Voices: Wes Streeting has won the spending review – but will he blow his winnings?
If Rachel Reeves did the spending review like a game show, she could invite her cabinet colleagues to 'come on down' the catwalk between the two red lines in the Commons, to music and strobe lights, to take their seats on the front bench.
She could announce the winners of the competition for public funding over the next three years in reverse order, with David Lammy, the foreign secretary – who has lost a big chunk of his foreign aid budget – going first, followed by Heidi Alexander, the transport secretary, and Steve Reed, environment.
The last to be summoned, as the ABBA soundtrack switches from 'Money, Money, Money' to 'The Winner Takes It All', would be Wes Streeting, the health secretary, who has been allocated spending increases of 2.8 per cent a year more than inflation over the three years from next year to 2029.
Arms in the air, in a sequinned jacket, as glitter falls from the ceiling, Streeting would take his place next to John Healey, the defence secretary, at the top of the line of winners and losers.
Sadly, the announcement of spending plans for the rest of this parliament will be less showbiz. Reeves will try to generate a bit of excitement, and maybe even some waving of order papers, by spinning the big and welcome increase in capital investment – although she has already cannibalised some of her good news stories with her transport infrastructure announcement last week and the go-ahead for Sizewell C nuclear power station today.
The problem with the capital projects, though, is that they will not start until 2027 at the earliest, so they won't have delivered anything except feelgood press releases before the next election.
Whereas the big increase in day-to-day spending on the NHS is the kind of vote-winning largesse for which Labour MPs are desperate. In the absence of glitter and balloons, the waving of order papers will be compulsory on the government benches at this point.
But wait: who is this, coming to spoil the party? It is the Institute for Fiscal Studies (IFS), performing its constitutional role of puncturing inflated government claims. Labour, having used the IFS to attack the Conservatives at fiscal events over the previous 14 years, will find that the tables have turned (even if the Treasury insists that this is not a 'fiscal event' – it is merely allocating a spending total set at the Budget).
Max Warner and Ben Zaranko of the IFS have written a paper for the Oxford Review of Economic Policy entitled 'Future challenges for health and social care provision in the UK'. It contains some startling facts, such as that, by the middle of the next decade, the NHS will employ 10 per cent of the entire workforce of England.
It also contains a striking table showing the increase in the number of doctors and nurses employed in the NHS since 2019, and the increase in treatments. There are 18 per cent more consultants, 32 per cent more resident doctors (who were called junior doctors in the old days, a year ago) and 23 per cent more nurses and health visitors, which are huge increases in just five years.
But the outputs from such dramatic increases have been disappointing. Hospital admissions have risen by just 9 per cent (except A&E admissions, up 2 per cent), and outpatient appointments have increased by just 12 per cent.
The IFS authors comment: 'The large fall in NHS hospital productivity since the start of the pandemic complicates the picture.' They say there are two scenarios for the future: 'The optimistic view is that there is substantial scope for 'catch-up' improvements in productivity: merely returning to pre-pandemic levels would represent a considerable improvement. The more pessimistic view is that the pandemic has permanently lowered NHS productivity, because of the ongoing impacts of Covid-19 on patient health and complexity and changes to working practices or expectations.'
They tentatively conclude that there are recent signs that NHS productivity is recovering, but the loss of capacity is still alarming. Despite the huge amounts of extra spending devoted to the NHS since the election, and promised for the next three years, no one in the think tanks that specialise in the health service thinks that Labour's targets will be hit by the next election.
Will Streeting, the lucky winner of the spending review showdown, be able to convince the voters that he has spent their money well?
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But as with any gamble, there is a risk it could go wrong. 'If the Government insists on accumulating the extra spending it's planning over the full parliament, it seems only fair to also draw attention to the £140bn of extra borrowing we're forecast to do over the same period,' says Johnson, at the IFS. Extra borrowing will keep Britain's debt pile rising every year until the end of the decade. 'That borrowing incurs a cost in the form of additional debt interest – and one that's bigger than it was a year ago,' says Johnson. The question was always whether the extra investment would bring sufficient benefits to make that worthwhile.' Government borrowing costs rose in the immediate aftermath of Reeves's announcement. Andrew Goodwin, at Oxford Economics, calculates that the Chancellor's already wafer-thin £9.9bn headroom to meet her borrowing rules has already been eroded by £2.5bn as a result of higher gilt yields. And while Reeves boasts about all the extra investment being pumped into the economy, another key question is: will she be able to get all of that money out the door? Previous analysis by the Resolution Foundation shows that successive governments of all stripes have struggled to spend all the money they wanted. Just £1 in every £6 in planned investment spending over the past seven spending reviews since 1998 actually went out the door. Why? Governments are often too optimistic about when projects become shovel-ready. There may be planning hold-ups, and the construction sector may not be able to cope with all that extra demand for engineers, project managers and construction workers to deliver these projects. 'We now know more about what sorts of projects the Government plans to invest in,' Johnson says. 'The focus must now shift to delivery and avoiding the all-too-common project over-runs.' Governments have in the past raided capital budgets in order to make their day-to-day spending budgets add up. New safeguards have been introduced to in theory prevent this from happening again. But this may simply make it harder for Labour to meet spending demands if plans go awry without putting up tax. Ben Ramanauskas, at Policy Exchange, casts doubt on Labour's ability to live within its means. He says: 'While the uplift to the defence and criminal justice budgets are welcome, this is unlikely to go far enough. Instead the Chancellor has chosen to prioritise the NHS by giving it even more money, without insisting on productivity improvements.' All this is expected to keep the size of the state permanently bigger than its pre-lockdown size. Ramanauskas says: 'The Government is yet to set out how it will fund its largesse to the public sector. However, it will almost certainly have to place even greater strain on the public finances by increasing borrowing or adding extra burdens to households and businesses by raising taxes.' Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more. Sign in to access your portfolio
