Today, the Chancellor announced the results of the 2015 Spending Review, which sets out the Government’s spending plans for each year of this Parliament.
The first thing to say is that the Spending Review reflects a huge amount of work by civil servants up and down the country. Public sector workers put forward more than 22,000 ideas on how to reduce waste, exploit technology to improve services, and work more collaboratively. Many of these will be implemented.
We would like to thank everyone involved, and above all the finance teams in departments, agencies and arm’s-length bodies for bringing it all together. This was the new finance profession in action.
The Spending Review prioritises, among other things, national security, the National Health Service, schools and pensions. And it emphasises important cross-cutting themes, such as infrastructure, devolution and public service reform and efficiency. The independent Office for Budget Responsibility forecasts tax receipts to be higher and debt interest to be lower than in the Summer Budget. This has enabled the Government to reduce overall departmental spending more smoothly, as well as to channel extra resources to other priority areas, such as counter-terrorism and frontline policing.
The fiscal consolidation begun six years ago has involved a lot of difficult decisions. And even with all the action taken so far, last year the national debt reached its highest level in relation to national income since the late 1960s. But we are making progress, and the Government remains on target to return to budget surplus in 2019-20.
One of the great successes of the last Parliament was the ability of the Civil Service to deliver more with less – better, more responsive services, at lower cost. And efficiency and modernisation lie at the heart of the plans for the next four years, whether through exploiting digital technology to move services online, improving and consolidating office space, or selling surplus land.
Reforms and innovations
Many departments have developed important reforms and innovations to help achieve the savings required in the Spending Review. For example:
- BIS plans to fund the growing number of apprenticeships through a new levy on the largest employers, which will raise £3 billion for HMG by the end of the Parliament and encourage more companies to offer higher quality placements
- MoJ has a bold programme of investment and transformation, to bring about a speedier, digital, justice system and a modernised prison estate more able to focus on rehabilitation and education
- HMRC will become one of the most digitally advanced tax administrations in the world, with its digital tax accounts allowing individuals and small businesses to see all their tax affairs in one place
- The Strategic Defence and Security Review published on Monday announced 7 new joint units, part of a concerted effort to break down departmental silos and promote more efficient joint working
- DWP will complete the reforms started in 2010 – Universal Credit, Personal Independence Payment, Child Maintenance and the new State Pension – and transform the way it delivers public services through better use of technology
In the last Parliament, the number of civil servants fell by about 20%. While today’s Spending Review inevitably means that the service will continue to get smaller, our best assessment is that it will do so more slowly.
In weighing up priorities for delivering excellent public services and getting the best value for taxpayers’ money, each department will determine the necessary size and shape of its workforce. But it’s worth saying again that there is no planned target for reductions in the numbers of civil servants. Where headcount reductions are necessary we will manage them as far as possible through natural wastage and voluntary redundancies. In some areas, staffing levels will actually rise.
Modernised terms and conditions
The Spending Review confirms the approach to public sector pay announced in the Summer Budget: an average of 1% annual pay award for the four years from 2016-17. While we are only too aware that pay restraint impacts on the living standards of civil servants, the independent Office for Budget Responsibility (OBR) estimates that it has protected approximately 200,000 jobs. Inflation remains at very low levels and is not projected to return to the 2% target until 2019.
The Government has also announced its intention to modernise further the terms and conditions of public sector workers, including civil servants, to bring them more into line with those in the private sector. So, it will consult on further action on exit-payment terms across the public sector, to reduce the costs of redundancy pay-outs and ensure greater consistency between workforces. A review of sickness absence in public sector workforces has also been announced in advance of a consultation on how to reduce its impact on public service delivery. In the Civil Service we have done well, reducing sickness absence by 15% since 2010. But there is always more that we can do to improve, and to help colleagues with health problems to get better and return to work more quickly.
The Civil Service’s biggest asset remains its people, and we are committed to maintaining the Civil Service as a highly efficient, capable, dynamic and diverse organisation, able to meet changing demands and priorities. Continuing to build our capability is crucial to successful reform and the future delivery of public services in a tough economic and spending environment.
Over the coming months the Civil Service Board will be developing a clearer blueprint for the Civil Service in 2020, building on the tremendous progress already made in recent years. By 2020 the Civil Service will be a leaner, more efficient organisation and more focused on implementation - but also an institution in which our traditional values of honesty, integrity, objectivity and impartiality are still at the heart of all we do.
As Minister for the Cabinet Office Matthew Hancock says:
“We are working hard to build a One Nation Civil Service that is thoroughly representative of modern Britain, one that backs innovation and delivers world-beating public services.”
The Civil Service is a precious national asset. Our work over the last few months has demonstrated that once again. Now, let's get on and make the country proud.
[This blog post has generated considerable interest and comment. Jeremy Heywood and John Manzoni have written again to address some of the issues you have raised. You can read their response here.]