To 2016 and beyond: plan now, save later

We may or may not get an emergency budget post-election. But whoever forms the government in May 2015 will need to come not only ready to launch a new spending review – but to do it very differently from the 2010 CSR and this week’s one year addendum. The cumulative cuts non-protected departments have seen will have reached very significant levels by May 2015. Many departments will have seen their administration and programme budgets cut by almost half in real terms. The scope for squeezing more out through another round of bilateral negotiations will be limited. So, as we have argued before, time has come to think differently about the way in which we do spending rounds. The election is likely to be characterised by both sides ducking big issues (as they did in 2010) – but also by political point scoring. The election debates boxed David Cameron in on pensioner welfare – and is why even now George Osborne can only take aim at the softest of soft targets – fuel allowance for pensioners in warm countries. Ed Balls’ speech has started to open up an area that had been deemed off limits. There are other untouchable areas that will need to be opened up back for scrutiny – including the budgets that now are benefitting from announced (health, aid, schools) or implied (defence, science) ringfences – but it is probably too much to hope for that sort of debate pre-election, much as it would help those forced to make decisions afterwards. More likely we will see two years of trying to lure one party or the other to fall between overtly political dividing lines. But the inability or unwillingness to go into detail should not deter essential big thinking by political leaders before the next election. First, as we have argued before a potential new government needs to think about how far it is willing to push localism. The answer so far is a medium-sized growth fund, but a further real terms squeeze in council tax and a blurring of the health/social care borderline. A future government needs to start thinking about whether England should see more devolution down to local government of some of the big resource budgets. The organisation of spending programmes comes back on the map. Compared to other governments of comparable size, the UK has a lot of government departments (24 ministerial and 20 non-ministerial listed on .gov.uk), reflecting that we do so much at the centre. Now many have been halved in size, should a new government be plotting a radical restructure, both of departments, but also the budgets they manage? And whether or not there is a radical restructuring, we need to make sure that we are extracting the efficiencies that fall between the gaps in programmes. Government should look again at its relationship with its arm’s-length bodies. One interesting statement in this spending announcement was the freeing of museums and galleries from some central controls which they found particularly constraining. A settlement of less money, more freedoms and (much) clearer and better performance management may make sense for those bodies with a long-term future – and a sensible strategic approach to the abolition of those it deems have outlived their usefulness. The danger for all concerned is in the timetable. A newly elected government will receive a Day One Treasury brief arguing that the spending round needs to be completed by the autumn – and that that means falling back on the tried and tested formula of bilateral salami slicing. All parties who aspire to form the next government need to be thinking now about how they are going to create alternative, more productive ways of running the next spending round – and how they are going to create the time and space to do it.