What does the Budget mean for the public sector?

2015 Summer Budget: Is there a fairer way to eliminate the deficit so that future generations are protected?
In a number of his Budget speeches to date the Chancellor George Osborne has boasted of ‘fixing the roof while the sun shines’, although his drive to clear the Budget deficit is just storing up problems for future generations.

The Office for Budget responsibility (OBR) is forecasting public finances to return to a surplus by 2019/20 which is welcome news, but there are already cracks appearing in the long-term financial plans, as well as huge challenges for public services to cut their cloth. It is hoped that the autumn spending review doesn’t revert to salami slicing budgets to the tune of £20bn and a more considered approach is taken towards aligning strategic policies with resources.

The government has made a point of protecting NHS spending to the tune of £10bn in real terms by 2020/21, but on the flip side they had also recently announced a cut public health spending by £200m.  This means services, such as smoking cessation and drug intervention, will be under threat. The long-term effects of this policy will be to put an increased strain on the NHS in 10 or 15 years’ time. Ultimately the health effects will impact the NHS. In a decade’s time we will see a rising cost of treating those who were not able to access primary intervention services now.

Despite the assurances of deficit elimination the liabilities on the government’s balance-sheet continue to grow and show an increase in net liabilities of 14% between 2012/13 and 2013/14.  If this was a balance-sheet of a company, banks would stop lending and investors would want questions answered. We believe more attention should be paid to the balance sheet for informing government policy.

Recent research commissioned by ACCA and conducted by Durham University, ‘Government consolidated accounts: how are they used?’ highlighted a lack of financial understanding by senior politicians and officials and means there seems to be little or no recognition of the dangers clearly displayed when examining the balance-sheet of UK PLC. Until this lack of understanding is addressed it will be difficult for strategic long-term financial planning to take place.

Finance professionals in the public sector are currently stuck between a rock and a hard place. Many commentators view them as ‘back-office’ staff, when during a period of prolonged austerity they should be seen as critically important, providing accurate financial information and analysis to allow decision-makers to make long-term strategic plans. Finance professionals should be at the heart of decision making helping to drive through change. For example, the recent announcement of the postponement of vital rail upgrade plans for the North West is at odds with the repeated commitment to the Northern Powerhouse. Leaving your finance professionals in the background means there is a lack of coordination between policy and finance.

The Chancellor clearly has a grand vision for the future as set out in his Summer budget, but without properly aligning finance and policy he is making good headlines while kicking future problems into the long grass, completely at odds with his claim to be ‘fixing the roof while the sun shines’.

Gillian Fawcett – Head of Public Sector, ACCA