Public services for the 2020s
Over the past 18 months there has been an outpouring of appreciation for NHS staff, carers and other workers delivering key public services under extraordinary strain. Yet at the same time the pandemic has exposed a lack of resilience within many of these services.
It is now widely recognised that the task beyond Covid-19 is to rebuild public services so they are better equipped to handle future challenges: both acute shocks, such as another pandemic, and chronic pressures such as the ageing population. Public services will also play a crucial role in achieving long-term national goals, such as decarbonisation and reducing regional inequality. Other insights from the experience of Covid-19, such as the importance of digital access and data governance, could also inform future public service provision.
Even before Covid many public services were under severe pressure, particularly at local level. A decade of major reductions in public spending had been accompanied by other important trends in service provision, such as outsourcing. At the same time a measure of devolution to city regions had created opportunities for innovation and more integrated service provision.
There are close relationships between public services and the social security or welfare systems. See also our Improving work and welfare pages.
The Institute for Government’s report How fit were public services for coronavirus? found an acute lack of resilience across the NHS, local government, education and criminal justice systems, and blame underfunding over the previous decade.
The House of Lords Public Services Committee’s report A critical juncture for public services: Lessons from Covid-19 identified a number of weaknesses in public service provision during the pandemic - inequality of access, over-centralisation, lack of integration - and outlines recommendations for reform.
The British Academy has conducted a major enquiry into the long-term social impacts of Covid-19 and the implications for the design and funding of public services in the 2020s. It sets out seven strategic goals for policymakers and five principles for a successful recovery by 2030.
The Women’s Budget Group Commission on a Gender-Equal Economy has laid out the roadmap for the creation of a 'Caring Economy', including recommendations both for particular public services (e.g. social care, health, housing) and for how public services are treated within the UK’s broader economic policy framework.
Extending the principles behind the NHS - universal services, guaranteed at a decent level to all citizens - to other public services is the rationale behind the proposal for 'Universal Basic Services'. See our analysis here.
Funding public services
In the decade before the pandemic, public services saw the longest sustained reduction in public spending on record. In 2019-20 day-to-day spending per person on public services was 7% lower in real terms than a decade before. Outside of health, real-terms public service spending was cut by 20% (25% per person).
Even without any change in policy, the UK's ageing population will require higher spending on health and social care and other services to maintain service quality. There are also widespread demands for better services and higher spending in areas such as schools and further education, childcare, public transport, policing, justice and legal aid and local services such as libraries and youth provision.
The UK spends less on public services (including social security and defence) than most other higher income (OECD) countries. The UK also raises less in tax as a proportion of national income than most others, though government plans are for this to rise in the next few years.
A higher level of spending on public services could be supported by an increase in borrowing (see our pages on 'Stimulating economic recovery'), but a sustained increase is likely to require a higher overall level of taxation. This could be achieved by raising the rates of existing taxes, or by tax reforms which sought to raise more revenue from other sources, such as from asset wealth or multinational companies. Our pages on taxation provide more information.
Analysing the March 2021 Budget, the Institute of Fiscal Studies notes that the government plans to cut public services by £16bn a year compared to pre=-pandemic levels. IFS Director Paul Johnson called the Chancellor’s medium-term spending plans “implausibly low”.
Bringing together evidence on underinvestment in the NHS, social care and public health prior to the pandemic, Anita Charlesworth of the Health Foundation argues that this, along with overly centralised decision-making and a reliance on non-competitive outsourcing, lies behind the UK’s high Covid-19 death toll.
A July 2020 survey by the National Centre for Social Research (NatCen) found majority support for increasing tax and spending on health, education and social benefits, as there has been since 2017.
A four-year commission of inquiry on the future of the NHS led by the London School of Economics and the Lancet argues that increases in public spending of at least 4% in real terms are needed for health, social care and public health over the next decade.
The Women’s Budget Group calls for spending on key public services (health, care, education) to be seen as investment in social infrastructure. It argues that a focus only on physical infrastructure reflects a gender bias in economic policymaking and leads to underspending on vital public goods.
A growing number of voices, including Tax Justice UK, IPPR, the Resolution Foundation and others, have called for wealth to be taxed more highly to pay for public services. This would include equalising tax rates on income from wealth and labour, reform of inheritance tax and reform of property taxes.
Local public services
The United Kingdom - especially England - has a highly centralised political system and economic geography. Decision-making power is more concentrated in central government than in comparable Western countries, and regional inequalities in income, wealth and health are larger.
The centralised management of public services has been a contentious topic during the pandemic. Many have argued the Government’s centralised response impeded effective provision of services, particularly with respect to public health and test-and-trace.
At the same time, the last decade has seen a degree of enhanced devolution, particularly to English city-regions. This has allowed new kinds of more integrated service provision and 'joined-up' policy making.
Covid-19 has also drawn attention to the financial fragility of many local authorities. In 2020-21, English local authorities’ spending power was 26% lower than a decade prior. This period also saw population growth of 7%, with rising demand and cost pressures, and new statutory duties for councils relating to public health, social care and homelessness.
For more information see our sections on 'Stronger local economies' and regional inequality.
The National Audit Office describes the financial position of local authorities “a cause for concern”. On top of pre-pandemic funding pressures, they find a £600m shortfall between Covid-related financial pressures and government support, and that 94% of single tier and county councils surveyed expected to cut services in 2021-22.
The House of Lords Public Services Committee has criticised the 'over-centralised' delivery of public services and argued that the pandemic has “demonstrated that certain [services] are best delivered locally”. The Committee also highlighted how underfunding has led to a lack of resilience in local authorities.
Think tank Reform has proposed a radical devolution of public service provision in England. It recommends devolving 95% of NHS England’s budget, along with the devolution of employment and justice services to 38 local commissioning areas.
IPPR North has set out an agenda for devolution in England, including the development of regional authorities.
Outsourcing, procurement and public sector capacity
A string of well-publicised failures and allegations of 'cronyism' (such as in test-and-trace and other Covid-related procurement) has brought attention to the government’s procurement practices and its use of 'outsourcing' to provide public services.
In the decades prior to the pandemic, the UK had come increasingly to rely on private providers to deliver many public services. Originally motivated by a belief that putting public services out to tender would generate competition and therefore improve efficiency and value for money, the evidence in practice has been mixed, with many questioning whether the profit motive leads corners to be cut and service quality to deteriorate.
As the use of outsourcing has increased, the capacity of the public sector to deliver services ‘in house’ has declined, often leaving authorities with little option but to look to private providers. But so far from increasing competition, a very large proportion of major government contracts go to a very small number of firms which specialise in winning such contracts.
This has led to growing calls for a reassessment of procurement practices and for a return to 'insourcing' (direct service provision) by public authorities.
Analysing the circumstances where insourcing of public services can improve quality, increase reliability and save money, the Institute of Government proposes guidelines for when and how public services should be brought back into government hands.
UCL professors Mariana Mazzucato and Rainer Kattel argue that an over-reliance on outsourcing in recent decades has led to a collapse in UK public sector capacity and expertise, undermining the government's to respond to shocks such as Covid-19.
The British Medical Association has published analyses of the acceleration in NHS outsourcing during Covid-19 and the windfall gains to private providers to which this has led.
Neil McInroy and Tom Lloyd-Goodwin of CLES (the Centre for Local Economic Strategies) argue that the present approach to outsourcing has failed, and that a combination of insourcing and 'social licensing' - the requirement that non-government providers of public services must meet certain minimum standards - would improve the quality of provision.
Examining financialisation and outsourcing within the care sector, IPPR argue that the growth of debt-financed private provision can lead to lower quality of service and financial instability. They propose a financial regulator. Common Wealth has proposed an industrial strategy for the care sector.
Public sector workforce: recruitment and pay
In the decade before the pandemic, public sector pay fell behind the rising cost of living, so that on average in real terms the UK's 5.5 million public sector workers earned £900 less per year in 2020 than they did in 2010. Some workers have seen particularly sharp falls in real-terms pay, including teachers (£1349), local government residential care workers (almost £1900), firefighters (£2500) and early career nurses (over £3000).
In this context, the Government’s decision in November 2020 to freeze pay levels for most public sector workers has attracted criticism. Many argue that it undervalues the work of millions of 'key workers' who have already seen a decade of declining pay. Many economists have questioned the wisdom of cutting wages while simultaneously trying to stimulate economic recovery. Public sector pay restraint will also exacerbate inequalities, as women, members of ethnic minorities and those living in poorer regions of the UK are disproportionately likely to work in the public sector.
The wider issue is about maintaining public sector capacity and the quality of public services. Low and declining pay makes it harder to recruit and retain high quality public service workers.
The TUC's analysis of the pay and conditions of public sector key workers proposes a three reforms: raising the minimum wage, which would improve earnings for 2 million workers, giving meaningful pay rises to another 4 million workers, and banning zero-hours contracts, which particularly affect those working in health and social care, and wholesale and retail.
Prior to the pandemic, the House of Commons Library estimated that recruitment and retention challenges in health and social care in England had led to a combined shortage of over 222,000 full-time equivalent staff across the NHS and adult social care.
IPPR has proposed a post-pandemic workforce strategy for the NHS, drawing on polling of healthcare professionals and based on the principles of 'recover, reward and renew'.
The IFS calculates that teachers have experienced a 4-8% real-terms fall in salaries since 2007. This is considerably worse than for other sectors, and is likely to have serious consequences for teacher recruitment and retention.