that has led to no action so far.

I’ve previously questioned the benefits of some NHS innovations like virtual wards, community diagnostic centres and elective hubs. The Improvement Analytics Unit at the Health Foundation has run an evaluation of elective hubs. That study found that there was a significant increase in elective activity following the opening of an elective hub. They also found that there was a statistically significant increase in general surgery volumes, though not other high volume low complexity specialities. The only thing it left me wondering is if there is any impact on non-elective hospital activity? Did it mean accepting longer urgent and emergency care waiting times, for example?

AI scepticism is catnip to me. So it was inevitable that this piece (£) from Steve Black would make it into this week’s edition. Steve argues that while there might be some limited use cases for AI in the NHS, it is not going to solve the deep-seated issues in hospital productivity that are mostly the result of operational inefficiencies. He describes AI as “the new snake oil”. I couldn’t agree more. What’s most disappointing is the number of UK policy people who seemed to have unquestioningly swallowed the line that AI will somehow solve every problem in public services.

Children and young people

Bridget Phillipson barely had a chance to skim the long, long list of urgent priorities in the DfE, when reports came through that the independent pay review body had recommended a 5.5% pay increase for teachers. It’s a figure higher than the current rate of inflation, and the 3% increase that the DfE had previously factored in when setting schools’ budgets for the next academic year. Jon Coles, the chief executive of United Learning, has a comprehensive thread on how the DfE had no real option other than to accept the recommended rise and convince the Treasury to fully fund it.

Coles made waves of his own when he proposed an alternative to the established teacher’s pension scheme, suggesting that teachers and employers could make reduced pension contributions in return for a higher upfront salary. He states that United Learning — a large multi-academy trust — could increase take-home pay for teachers by up to 24% if teachers were to opt into the new plan. While unions have vociferously rejected Coles’ and United Learning’s proposal, calling on Phillipson to intervene, it’s interesting that their members may have more nuanced views on the topic. In a Teacher Tapp survey, one in five teachers overall supported higher salaries with a lower pension, rising to 28% for teachers under 30.

“The SEND system is broken.” The opening remark of a new joint report by the County Councils Network and the Local Government Association pulls no punches on the abject state of SEND provision by local authorities and schools. The number of school-age children with an EHCP has risen by over 80% since 2015, 85% of local authorities have declared a deficit on their high needs budget, and outcomes for pupils with SEND remain behind their peers. The report calls for national reforms to the SEND system based on two principles of inclusion in education and preparing young people for adult life, and for more clarity on levels of special needs. Labour appear to be receptive to these: Reeves announced that a commitment to reforming the SEND system nationally into a more inclusive and financially sustainable system.

Criminal justice

There has certainly been lots going on in the criminal justice field! Major policy announcements, big new data releases, an IfG report — all the goodies. Let’s dive in.

Sudden outbreaks of violent disorder, triggered by the awful and tragic attack on a children’s holiday camp in Southport this week, have pushed the prison capacity crisis from the top of the criminal justice agenda. We have a new comment piece out today on the challenges this poses for both policing and the new government: Starmer and Yvette Cooper must be seen to show leadership and take action, but operational policing decisions are out of their hands.

The prison overcrowding crisis also continues near the top of the list. We’ve written about this before but things really heated up during the election campaign — so much so that the Prison Governors’ Association wrote an open letter to the leaders of all parties the week before the election, calling on them to cut the portion of their sentence prisoners spend behind bars from 50% to 40%. This is exactly what the new government has done, though with carve-outs for those serving sentences over four years or convicted of certain offences associated with domestic abuse. The new early release scheme (known as ‘SDS40’ to the Ministry of Justice and HM Prison and Probation Service) will ease pressure on prisons and buy some breathing room, but it’s not due to come into effect until the beginning of September. Time will tell if we can make it through the summer without a major incident or additional emergency measures being needed. Recent unrest triggered by the terrible events in Southport this week may make this all the more challenging.

If you missed it, our report from just before the election sets out how we got into this mess and the options for the new government. We covered it on our Inside Briefing podcast, ‘Keir and prison danger’, and for the really deep dive, check out my colleague Cassia on Michael Walker’s Crash Course podcast. And finally, we also wrote a comment piece on who exactly is to blame for the crisis (spoiler alert, it’s not the people who’d been in government less than a week when they were forced to announce new emergency measures).

Some of the big annual data publications came out last week, and we’ve been having a dig through them. The most worrying signs unsurprisingly come from prisons: both safety in custody and protesting behaviour stats are going strongly in the wrong direction. Incidents of ‘concerted indiscipline’, where 2+ prisoners act together to break prison rules or disobey officer/staff instructions, are up 50% year on year, and almost back to pre-pandemic record highs. Barricades and ‘incidents at height’, a lower-level protesting behaviour such as climbing on netting or rooves, are also up significantly: 33% and 50% respectively. The number of assaults in prisons and the assault rate have both risen as well, with all assaults up 25% on 2022/23 and assaults on staff up 32%.

All these rises are likely driven principally by the increasingly intense capacity pressure in prisons, with almost a quarter of all prisoners now held in crowded conditions (24%). But they raise the spectre of still worse: if there is a major riot or unrest were to spread across multiple prisons, we could lose potentially hundreds of prison spaces at a stroke. September’s early release measures can’t come quickly enough for the prison system.

Local government

There were some glimmers of hope for local government in Reeves’ statement. The report laid out intentions to consolidate funding streams for local government and to “overhaul” the local government audit system. Reeves also confirmed in the commons that the government would provide longer-term finance settlements to local government. All of this is welcome. But again, the proof will be in the pudding — it’s very tempting to retain flexibility in the centre by giving local government shorter settlements.

And if anyone needs reminding about the parlous state of local government audit, this PAC report from last year is a good refresher. Given that, it’s heartening to see the government actually paying attention to the issue, though it’s still unclear what exactly they intend to do. The previous government planned to set up the Audit, Reporting and Governance Authority (ARGA), though never actually got round to it. Will ARGA now go the way of the Dilnot reforms?

The government may not have much time to spend planning how it is going to reform local government finance. Local authorities are reporting large in-year deficits. For example, the London borough of Newham has a deficit of £40m on a budget of roughly £367m, driven primarily by demand for temporary accommodation — a common pressure across many authorities. Labour may not have long before it has to decide how to handle local authorities that are at risk of issuing section 114 notices. Will they take a leaf out of the Conservatives’ book and rely on “exceptional financial support”? Allow further council tax rises?