Budget 2017 - What has the Chancellor done for public services?

Nick C Jones blogs on the Autumn Budget 2017 and considers what it means for the public sector.

This Budget provided an opportunity for the government to deliver a boost to the economy and living standards while setting the UK’s future course as we get ready to leave the EU.

Indeed, the Chancellor set aside an additional £3 billion to prepare for Brexit, a much needed boost to the capacity and capability to deliver a successful exit from the EU. Beyond Brexit, the need to boost productivity, while addressing intergenerational fairness, were the underlying issues for the Chancellor to address. Living standards will only resume an upward path if the UK invests in the skills, infrastructure (transport and housing) and innovation that are vital to deliver good, place-based inclusive growth.

So what did the Chancellor’s Autumn Budget mean for those under strain in the public sector? Public spending restraints will remain in place given that the public sector deficit is still around 2.5% of GDP and the debt to GDP ratio well above 80% (although with both forecast to continue to decline over the next five years), with no let-up in public sector austerity for most for some time as demand increases.

The need for transformation therefore remains as important as at any time in the last decade. While some services like health received a funding boost, savings are being sought elsewhere in lower priority areas in order to stay within public spending limits. The Barber Review published earlier this week also set out a new framework to unlock greater public value and increase productivity.

Part of this challenge involves the use of new technology. This includes how government will fund and prioritise digital advancement (such as robotics, automation and Artificial Intelligence, AI) and boost digital skills. It was therefore welcome to see the pre-Budget launch of a GovTech Catalyst team, and Fund of £20m, to help tech firms deliver ‘innovative fixes’ to public sector challenges.

With the creation of new Gov.Tech funds, the starting gun has been fired for tech entrepreneurs and funders for a more widespread piloting and adoption of new technologies like AI which have the power to transform public services and boost public sector productivity. This was supplemented by Budget funding for maths and computing in schools as well as a national retraining scheme for digital skills.

A key part of the response to intergenerational inequality was dealing with the housing gap – now a ‘national infrastructure priority’ and the most important non-Brexit issue. While there was 'no single magic bullet', the key measures were underpinned by a total of £44 billion of capital funding, loans and guarantees over the next five years. There was important and much needed help for first time buyers, through abolition of stamp duty for first time buyers for homes under £300,000, but there is still a real need for more suitable homes for the elderly as well as incentives for them to downsize.

Longer term, lifting productivity growth will be the focus of the forthcoming Industrial Strategy. This is likely to emphasise skills, infrastructure and R&D, with an additional £8 billion pledged for the National Productivity Investment Fund. If there is to be a real productivity improvement, however, the gap between London and other regions needs to be further closed. This means industrial strategy needs to be localised spanning skills, infrastructure, business support and supported by further fiscal devolution.

Overall, this Budget offered little respite to a hard pressed public sector with the need for a laser focus on doing better for less an enduring feature of the landscape. This means some clear priorities for public sector organisations.

Firstly, with a spotlight on strategically and sustainably managing costs, there is a need for real focus on strategy through to execution. Opportunities remain to share services, assets and costs across organisations and co-commission outcomes through pooling funds to deliver more value from the use of public funds.

Secondly, against the background of uncertainty and ambiguity, the need to join up policy and delivery has rarely been greater. Consider the example of border control with multiple agencies involved. This, in turn, needs leadership and direction from within and across public bodies.

Thirdly, as funding public services and addressing intergenerational fairness depends so much on the strength of the economy to deliver tax revenues, the importance of cross-government programmes to deliver on the forthcoming Industrial Strategy nationally, regionally and locally cannot be under-estimated.

The public sector will need agility and resilience to be ready for a post-Brexit future: now is the time for public leaders to step up and deliver a compelling, ‘Brexit fit’ vision to guide their organisations into the next decade.


Nick C Jones | Director, Public Sector Research
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