In my inaugural professorial lecture at Nottingham Business School in 2009 I discussed the situation of UK public finances and the future of public services. (www.ntu.ac.uk/document_upload/92234.pdf)One point I made was that the current situation was such that it should not be seen as a blip in the long term trend of increased expenditure on public services. Instead I suggested that it might be seen as a watershed in our social and economic history and something which should require a radical reconsideration about the way public services are organised and financed.
Since 2010, the present government has embarked on a “so-called” policy of austerity designed to eliminate the public sector deficit, reduce annual borrowing and stop the continually increasing mountain of public debt now around £1trillion. Originally the government aimed to eliminate the deficit and associated borrowing by the end of this parliament but this has not proved possible and, at the current time, it is unclear when the deficit might be eliminated. Thus the government is still borrowing billions of pounds each month which will have to be repaid ultimately by our children and grandchildren.
Until recently, at least the government could claim that its borrowing was being reduced even if not as quickly as would be desired. However, this week there came a sharp jolt. Government figures showed that government borrowing for September 2014 was £11.8 billion which was £1.6billion than for September 2013. This was much higher than expected and caused by a failure of limited economic growth to deliver higher tax receipts.
One particular point I mentioned, in my inaugural lecture, was that the constraints on future public spending were such that if the government wished to try and change people’s behaviours in some positive manner they would probably need to think more about sanctions for bad behaviour and less about financial incentives (which cost money) to encourage good behaviour. An example here might be actions to try and encourage people to adopt healthier lifestyles and subsequently reduce the burden on the NHS – this could be approached by using sanctions or incentives.
Imagine my surprise, therefore, to read that in the same week as the bad news about government borrowing was announced, the government has come up with two new and expensive schemes designed to try and change individual behaviour by the use of financial incentives. These were
· Dementia – proposals were announced to pay general practitioners £55 for every dementia patient they identify. Leave aside the ethics and practicality of all this, it seem surprising that in these financially constrained times we are using public money to pay GPs to do what I thought they were already supposed to do under their existing contract
· Obesity vouchers – suggestions, from government sources, have been made that the NHS might use its limited resources to offer financial incentives in the form of shopping vouchers to individual citizens in return for them losing weight.
These items come on top of a party political conference season where the main political parties competed with each other to see who could promise to spend the largest amount of public money (which we haven’t got and must borrow) on the NHS.
It seems to me that the radical reconsideration of public services, which I referred to earlier, just hasn’t happened and the “chickens will shortly be coming home to roost”. Expect more large scale cuts in public spending after the general election irrespective of whoever wins. Also, the problems of the Eurozone and the World economy mean that another major economic crisis can’t be ruled out.