UK: Could Preventative Spending Help Cure The Impact Of Public Sector Spending Cuts?

Last Updated: 11 March 2011
Article by Carron Rand

A look at the Finance Committee's Report on their inquiry into preventative spending

In its first Report of 2011, the Finance Committee of the Scottish Parliament considered the advantages that preventative public spending might offer. The Committee undertook to consider how public spending can be best focussed over the longer term on trying to prevent, rather than simply deal with, negative social outcomes. Meanwhile, Graham Allen, MP, has also carried out similar research south of the Border. His studies concentrated on one particular area of preventative spending, and have been recently presented in the UK government-commissioned report, "Early Intervention: The Next Steps".

The idea that "prevention is better than a cure" is certainly not a new one. However, the unanimous support expressed within these Reports suggests that if this old idea can be put into practice in the context of public sector spending, it might just provide the innovation and change required to protect services across Scotland's communities.

A challenging environment

The Finance Committee's inquiry stemmed from their earlier Report, published last year (June 2010), which examined how the public sector was preparing for a period of "tightening public expenditure". Just one month later, the Independent Budget Review Panel (IBRP) reported on what they considered to be the most challenging public spending environment since the Second World War. More recently, news headlines have been dominated by details of the budgetary cuts faced by local authorities and public bodies across the UK.

However, in addition to the current series of cuts, there are other factors contributing to the challenging environment public bodies are operating within. Witnesses to the inquiry identified a number of contributory factors. COSLA outlined the findings of a sophisticated financial model developed to map out expected expenditure over the next six year period, incorporating demographic change and other changes in service demand. Highlighting the growth in demand, the model shows that, even if there was no anticipated decrease in future resources, it would still be very difficult to continue with the current level of service investment due to the increased growth in demand. Furthermore, there will be no increase in resources going forward, marking a significant change for the Scottish Parliament which had become accustomed to an annually growing budget over the past 10 years. The IBRP's Report cited figures from the Scottish Government that suggests it could be as long as 15 years before the budget will return in real terms to 2009 – 2010 levels.

The public sector is not only challenged by the financial factors restricting funds available to it, but also by the enormous scale of issues it requires to address. A particularly difficult set of such issues are those referred to within the Report as "negative social outcomes". To outline the nature of the severe and deeply entrenched problems in Scotland, the Report includes various examples, including: one quarter of inmates in Scotland's prisons have been in care; Scotland performed badly in terms of drunkenness, obesity, teenage pregnancy and violent crime compared to other countries; and, a joint report by Action for Children and the New Economics Foundation claimed that the economic cost of addressing problems such as crime, mental ill health, family breakdown, drug abuse and obesity would be almost £4 trillion over a 20 year period.

With statutory duties to comply with, negative social outcomes to tackle and spending cuts to manage, there is little wonder that the public sector is searching for a new way to provide Scotland with services. Several witnesses to the inquiry spoke of the need for a radically new approach to public spending and, indeed, a striking feature of the inquiry was that all witnesses supported the concept of preventative spending as, perhaps, the primary way to improve negative social outcomes evident across Scotland.

Is prevention better than a cure?

The Committee did not define the term "preventative spending" in their call for evidence. From the wide ranging policy areas referred to in written evidence – including the early years, climate change and health and social care, and more specific areas such as mediation, fire prevention and smoking – the Committee only heard oral evidence on those areas that had arisen most frequently. Accordingly, the main issues for consideration by the Committee were the early years, health and social care.

In its Report, the Committee explained that "[i]n the simplest terms early interventions aim to provide support for children, including through their families, at as early a stage in their lives as possible, including pre-birth. Such interventions...can significantly help to prevent or reduce the likelihood of children developing future social problems that may otherwise have necessitated an intervention by the state." Early intervention clearly provides a potential for significant savings, but witnesses also emphasised the benefits this approach would bring to reducing negative social outcomes by helping children, their families and society as a whole. Alan Sinclair of the Centre for Confidence and Well-being told the Committee that "[b]y investing in early years we have a route to ending or at least reducing a series of intractable problems: the long tail of school failure; heath inequalities; alcohol and drug abuse; violence in our community and so many people being excluded from work."

The Committee was persuaded by the evidence with which it was presented and recognised that a preventative spending approach to the early years could allow the public sector to make significant savings, take steps to eliminate existing negative social outcomes and also endeavour to prevent such outcomes from arising in the future. In light of this, the Committee welcomed the work undertaken by the Scottish Government so far, in launching The Early Years Framework in December 2008. However, in highlighting their concern at the very little mention or discussion of the EYF in evidence, the Committee agreed with a number of witnesses who acknowledged the wealth of evidence in this area and called for a shift of focus onto the implementation of the early years policy.

Throughout the inquiry it became clear that a preventative approach to public sector spending on early years would bring benefits that would filter through to further areas, including health and social care. Furthermore specific examples of the success of preventative spending in these areas were cited, for example health visitors. However, in other health-related services, some witnesses warned that "there may not yet be programmes proven to have an impact" and reported their difficulties in measuring the success of implementation. As such, it seems further work may still be required to, firstly, establish where preventative spending can best be directed, and secondly, to ensure that service providers are aware of such findings.

Whilst the evidence of the potential benefits that preventative spending, generally, could bring, was plentiful, those presenting such evidence made no secret of the fact that neither results nor savings should be expected overnight. Furthermore numerous concerns were raised regarding the difficulty in measuring progress. COSLA referred to a study carried out by academics from York University in 2007, which explained that "[t]he longer-term case for prevention...has to be made on the basis of outcomes and not savings – and if cost savings do result, they may well benefit other agencies rather than those offering prevention. In the immediate future a shift to preventative services will almost certainly cost money."

Despite this cost, the evidence referred to within the Report suggests that action is required immediately. In arguing for a radical transformation towards preventative spending, COSLA was clear that resources must be redirected to complete a shift from reactive services to preventative services. They advised that in doing so, the need for reactive services will be diminished. COSLA clearly had the statutory duties of its members in mind when it cited the rationale for this change to be "mainly" about "improving individual lives and personal outcomes", although it also recognised the "growing evidence base which suggests that moving towards early intervention and prevention could also be economical."

It seems then that witnesses to the inquiry and the Committee itself were persuaded that preventative spending would allow a better use of the public resource that, according to strategic objectives underpinning public sector reform, exists to create a Scotland that is "wealthier and fairer; smarter; healthier; safer and stronger; and greener". However, whether this bold and radical approach can be put into practice, and whether that practice would help to address the impact of public sector spending cuts is less clear.

Can preventative spending be put into practice successfully?

Following consideration of the benefits that preventative spending could bring, the Committee also considered the barriers standing in the way of implementation. They were presented with issues that would cause difficulties to specific areas and others that would stand in the way of a more general shift to public sector preventative spending across various services.

Perhaps the most obvious difficulty facing any such transition in approach to spending is the significant series of "disinvestments" that would require to be made before "reinvestments" could be put in place. For example, freeing resources which are "locked up" in acute care and hospital provision present real difficulties for those providing health and social care services. However, this issue, which COSLA termed the "chicken-and-egg element", would no doubt cause problems in numerous areas. The Committee recognised that the results of preventative spending would not be immediate, and logically then, it also appreciated the concern raised by witnesses that an investment in preventative spending would not mean reactive budgets could be immediately cut. As such, there would be a requirement for dual funding. At a time when public resources are under immense pressure, this would seem to be a difficult barrier to break through. However, in order to do so, COSLA has called for a new model that would allow the redirection of resources within individual public sector organisations, between public sector organisations and at government level.

Whether such a redirection of resources is possible in the current climate of spending cuts is a key issue. The tension between spending cuts and dual funding is clear. However, further subtle conflicts also exist. The Committee highlighted the success of a universalistic approach to preventative spending, and called for the Government to state whether it has any future plans to roll out preventative programmes on a universal basis. In light of the Report by the IBRP, it seems unlikely that any such plans will be forthcoming. The IBRP noted that while the principle of universality is "commendable", it may no longer be affordable, suggesting that a "debate needs to be had on whether those who can afford to pay might be invited to do so". But in response to these conflicts, those witnesses arguing in favour of preventative spending encouraged the Committee to see the budget cuts as an opportunity to reform and consider such new approaches to spending with the longer term view in mind.

Evidence presented to the Committee made it clear that should a shift to preventative spending be undertaken, it would require significant reform to the structure of the public sector. The Committee reports on "fundamental criticisms of the way that the Scottish public sector is organised", in that it seeks to react to and manage social problems instead of preventing them. Furthermore, witnesses criticised the fact that public sector bodies often fail to work together to tackle such problems, and cited the sense of ownership over budgets as an issue standing in the way of preventative spending. However, in defence, the Association of Directors of Social Work told the inquiry that services are delivered "according to current statutory frameworks and sets of guidance that are laid down by Government in legislation and so on..".

The nature of government and the political cycle was identified as a further barrier to a move to preventative spending. Governments often lack the incentive to commit to policies providing long term benefits. However, in providing evidence to the Committee, the Scottish Government certainly showed their support to preventative spending and went so far as to present ways to break through existing barriers, including the need to identify "the appropriate mix of policies and interventions" to address issues arising in the short term, and provide for long term benefits.

The Government recognised in their evidence that it is "perhaps understandable" that the main priority for parts of the public sector is their statutory obligations, and in order to meet those, "scarce resources" must be focused accordingly. Despite the support shown by the Government and other witnesses to the inquiry, whilst these barriers are in place and statutory obligations require to be fulfilled, it may be too difficult for the public sector to make the shift in spending approach that so many would like see.

In his report, Graham Allen MP suggested that private investors should be encouraged to fund early intervention programmes and then invited to enjoy a "slice of [the] profit" saved from preventing a child from "going off the rails". This is in stark contrast to the recommendations of the Committee that suggest further investment from the Scottish Government. Whilst the idea is an interesting one, it is unlikely to break through the barriers to preventative public sector spending in Scotland completely. Allen identifies the need for such early intevention programmes to be "really rock solid and really provable"; whilst he has worked on this point in his focused report, the Committee heard that such proof is hard to establish across a number of service areas. Furthermore, the idea of a making a "profit" from such programmes is likely to be considered – at best – an ambitious idea, particularly in a climate where any savings are a 'must' and not a 'bonus'. Nevertheless, perhaps this idea will be given further consideration. The Committee, Scottish Government, other parliamentary committees and those who contributed to the inquiry, will continue to discuss the Committee's Report, the Scottish Government's response and how the barriers can be broken down to establish whether or not preventative spending can be put into practice in Scotland's public sector.

Conclusion

In light of the evidence to the Committee, it is clear that many believe that investing in the prevention of the negative social outcomes that plague Scotland would, indeed, be better than investing in services that may, or may not, cure them, particularly, in such difficult financial times. However, how to make the jump from reactive spending to preventative spending will require more consideration, and more funding too. No doubt witnesses to the inquiry will welcome the opportunity to discuss these issues further and challenge decision makers to implement preventative spending. It remains to be seen whether the decision makers will be persuaded to make the "leap of faith" towards preventative spending, and perhaps, more importantly, whether there will be funds to allow them to do so.

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