In his conference speech, Keir Starmer said that a Labour government would be “fixed on a single-minded purpose to govern for the long term”. This was a week after “long-term decisions for a brighter future” was the slogan on Rishi Sunak’s conference lectern. In political circles, there is increasing acknowledgement that the UK’s culture of short-term, reactive policymaking is a problem.
The failure to think and act long-term is nothing new. It has been all too visible in the approach to public-sector investment, which has been too low and all too often plagued by delays and cost overruns, with HS2 a textbook example. This is not an esoteric problem or interesting quirk – it really matters. There is a growing consensus that if the UK is to break out of 15 years of sclerotic economic growth, it needs to rebalance public spending by investing more for the long term. It takes time to deliver growth and make tangible improvements to people’s lives. Staying the course is politically hard.
While the UK desperately needs improved infrastructure, better digital connectivity, and schools and hospitals that are built to last, it’s important that any renewed push to increase investment isn’t too narrowly focused. Bricks and mortar matter, but in the 21st century our well-being and economic success depend on more than that – human and social capital are critical.
“Prevention is better than cure” has been an axiom of public policy for decades. In 2018 it was the title of the government’s white paper on health. It’s hard to find anyone in politics who disagrees with it. While the Labour leader once again reiterated the need to shift the NHS away from being a sickness service to one that prevents illness and keeps people healthy, Sunak emphasised the need for better preventative care to keep people out of hospital. In practice, however, there is a widening gulf between political rhetoric and government spending decisions.
The Institute for Fiscal Studies has calculated that tax revenues as a proportion of national income are higher than at any time since the 1940s. Yet public services can’t cope with current pressures, let alone growing demand from an ageing population. More of the same is looking increasingly unsustainable. The UK needs a structural change in the way it spends money to translate rhetoric into reality and become what the cross-party think tank Demos calls a “preventative state”.
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Shifting the profile of public spending will be hard – but there is real, urgent need. The combination of a decade of austerity and the pandemic has left deep holes in the fabric of the welfare state, with waiting lists for hospital treatment having reached more than 7.7 million, growing unmet need for social care, local government services pared back to the statutory minimum, and voluntary and community groups struggling to plug the gaps.
Political leaders should pay heed to a second key axiom of public policy: “what’s measured matters”. There is currently no robust, consistent measure of prevention spending across government. This has to change. At the turn of the century, recognising that not all spending should be treated in the same way, the New Labour government reformed public spending rules to separate out capital investment from day-to-day running costs. In Treasury jargon, these two categories of spending are known as capital and resource departmental expenditure limits (CDEL and RDEL).
Twenty-five years later, a new category of spending is needed to measure spending on prevention and create a transparent process of budgeting and accounting across the public sector. It could be known as preventative departmental spending limits, or PDEL. This would allow parliament and the public to hold the government to account for spending on prevention, to see if its rhetoric is matched by reality.
But while a consistent and transparent measure of prevention is necessary, it is not sufficient. The UK almost certainly under-invests in prevention. If we take health, spending per person on the public health grant – which is paid to councils to spend on local services to improve health – has fallen by a fifth in real terms over the past ten years. At the same time, funding for treatment services increased by a fifth.
Government should therefore differentiate prevention spending from the day-to-day costs of running services and treat it as investment. When the separate category for capital was first created, the government operated a “golden rule”, borrowing to invest but not for day-to-day spending. In future any such fiscal rules should consider prevention spending as equivalent to capital.
Allocating investment to prevention doesn’t guarantee that it will be spent well. As HS2 has shown, how efficiently money is spent is just as important as how much is spent. Prevention spending should be targeted at programmes that are effective, with a strong focus on evaluation and accountability for impact. There is also a case for more innovative funding models to channel funding to social enterprises, charities and civil society organisations.
The policy case for a stronger focus on prevention is clear. But without measuring it and reforming public spending decision-making to incentivise and support it, the risk is that the gulf between political good intentions and change on the ground will remain as wide as ever.
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