Winners and losers in spending review

While education and health have struck gold, local government feels it will
have to ‘survive on scraps’. Paul Nelson reports

Chancellor Gordon Brown’s Comprehensive Spending Review has created an equal
measure of excitement and disappointment in the public sector.

Spending by government departments will rise by £61bn to £301bn by 2005/2006
– the biggest sustained increase in public expenditure for 30 years. While
there is a growing expectation that it might lead to better schools and
healthcare provision as well as safer streets, other sectors – particularly
local government – feel they will miss out.

The Government has committed itself to improving the efficiency and quality
of public services, so the extra cash is tied to reform, additional targets and
checks on delivery.

Key HR issues, such as recruitment and retention, are at the forefront of
this overhaul. The Government is trying to improve education, training and pay
to increase the flow of talented staff into the public sector.

The funding and reforms – particularly in education – are aimed at
supporting and improving the drive for increased productivity

Brown called on public sector employers to "demonstrate progress by
2006 on the government’s long-term objective of raising the rate of UK
productivity growth over the economic cycle".

So, which HR professionals will be the winners and the losers of the public
spending review?

The winners


Education spending will rise by 6 per cent each year for the next three
years to £58bn. The teaching of science – and, ultimately, the engineering and
technology sectors – will benefit from an investment of £1.25bn over the next
four years.

It is the largest sustained increase in spending for the sector in a decade,
and the Government hopes it will boost the UK’s economic performance and raise
levels of innovation and growth.

New recommendations promoting the supply of skilled scientists and engineers
will be implemented. These include: writing off student loans for maths and
science teachers, and offering schools pay flexibility to attract and retain
them; creating a national centre for excellence for science teaching, and
giving teachers enhanced training opportunities; and paying undergraduates and
post-graduates in science, maths and technology to work in schools, supporting

The Engineering Employers Federation believes the investment will tackle the
sector’s chronic skills shortage.

"In the long-term, the money will create a greater potential workforce,
giving employers more people to recruit from," said Ann Bailey, head of
education and skills at the EEF.

"Young people will be enthused to go into science and engineering and
the fall-out of people reading science and engineering degrees will stop. Big
differences should be seen in teaching within five years, and employers should
see the benefits in 10."

Further education colleges – often regarded as the ‘poor relations’ of the
education sector – have also benefited from the spending review, with a further
1 per cent (£400m) increase in core funding.

Director of communications of the Association of Colleges, Lynda Butler,
said: "We have acute staffing problems. Colleges are losing a lot of
academic staff to schools, and vocational lecturers to the private sector. This
money will help us compete for staff on an equal playing field."


The NHS has been a big beneficiary of public spending this year, with the
Chancellor aiming to invest £40bn in 2007/2008 – a 43 per cent spending rise.

The extra funding will help the NHS meet government staffing targets, which
include recruiting 35,000 more nurses, midwives and health visitors, 30,000
more therapists and scientists, and 15,000 more consultants and doctors.

Elaine Way, president elect of the Association of Healthcare Human Resource
Managers, believes the additional money will help improve the quality of
healthcare delivery as well as staff morale.

"This money is much needed to deliver the reform agenda, and will fund
staffing increases and service changes," she said. "With the
employment of so many additional people, workload pressures on existing staff
will undoubtedly decrease, and morale will improve."

However, it has raised concerns about HR’s ability to respond. "How to
recruit, train, reward and retain the extra staff present real challenges as
well as opportunities for HR," said Way. "Our members are concerned
about the profession’s capacity to deliver."

A new inspectorate is being introduced to ensure the funding delivers
improved healthcare. But John Adsett, acting head of personnel at Basildon and
Thurrock general hospitals NHS trust, is concerned the new inspectorate will
not take account of the need for local flexibility.

"The NHS is being inspected inside out and upside down with an
inspection every couple of months. There is a real danger that all these
inspections will lead to a ‘tick-box’ culture."

The loser

Local government

Council revenue grants will increase on average by 3.9 per cent during the
next three years.

The Government is currently trying to set up council league tables, with the
best performers getting more money, and freedom to raise further cash. Councils
could be awarded up to a maximum of £635m for three years of funding.

However, this amount will only be awarded if 130 different Treasury targets
are met. Poor performers will face financial penalties, or even management

The Society of Chief Personnel Officers is disappointed with the spending
review. The HR body believes the funding will not help local government address
poor recruitment, retention and morale among staff, or improve its employer

Francesca Okosi, president of Socpo, said the spending review also doesn’t
help councils to address the current industrial action over low pay.

"I am disappointed with the spending review. It does not address where
we are struggling. Local government is not seen as a ‘sexy’ sector. There are
problems with teaching, but there are also problems elsewhere, such as social
services," she said.

Local government trade union Unison, claims that local government is being
"shoved to the back of the queue" and having to "survive on

Dave Prentis, general secretary of Unison, said: "You cannot unblock
the beds in our hospitals without having the back up available in local

"You must invest in homecare services, in residential care staff and
the meals on wheels services, if you are going to cut hospital waiting

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