How to cut spending

Margot James at Conservative Home has written an article about how to reduce public spending on health and social care, based on discussions with the head of service in her area. It shows how difficult it actually is to cut spending, and its conclusions offer little comfort for conservatives.

She claims that some money can be saved by merging the primary care trust, local council and mental health trust into one - an idea with some advantages, though I would be amazed if in practice there were any savings in the short or medium term. Something which she doesn't mention but which is well established in all sectors is that achieving savings by merging and reorganising services requires high quality organisational management and leadership - suggesting that cutting the pay of public sector managers is likely to be a false economy.

The next bit was interesting: "Secondly, out of a total budget of some £24m for learning disabilities within the Local Authority, some £10m is spent on residential care. The cost of caring for some of the clients with more complex needs can reach £3,000 per week. These are private homes charging the taxpayer a great deal of money and their books should be scrutinized. Local Authorities account for almost 100% of their income. The Councils should work together to drive down costs whilst maintaining standards."

It is unusual to hear this argument from a Tory - public sector agencies working together to squeeze profits in the private sector. This is a classic centre-left argument, and it reinforces the point that any discussion of public spending has to acknowledge that large chunks of money spent by the government goes to the private sector.

Another way of saving money would be to transfer services to be run by the voluntary sector. Margot reports that "services contracted out to independent groups or companies are almost invariably delivered at a lower cost", but at lower quality.

She concludes by warning that, "Transferring services should not be seen purely as a cost cutting measure. You only have to look at the residential care sector for older people to see that Local Authorities pay significantly below the cost of providing good quality care in so many cases. That is wrong. As important as the legitimate savings that do exist is the harnessing of the passion and dedication of many of the people who run and work in these organisations."

In other words, overall spending is probably too low, not too high, to provide a good quality service.

So one of the Tory A-Listers went to try and find out how to cut public spending, and ended up sounding like a social democrat - clamp down on private care homes, make local authorities bigger and more powerful, recognise that lower cost services are often lower quality, harness the passion and dedication of public servants and spend more to provide good quality care.