HSJ’s expert briefing on NHS finances, savings and efforts to get the health service back in the black. Contact me in confidence here.
The Office for Budget Responsibility has been good news for fiscal transparency, but could prove an irritating obstacle for the NHS.
In the spring statement last week, chancellor Philip Hammond signalled the Treasury belt could be loosened in the autumn budget – but only if the OBR doesn’t spoil the party.
Note the words “if” and “capacity” in the chancellor’s speech last week: “If, in the autumn, the public finances continue to reflect the improvements that today’s report hints at, then, in accordance with our balanced approach, and using the flexibility provided by the fiscal rules, I would have capacity to enable further increases in public spending and investment in the years ahead.”
In other words, future public spending will depend solely, or at least extremely heavily, on the forecasts of the independent OBR.
On this occasion, the watchdog’s economic forecasts (which lopped £4bn off the estimated deficit) were the reason for Mr Hammond’s self-proclaimed Tiggerish mood. But things could easily take an Eeyoreish turn when it’s time to make the real spending decisions later this year.
Many will applaud the OBR’s depoliticisation of public finance forecasts, because it helps keep the government on track to meet its fundamental commitment to eradicating the deficit.
Some have argued it effectively outsources the government’s most important political decision – how much it should spend – to unelected officials who make highly uncertain predictions.
Clearly ministers are not bound completely by the OBR forecasts, but they do provide a solid defence when besieged by demands on the public purse.
This reduces power of the NHS, which because of its political importance has been a constant and effective battering ram against the Treasury doors throughout its 70 year history.
Will individual tragedies such as Mavis Skeet have the same power over government spending, when the chancellor can use the OBR’s cold and compelling logic as a political buffer?
In this light, the longer term outlook in the OBR report makes for uncomfortable reading: “If the deficit was extrapolated to continue falling at the average pace that it falls beyond the spending review period (the three years to 2022-23) it would reach balance in 2027-28.
“Among other things that would require per capita departmental spending – around 60 per cent of which in 2019-20 is planned to go on health and education – to continue to fall each year in real terms.”