‘The Big Nasties’: What are the spending problems facing government?

Public Accounts Committee (PAC) chair Dame Meg Hillier warns there is ‘lack of forward thinking’ from government

Labour MP and Public Accounts Committee chair Meg Hillier (PA) (PA Archive)

Major long-term investment is required by government departments to deal with issues in our health, defence and nuclear sectors, the head of the Commons spending watchdog has warned.

Public Accounts Committee (PAC) chair, Dame Meg Hillier, warned there is a  “lack of forward thinking” from the government.

The annual report outlines major spending problems, dubbed “the Big Nasties”, that the government will have to grapple with, including poor infrastructure in hospitals, schools and prisons, and a skills deficit across departments.

The report focuses on three themes of recommended focus for government. These include long-term thinking and investment, resilience, and risk management and understanding.

In a scathing opening, the Labour MP said that while some publicly funded projects had been met with success, all too often she heard of “projects gone awry, deadlines shifted and money wasted”.

“All too often, we have seen money misdirected or squandered, not because of corruption, but because of group-think, intransigence, inertia, and cultures which discourage whistle-blowing,” she said.

“Government does not do enough to plan for the long term, or to provide long-term investment for its policies,” Dame Meg added.

“This not only causes problems now but leaves problems that will be critical in the future.”

So, what problems were found and what are the recommendations made in the report?

Health

The report noted that £178.3bn was spent on the health budget, despite record waiting times and operation delays.

Dame Meg found that NHS targets for waiting times have not been met for four years, and targets for cancer services not met for six years, which, combined with an ageing population, means more will need to be invested in treatment and prevention.

Hospital buildings are flagged as a major issue that is preventing the NHS from modernising and hampering productivity.

She noted that by 2021-2022, the value of the maintenance backlog for NHS hospitals had reached £10.2bn, while the plan to deliver 40 new hospitals by 2030 had now fallen victim to insufficent funding.

The Department of Health and Social Care is accused of “raiding” capital budget funds, and the report warns against any future reduction in capital investment to plug gaps in day-to-day spending.

Education

Dame Meg warned that a lack of long-term investment has resulted in over 700,000 students learning in a school that needs major rebuilding or refurbishment, and 38 per cent of school buildings are beyond their initial design life.

The report states: “The Department for Education does not have a good enough understanding of safety risks, including asbestos and reinforced autoclaved aerated concrete (RAAC), across school buildings for it to fully quantify and mitigate them.”

While £9.4bn of the education allocation is spent on special educational needs, many of the 1.3m school age children with these needs and disabilities are not receiving the support they require.

If unaddressed, SEND children will remain in a “postcode lottery”, unable to receive the same education as mainstream peers.

The Department for Education failing to consider the long-term impacts of RAAC (reinforced autoclaved aerated concrete) and asbestos, the report states.

Despite the £4bn requested by the DfE, the treasury only allocated £1.3bn towards the rebuilding of schools, with the DfE also behind on schedule in awarding contracts for its rebuilding programme.

Defence

The Ministry of Defence has not decommissioned a single nuclear submarine since World War 2 despite removing 20 from service, which has cost the government £500m from 1980 to 2017.

The report states the department has “repeatedly made decisions on short-term affordability grounds which have increased costs in the longer term and led to poor value for money”, adding that the Ministry of Defence “has not had the discipline to balance its budgets”.

Other issues and recondmendations

Dame Meg said the government “consistently underestimates the scale and complexity of reforms” necessary to decrease court backlogs.

As with health and education, infrastructure is flagged as a major problem for the Department of Justice, with the report stating that 500 prison places each year are taken “permanently out of action” due to poor conditions.

The report states local authorities are “under severe financial pressure”, with local government spending falling by more than 50% from 2010/11 to 2020/21,

Dame Meg also raised areas requiring spending across departments, including a lack of specialist skills and replacing outdated IT systems.

According to findings in the report, in 2018/2019 the government spent an estimated £980 million on management consultant fees to fill the skills gap. It adds: “The lack of skills must be addressed otherwise there will be huge risks to delivery of major capital projects”.

She added that on occasions, the scale of failure in controversies such as HS2 or the Post Office scandal have been “seismic”, while on other occasions the system has failed to be agile and adaptable.

Describing the progress of restoration work on the Palace of Westminster as “painfully slow”, the government currently spends £2m a week on its buillding works, despite there being no final agreed plan for what the restored palace might look like.

The report is underpinned both by the cross-party committee’s scrutiny work and Dame Meg’s observations from 13 years serving on the PAC.