The spending review is a huge opportunity for George Osborne to put local areas in control of health budgets and sickness benefits, says a former Treasury adviser

George Osborne will stand in the House of Commons on 8 July to deliver his first budget as a chancellor of a Conservative majority government.

There will inevitably be a crowd-pleasing rabbit that has become the hallmark of Osborne budgets, but crucially he will also set the spending envelope for the next four years that will form the basis of the spending round.

At its heart the spending round is about making the numbers add up. Departmental budgets have to be set, and in that sense the spending round is a means to an end.

Opportunity for reform

But just as the budget is more than decisions about duty on cigarettes and alcohol, so a spending round takes on a higher importance. Why? Because it serves as a giant pause button on Whitehall. It is one of the few opportunities when radical reform will be welcomed; provided it saves money.

‘Narrative at a spending round can mean one of two things’

“Narrative” is one of the more overused words in the modern political lexicon, but at a spending round it can mean one of two things. Either it is a retrospective “message” used to hang together a number of unconnected cuts to give the semblance of coherent decision making, or it is an actual vision for public policy.

Before the last spending round, the Treasury – with the support of the think tank Reform – put on a number of seminars on key areas, inviting specialist to come and tell us where they thought we were going wrong and how we could do better.

These were hugely helpful in focusing the debate on key policy areas. The one frustration, however, was while the problems were always summarised with lucid examples, too often the answers fell back to stilted buzzwords.

Efficiency savings

Health and social care was an exception. Out of that seminar came the better care fund. An idea that Danny Alexander had sketched out, but one that gathered traction the more people centred upon the importance of ensuring that decisions about how money is spent in the NHS cannot be made in isolation of the impact on social care, and vice versa.

‘The Better Care Fund had a genuine reforming narrative behind it’

The better care fund has had some issues, but I truly believe that it was one of the elements of the last spending round that had a genuine reforming narrative behind it.

So what is in store for health? The Conservatives have said they will provide the NHS with the Stevens’ £8bn. Even though they haven’t even so much as hinted as to how they will pay for it, let’s take them at their word and presume that spending round 15 delivers on that commitment.

The big challenge for the NHS at this spending round will then be finding the £22bn efficiency savings needed to make the £8bn viable.

Salami slicing policy

Around this time, minister’s regularly attack the public policy “salami slicer” as the arch enemy of reformers. But make no mistake, no spending round is ever conducted without that particular butcher’s instrument; for further details see the recent and depressingly short-sighted £200m cut from public health.

There is, however, a real opportunity at this spending review to find savings through reform befitting of the label “narrative”.

The devolution of £6bn of NHS funding to Greater Manchester was a move of genuine, radical reform. As a liberal, I believe wholeheartedly that decisions are made best when they are made locally. And from a Treasury point of view, better decision making means better value for money.

‘Manchester is the Whitehall golden child, an outlier of devolution’

Manchester is the Whitehall golden child, an outlier of devolution, but it mustn’t end with Manchester. My hope – and expectation – for the 2015 spending round is that areas will be invited to come forward to replicate the Manchester health deal.

And if they have a credible plan, they should be given the same freedoms afforded to Manchester. It is the natural next step from the better care fund and one that has the potential to move us further towards the silver bullet of greater integrated care.

I’d urge the Conservatives to go even further and explore devolution of the sickness benefit, employment and support allowance. For me, it would be illogical to give local areas more control of health spending – a huge Whitehall “lever” – but for Whitehall to micromanage policy decisions about those too sick to work.

Win-win approach

In true Paddy Ashdown style, I will “eat my hat” if the Conservatives don’t change either the rates or the eligibility threshold for ESA. It is one of the few benefits they haven’t ruled out making changes to as part of their commitment to find £12bn of welfare savings.

No doubt a narrative will be hung over it to justify whatever changes are made, but real change would be more fundamental.

The spending round is a huge opportunity to put local areas in control

Manchester’s Working Well programme has shown the benefit of an integrated approach by giving people with health problems evidence based treatments to help them back into work. Given the amount of people on ESA with mental health problems, we simply can’t go on treating all sickness benefit claimants as an issue for just JobCentre Plus.

Silo thinking

It’s why Nick Clegg, Danny Alexander, and Liberal Democrat health ministers Norman Lamb and Paul Burstow pushed for greater investment in Improving access to psychological therapies services, more trained staff in JCPs, and worked to break down the silo thinking.

The spending round is a huge opportunity to put local areas in control of health budgets and sickness benefits, and to devolve power away from Whitehall and into the hands of local communities.

I firmly believe that it would be a radical approach that the taxpayer, and more importantly patients would benefit from.  

John Foster was a special adviser to the former deputy prime minister and former chief secretary to the Treasury during the 2013 spending round.

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