Centre for Public Policy

The ongoing transformation in the UK public sector’s funding environment will require a reconfiguration of the range and quality of services delivered to the public. The Spring Budget 2024 confirmed limited growth to devolved government budgets in 2024/25 and beyond, which will create fiscal challenges for government.

In what ways are central, devolved, and local governments preparing for budget constraints? How are budgetary decisions being taken to ensure that services and the most marginalised in society are protected from any adverse impact?

Impact on public services

The UK Government’s ongoing programme of fiscal constraint has led to significant challenges in both total public spending and financial resource allocation across the UK.  The Spring budget 2024 reinforced the Autumn Statement by implementing a programme of tax cuts in a bid to boost growth with no new funding available to support public services. The UK public sector must adapt to changes in funding levels, alongside managing an increased demand for services, following on from a decade of austerity, the Covid-19 pandemic, and Brexit. The squeeze on public sector funding will make it harder for services to recover to pre-pandemic performance levels. The IFS reported that public services are already showing visible signs of strain and in many cases are performing less well than they were back in 2010. At the more extreme end, several Councils in England have already issued section 114 notices, effectively declaring bankruptcy.

Tough choices in fiscal decision-making

Considering the tight public sector spending environment, tough decisions must be taken by devolved and local governments when delivering public services. Trade-offs are inevitable and often discretionary services are cut to protect the delivery of statutory core services. For example, in the first instance, Councils across the UK are considering a reduction in parts of funding for services in adult social care, children’s services, and youth services, alongside increased charges for council tax, domestic waste uplifts, and parking charges. Discretionary services tend to underpin a range of health and other initiatives specifically aimed at addressing social and economic issues for individuals and communities in a preventative manner. Withdrawing these types of services is short sighted and in the long term has the potential to create additional pressures on core public services and welfare systems.

As the most frequent users of public service provision, it is anticipated that the most marginalised in society will bear the brunt of cost cutting exercises. For example, women are expected to come off worse from a lack of investment in public services. The UK Women’s Budget Group (WBG) note that women often experience a triple-whammy effect as key users of public services, employed by the public sector, and when services are cut, women tend to increase their unpaid work to fill the gaps created. That being the case, service change can lead to increased socio-economic risks such as higher concentrations of poverty, inequality, and fewer economic opportunities.

Given that fiscal constraints are inevitable – how can the most marginalised in society be protected from any adverse impact of changes to public services?

Mitigating socio-economic risk impact

For budgetary decision makers, difficulties can exist in typifying the full range of potential risks, their exposure, and impact on society. Councils must comply with Equality Impact Assessments (EQIAs) when making decisions about changes to public sector provision. This is a tool used to assess the adverse impact of a change to services on people with protected characteristics. When allocating budgets for public services, EQIAs can be useful in supporting Councils in the analysis of socio-economic risk impact from budgetary decision-making. That said, limitations exist when considering those on the margins of poverty and who often slip through the net. Considering the extent of anticipated budgetary constraints, Councils should cast their net wider to include groups not ordinarily protected by equalities legislation. For example, those experiencing in-work poverty and low-income households.

When undertaking a previous research study, my colleagues and I recommended widening the scope of EQIAs, beyond protected characteristics, to include a distinct reference to the identification and analysis of social risk. Other comparable frameworks of analysis include gender budget analysis and human rights budgeting. These frameworks recognise that budgetary decisions can have materially different outcomes for diverse groups, advocating for an approach to budgeting that distributes resources in a way that puts people first. Utilising these frameworks proactively can help to understand how socio-economic risks are created and redistributed via budgetary cuts.

Moving forward, challenging times are ahead. The pressures Councils face cannot easily be met by reducing costs, making efficiencies, or raising council tax. The Chancellor stated in the 2024 Spring Budget, that the focus is on creating ‘a more productive state not a bigger state’ indicating the Government’s longer-term plans for the public sector more broadly. A change in UK Government at the next election is expected to lead to a change in rhetoric for the state and public services. The Shadow Chancellor, Rachel Reeves, unveiled new plans to crack down on tax avoidance with the proceeds being invested in the NHS and education. The next government’s choices will determine the size and role of the state and the long-term sustainability of the public finances. Recognition should be given to the most vulnerable in society and governments should seek, where possible, to mitigate the socio-economic impact and future proof public services in longer-term.

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^{Photo by Nick Pampoukidis on Unsplash}

First published: 25 April 2024