Fabian Society Commission on Future Spending Choices
Hearing 7: ‘Public services: productivity, innovation and waste’
7th May 2013, 9.30am – 11.30am
Committee Room 21, House of Commons
Key questions for this hearing include:
- With no new money, can innovation drive continuous improvements to public services or will standards decline?
- After five years of cuts, to what extent will there be further scope for annual incremental reductions to inefficiency and waste after 2015?
- Are there strategic decisions regarding the design and organisation of services or the nature of capital spending which could realise major savings?
- Can integration and coordination of health and social care result in better, more affordable services?
- Anita Charlesworth, (Chief Economist, The Nuffield Trust)
- David Robinson (Co-Founder and Senior Adviser, Community Links)
- Simon Parker (Director, New Local Government Network)
Hearing 7, the Commission’s second on public service spending choices, began with Anita Charlesworth’s presentation on productivity and innovation in healthcare. Setting the context, Charlesworth presented three spending scenarios for the NHS: a real freeze up to 2021-22; spending rises in line with GDP; return to long-run average of 3.8 per cent a year.
Charlesworth argued that due in large part to its current pay settlement it would be possible for the NHS to continue providing services at the same level of quality up to 2014-15. After this point progress on meeting productivity savings will be required alongside innovation and change in the way services are delivered.
There are difficulties in measuring quality and as such it is very difficult to arrive at accurate estimates of NHS productivity. However, as Charlesworth demonstrated, the health service productivity growth lags that of the whole economy productivity and since 2006 has been essentially flat. Sectors that enjoy higher levels of productivity are those with the ability to substitute capital for labour, but there is little scope for this in the NHS.
The Commission heard that despite the rhetoric about savings in the NHS’ Quality Innovation Productivity and Prevention (QUIPP) programme, in reality much preventative spending has suffered during budget cuts. Charlesworth suggested that one opportunity lay in health and social care integration. Innovation at the boundary between these two boundaries has the potential to improve the way services are delivered and save money.
The Commission’s second witness, David Robinson, took up in more detail the reasons why the current context of spending reductions should be an opportunity to embed preventative principles into service delivery.
Robinson argued that because preventative spending is ultimately about needs reduction, there is scope for this approach to save money in the future. Prevention is more aspirational than the concept of resilience; it envisages a society ‘ready for anything’ which can realise a ‘triple dividend’: thriving lives, costing less, and contributing more.
Outlining why this widely acknowledged ‘common sense’ is not reflected in policy practice, Robinson spoke about the institutional barriers to prevention. Robinson argued that the short-term horizon of the British electoral cycle is less of a barrier than budget and spending review cycles which encourage short term thinking and planning.
Overcoming this incentive towards short termism, the Commission heard that the Early Action Taskforce had recently advocated a ‘ten year test’ which should be presented alongside budget decisions to help evaluate their long term impact.
Simon Parker then made the final presentation, outlining the worsening spending scenario for local government now and in the future. While councils have so far handled their budget cuts as well as could be expected, Parker noted that many are pessimistic about their future ability to provide any more than their their statutory duties.
Describing the outcomes of New Local Government Network research into how an imaginary council might make spending reductions, Parker suggested that while incremental savings and returns from innovation are vital, they will not be enough.
Building on comments made previously in the hearing it was suggested that health and social care integration would be an important step forward and should proceed. However, as others had remarked earlier, social care spending will continue to exert pressure on budgets. In addition, Parker argued that further attention should be given to personalised budgets and supported the case presented by the previous witnesses on the need for prevention to become more widespread.
In terms of priorities, the Commission was told that a future government should shift the focus of growth onto city regions in line with the recommendations of Lord Heseltine’s recent growth review. However, local governments also need to share in this growth. It was argued that Greater Manchester’s ‘earn back’ scheme provides a model for this process.
Questions from the Commission panel focused on a range of issues beginning with the cost pressures outlined by Anita Charlesworth’s presentation on health. She reiterated that if health and care are delivered in new ways then it is would be possible for spending to grow in line with GDP. But no country has achieved flat real spending over a long period of time and changed the trajectory of spend in doing so.
The questions then moved onto the conditions for expanding the scope of prevention. In particular discussion focused on the necessary overlap of acute and preventative spending that will be required as the latter becomes embedded and institutionalised. Although this ‘double spending’ is of concern to policymakers and politicians, David Robinson suggested it should not be exaggerated. More difficult for policymakers and advocates is the question of how far these savings are ‘cashable’.
In relation to the issues raised by the evidence received on localism, questions focused on Total Place schemes and their re-emergence in Whole Place budgets. It was suggested that the Whole Place approach could provide an opportunity for greater prevention in service delivery, but this depended on change in Whitehall and leadership at the senior political level. However, David Robinson argued that entrenched cultures at a local level too could restrain the development on Whole Place approaches, and prevention requires change at all levels.