Look no further than the Treasury for a successful Budget

22 November 2017

Who’d be a chancellor? Today, Philip Hammond is expected to deliver a budget that is both radical and sensible, financially cautious and expansive, sets the finances for Brexit and delivers domestic change – and those are just the reported views of the Cabinet. With such pressure, it is little wonder that, as the Financial Times notes: “From Churchill to Callaghan, previous chancellors have often missed the mark”.

If Hammond is to hit the mark, he should hold tight on public finances, while incentivising innovation from public services within these budgets. Doing so would benefit citizens and taxpayers regardless of the economic backdrop.

This approach would go against big voices. Simon Stevens has called for extra NHS spending. Sajid Javid wants £50 billion for housebuilding. Former ministers, including Nicky Morgan, Oliver Letwin and Nick Boles are all pushing for cash injections into public services.

For one, the Chancellor does not have this money. The Office for Budget Responsibility will today downgrade productivity estimates, wiping out as much as two-thirds of the Chancellor’s £26 billion ‘war chest’ to spend should the economy stutter during Brexit negotiations.

But extra spending would not be helpful. In this year’s Reform and Deloitte State of the State survey, public leaders pressed the point that budget constraints have driven organisational change and that “a return to greater public spending would kill the momentum for innovation.”

Nor is the public as “weary” of fiscal restraint as the Chancellor believes. A YouGov poll from last year concluded that “few now say cuts are having an impact on their lives”. Satisfaction in the NHS and police are consistently higher than under the big-spending noughties.

Instead, the Treasury should drive innovation in public services. This attitude is starting to take shape in Hammond’s department. Last week, Sir Michael Barber published a Public Value Framework, which attempts to identify the outcomes of public spend. As Sir Michael notes, “the Treasury has historically placed greater emphasis on inputs rather than outcomes. Of course, it is necessary and right that the Treasury should count the pennies – someone has to – but that should surely not be its only focus, even in hard times.”

Instead, Barber wants the Treasury to allocate spend based on the outcomes of services, including paying attention to citizen engagement. This requires better data, but a shift in emphasis towards continuous improvement based on this understanding of the effects of inputs. The Chancellor should lend his support to this approach today and, as Sir Michael recommends, pilot this framework for allocating spend between Whitehall departments.

This turns today’s debate into a profoundly more optimistic one. One in which service leaders are, as they want to be, freed to change to achieve better outcomes for citizens. Examples of this best practice are for all to see. This week, the simple idea of bringing cancer scans to people at supermarkets and high streets in Manchester found that four times as many tumours were spotted early enough to be given a chance of being cured.

It is now over to the Chancellor to make this innovation the norm. As Torsten Bell argued in The Guardian this week, “the whole point of assuming the privilege, and more importantly the responsibility, of being chancellor isn’t to bemoan the state of the world – but to change it.” For those wanting to seize the opportunities of public-service reform, who wouldn’t want to be chancellor?

Alexander Hitchcock, Senior Researcher, Reform



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