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Public services performance lags pre-pandemic levels

Author: ICAEW Insights

Published: 26 Oct 2022

Scope and quality of public services has deteriorated over the past two years with hospitals, criminal courts and prisons the worst affected, CIPFA/IfG analysis shows.

Public service performance has not yet returned to pre-pandemic levels, despite significant boosts in spending, according to the latest Performance Tracker assessment by CIPFA and think tank the Institute for Government (IfG).

The review of nine public services – general practice, hospitals, adult social care, children‘s social care, neighbourhood services, schools, police, criminal courts and prisons – shows that inflation and higher than anticipated pay awards have meant that the projected 3.4% per year average budget increases set out in the 2021 spending review have fallen to 1.5%.

As a result, funding for most services is unlikely to be enough to meet growing demands and deal with the aftermath of COVID-19, the CIPFA/IfG analysis warns. Without sustained investment to address these ongoing costs, or measures to reduce demand, public service providers will face a choice between letting quality standards slip or reducing the scope of service they provide, the review says.

It warns that spending increases in schools are not enough to recover the pandemic-induced lost learning, hospital spending is not enough to catch up with COVID-19 backlogs, new demand in prisons and courts is set to exceed even generous spending settlements and the spending settlement for local government is no longer sufficient to meet demand in adult social care, children‘s social care and neighbourhood services.

A record 6.8 million people are waiting for elective treatment as of July 2022 and the report highlights a backlog across the crown courts of 59,700 cases yet to be concluded in June 2022, slightly below the peak of over 60,000 in June 2021 but higher than at any point since at least 2000.

Against a backdrop of the biggest squeeze in living standards in a generation – with double digit inflation alongside soaring energy prices – Jeff Matsu, CIPFA Chief Economist, said the report’s findings served as a good reminder of the need for strong public sector financial management to weather the storms of uncertainty ahead. 

“Despite spending having increased massively during the pandemic, performance has declined significantly. While the 2021 Spending Review settlement was relatively generous, with budgets predicted to increase by 3.5%, this has fallen to 1.5% as a result of inflation and higher pay awards. The settlement is unlikely to be sufficient to meet growing demand,” Matsu said. 

“Hospitals, criminal courts and prisons are worst affected with all three services unable to carry on as business as usual during the pandemic, resulting in increased demand, backlogs and waiting times,” he added. However, staff shortages are the main constraint on government plans to reduce backlogs and address unmet needs. 

The report finds that the biggest cost pressures for public services are staff costs. Across the nine public services mentioned, the total cost of pay awards in 2022/23 will be £3.4bn more than the 2-3% increase anticipated by the Spending Review. 

Nonetheless, public services are struggling to recruit and retain the staff needed to deliver their services, leading to a greater use of higher-cost agency workers, and long-term staff shortages are set to worsen due to below-inflation pay rises and the cost-of-living crisis. The NHS wage bill alone will increase by approximately £2bn in 2022/23, unfunded money that the NHS will have to find in its existing settlement – meaning cuts elsewhere in the service. 

The report warns that it will need to take immediate steps to ensure there are enough staff to enable services to cope with even higher demand this winter. It urges the government to allocate money where it will have the greatest impact on public service performance, building on the processes used in the 2021 Spending Review to align spending with priority outcomes. 

However, it also warns that efforts are needed to improve the range and quality of data collected by public services in order to better understand and improve their service delivery. CIPFA and IfG are calling on the government to publish updated plans for how each service will tackle backlogs and needs not yet fulfilled.

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