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"Short-Term" Spending Leaves Next Government Facing "Critical" Challenges

Chair of the Public Accounts Committee Dame Meg Hillier said government must get better at "slow politics". (Alamy)

5 min read

A new report from the influential Public Accounts Committee of cross-party MPs has criticised the government for "short-termism" in policy making – highlighting a number areas in public spending the next government will have to grapple with.

Chair of the committee, Labour MP Dame Meg Hillier, in the foreword to the report said a future government must become better at "slow politics" to ensure the long term investment in public services the UK needs. 

"We must recognise that some of the major challenges facing Britain require long-term investment and planning," she wrote.

"These challenges should never become merely matters of political controversy, but instead should be dealt with over decades, and always in the national interest."

A general election must be called before the end of this year, with Labour widely expected to win. But the current opposition party, which is making a pitch for change to dissatisfied voters, has faced warnings that a succession of national crises including Covid, the Ukraine war and a revolving cast of prime ministers may leave them with a bigger challenge than they had hoped. 

Areas of specific concern flagged by the committee report – dubbed "The Big Nasties" – include health, education, defence, justice, energy, and housing. 

On the NHS, the report found the Department for Health and Social Care (DHSC) "for many years" had "prioritised short-term spending needs", and that combined with a "lack of long-term thinking" and an ageing population, this would have serious consequences for the NHS. 

"By 2021–22, the value of the maintenance backlog for NHS hospitals had reached £10.2bn," reads the report. 

"The New Hospital Programme was supposed to address this issue by delivering forty new hospitals by 2030. Now, there appears to be insufficient funding to build all of the planned hospitals, and the new hospital design will be too small for projected future demand."

The report also highlights the spiralling costs of some NHS initiatives, including the UK Health Security Agency health security campus, which was estimated to cost in total £530m in 2015, but in 2023 was estimated to cost £3.2bn.  

In the area of education, the committee points out that over 700,000 pupils are learning in schools that need major rebuilding and refurbishment, with 38 per cent of school buildings now "beyond their initial design life", highlighting maintenance concerns around issues like RAAC in schools. 

It also says that despite the Department for Education (DfE) recommending £5.3bn annual capital funding in its 2020 spending review, the Treasury has only allocated £3.1bn, leaving a more than £2bn shortfall. 

"Government needs to invest to save—spend on rebuilding schools before they are unsafe and very costly to refurbish," said the report. 

"However, HM Treasury allocated only £1.3bn per year for rebuilding schools (compared with the £4bn per year requested by DfE), and DfE is behind its own schedule for awarding contracts for its School Rebuilding Programme.

"DfE must mitigate concerns about safety and value for money, and produce clear plans to address these challenges."

In the area of defence, the committee criticises "decisions made on short-term affordability grounds which have increased costs", noting the Ministry of Defence (MoD) has not decommissioned any nuclear submarines since World War Two despite removing 20 from service since 1980.

It also points out there is a £16.9bn "minimum gap" between the cost of delivering the government's 2023-2033 Defence Equipment Plan and the money available to do it. 

Other deficits in defence spending includes the UK's nuclear deterrent, with the report highlighting a £7.9bn deficit between the expected cost and the current indicative budget. The committee warned that "without an effective nuclear deterrent the UK's national security would be compromised". 

"The MoD must now overcome funding gaps, fill critical skill gaps and ensure its supply chain is maintained effectively – all at a time of significant uncertainty in international politics and trade," the report continued.

On justice, the committee said £1.3bn was the estimated total cost of court reform programme in 2021, which did not include all work required, with £1.1bn already spent by HM's Courts and Tribunal Service (HMCTS) by December 2022 after completing just 24 of 44 reform projects. The committee also said despite promises to create 10,000 new-for-old prison places by 2020, just 206 new places had been delivered by January 2020 leading to "unsafe, crowded conditions" for prisoners. 

On housing, the committee said £20.7bn was the forecast total spend on the Affordable Homes Programme in 2021–22 prices, warning there "are severe shortages of genuinely affordable housing in the places where they are needed". They called on the government to "invest now to build future-proof affordable housing which will not need to be retrofitted at taxpayers’ expense in the future". 

On energy, the committee said "too often government's plans for supporting the progression of net zero technologies are short-term, putting at risk the large amounts of private investment". 

The report noted the government's plan to invest £4.2bn in its delivery plan for net zero research and innovation between 2022 to 2025 - however, it states £46-69bn is the expected annual low-carbon investment needed until the 2030s to achieve net zero. 

The committee also say it is "highly unlikely" the government will be able to decarbonise the power sector by 2035 as currently pledged, with £280-400bn  of public and private investment in new generating capacity needed by 2037. 

"With only 12 years left to hit its ambition, DESNZ [department for energy security and net zero] has a lot to do if it is to achieve its ambition and do so at best value for money to bill payers and taxpayers, all while ensuring security of supply so that the lights stay on," said the report. 

Responding to the report, a Treasury spokesperson said: “The government is protecting the record 2020 increase in capital spending, delivering over £600 billion of planned public sector investment over the next 5 years.

"This builds on the record £30 billion real terms increase in capital budgets over this Parliament.

"Any transfers between capital and day to day spending are not from delaying critical capital works but from underspends in certain areas.

"These underspends can be used to manage wider priorities.”

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