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.
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.
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.
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.
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.