The public health budget cuts send out a clear message that the only way to invest is to ask the Treasury for more resources, rather than more effectively managing the resources departments already command

Now I could be wrong, but this is how I imagined it came about that public health budgets have been cut by government as part of the in-year budget review announced earlier this month…

Needing to find some in-year savings demanded by the HM Treasury for a quick announcement, departments coughed up as requested.

‘To find some in-year savings departments coughed up as requested’

Transport (£545m), defence (£500m), education non-schools (£450m) and Bureau of Industry and Security (£450m) made the biggest reductions, while justice (£249m), and communities and local government (£230m) were next. The list then goes all the way down to the bottom with the Cabinet Office (£17m) and the Treasury itself (£7m), with the smallest cuts, demonstrating their own lack of fervour to discharge their central responsibilities for efficiency and public finance.

Of course, one could merge them with Number 10 to create a better and more coherent corporate centre to government that reduces cost too, but there are limits to what’s possible under fiscal austerity.

Draw on your reserves

Now this would have raised the issue of how the Department of Health could be cut so soon after an election in the run-up to which everyone promised the NHS more money.

So I’ll wager that a bright spark in the Treasury (well worth the avoidance of larger cuts then) spotted that councils are holding £200m in reserve from underspending on the ringfenced public health budgets transferred to local government.

‘Delivering the forward view will fundamentally require support from local government’

So a good solution would be to cut the grant by £200m, confident that councils could afford it by drawing on reserves.

Finding a way for savings to be passed on to local government and not the health sector will get many nods of approval. Actually of course, it is NHS providers that will be affected because about half of all public health budgets are used to commission substance misuse, school nursing and sexual health services.

But as important as the impact on NHS providers is, that’s not the real story.

The NHS Five Year Forward View is predicated on the aim that the sustainability of the NHS depends on a genuine commitment to prevention. 

Delivering this will fundamentally require support from local government, given their statutory responsibility to improve public health.  

Polar opposites

Cutting the grant, which already only accounted for less than 3 per cent of overall health spending, sends the symbolic message that there is a lack of belief or commitment to the prevention agenda.

The consequence is that as well as effectively taking the post-transfer public health budgets back to just about the real terms level they were prior to transition, the signal to the system that prevention, upstream activity and early intervention will always be cut to protect acute expenditure is the polar opposite of the new narrative of integration and prevention.

My final concern beyond the obvious impact on outcomes is about good financial management and the, at times, unhelpful role of the Treasury, which really should develop an approach beyond its focus on in-year cash.

The prevailing culture is not acceptable, namely that this sort of short term fixing is regrettable, but realistically this is the way a politics driven system has to work.

Making unexpected in-year savings with unplanned service impacts is simply a sign, in my opinion, of an immature system of public financial management.

‘By mopping up underspending the Treasury promotes the notion that you “lose” your unspent budget’

Seeing reserves as a target for raiding is the sign of highly centralised control that disempowers the development of effective budget holder accountabilities. For example, when taking over the worst run pubic services - whether councils, police forces or health bodies - one of the first acts of a new leadership team is to give the clear message that managers should stop asking for resources to do new things. Instead, they should make better use of existing resources, underspend and reallocate budget to new measures.

By constantly mopping up underspending the Treasury gives the public sector, and in this case the health system, a clear message that the only way to invest is to ask the Treasury for more resources, rather than more effectively managing the resources they already command. 

It promotes the old and outdated notion that you “lose” your unspent budget and this encourages wasteful, rushed year-end spending. Surely these aren’t the levers and incentives we want in our public financial management system?

So when Treasury offers up a merger with the Cabinet Office and Number 10 to reduce costs and changes its system of micro-managing in-year cash with the encouragement of local reserves that underpin medium term planning, we will know that it’s really serious about better financial management and culture change with the management of public finances.

Rob Whiteman is chief executive of the Chartered Institute of Public Finance and Accountancy

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