A similarly clear drop in activity can be seen in schools. According to data published by the Department for Education, as little as 43% of pupils attended school during the eight days of national teacher strikes that took place between February and July 2023. Secondary schools were struck particularly hard, with only around a quarter of pupils going into school on strike days. ¹ Department for Education, ‘Pupil attendance in schools: Week 28 2023’, 27 July 2023, accessed 23 October 
2023,  https://explore-education-statistics.service.gov.uk/find-statistics/pupil-attendance-in-schools/2023-week-28  The absence of so many pupils for more than a week this academic year will only make it harder for schools to catch up on learning lost during the pandemic. 

The industrial action by criminal barristers between April and October also reduced the activity that criminal courts were able to undertake. The number of cases processed in crown courts fell from 25,172 in March 2022 to 20,068 in September 2022, again hurting backlog reduction efforts. 

The government’s strikes strategy likely extended the strikes, and so their disruption 

The widespread strike action over the past year has deep and broad roots, including the coalition government’s decision to hold down public sector pay from 2011 onwards (Figure 0.7), the more recent spike in inflation, and the impact of the pandemic on services and staff wellbeing. Given the UK’s low economic growth, high levels of debt and inflation, and the need to consider the impact of pay offers to some groups on the demands of others, any government would have found it difficult to resolve these industrial disputes. 

However, there were important weaknesses in the Sunak government’s strategy for responding to strikes, which likely extended their duration and thus the level of disruption caused to public services. Most critically, ministers refused to negotiate on pay for months. Strikes by NHS staff, including nurses and paramedics, began in December 2022, teachers from the National Education Union in February 2023, and junior doctors in March. This followed months of campaigning and balloting by the unions involved. But it wasn’t until March that an improved offer was made to NHS staff and teachers (with the schools pay dispute only resolved after a further, improved offer), and junior doctors’ pay was eventually raised unilaterally in July, when the government accepted recommendations made by pay review bodies. 

For too long the government unreasonably claimed that higher pay was not possible due to the impact on inflation. However, there is no evidence that improved offers below the consumer price index (CPI) but closer to private sector wages would have any impact on inflation. ² Whiteley P, ’Does public sector pay drive inflation?’, LSE British Politics and Policy blog, 21 February 2023, 
retrieved 17 October 2023, https://blogs.lse.ac.uk/politicsandpolicy/does-public-sector-pay-drive-inflation  Indeed, the government eventually made offers at this level. If it had done so earlier – in autumn 2022, rather than spring 2023 – it may have been able to bring at least some of the disputes to an end with far less disruption. Instead, the government’s combative approach, including the introduction of the Strikes (Minimum Service Levels) Act, probably exacerbated resistance from strikers, making it even harder to reach agreement. 

The same is true of the dispute with criminal barristers that was resolved in 2022. Little progress was made by Dominic Raab while he was justice secretary, yet Brandon Lewis, who took a much more conciliatory approach, was able to end the strikes by making an improved pay offer, despite only being in post for six weeks. 

Of all the disputes, the one with junior doctors looks most difficult to resolve. The British Medical Association is seeking a 35% pay rise (to bring pay back in line with 2008/09 levels) and there has been little evidence that it is willing to negotiate substantially down from this. Despite the relatively low cost of meeting this demand, ³ Hoddinott S, ’The government needs to rethink its approach to public services strikes’, Institute for Government, 20 April 2023, retrieved 17 October 2023, www.instituteforgovernment.org.uk/comment/public-services-strikes 
  it would have been difficult for any government to do so given the knock-on impact on the (more modest) pay demands of less well paid NHS staff. 

However, even in this case, a different approach by government may have helped. With a more moderate and reasonable public stance, the government could have garnered greater public support, putting pressure on junior doctors to compromise and on consultants* not to join them on the picket line in July. Instead, public support for junior doctors grew from 47% in January to 56% in June. ⁴ Hall R, ’Majority back NHS strikes despite disruption, polls show’, The Guardian, 2 July 2023, retrieved 
17 October 2023, www.theguardian.com/society/2023/jul/02/majority-back-nhs-strikes-despite-disruption-polls-show 

^{* Consultants, while still in dispute with the government, have offered not to conduct further strikes if the government will agree to talks facilitated by ACAS, www.bma.org.uk/bma-media-centre/bma-offers- government-route-to-resolve-consultants-dispute-via-acas}

Workforce problems will prevent some services returning to pre-pandemic performance levels by the end of the current spending review period in April 2025 

Staffing is the single biggest expenditure for public services, accounting for more than half of spending for most of the services covered in this report. While there are a variety of ways that government could improve the performance of services, absent major productivity improvements, the size and composition of workforces will be a key factor. 

Policing is the only service covered in this report for which the workforce should enable a return to pre-pandemic performance levels by April 2025. Though there remain shortages in key positions, such as investigators, and the number of PCSOs has fallen, the number of police officers has increased by more than 20,000 and by April 2025 many of these recruits should be more effective and be contributing to better police performance, particularly in terms of the number of charges. Indeed, the recent reversal in the long-term trend of falling charges may be early evidence of this. 

At the other end of the spectrum, prisons, criminal courts and children’s social care do not have plans in place that will lead to sufficient recruitment or retention of staff. The problem is most severe in prisons. Most critically, there is no credible plan in place to recruit the number of officers needed to safely staff the huge expected increase in prisoners over the next few years due to the greater police numbers cited above; this will also affect courts, in which the current workforce of judges and barristers is likely to be insufficient to process a substantially higher volume of cases in the crown court. 

Demands on children’s social care services are rising but the number of children’s social workers fell over the past year. With evidence that caseloads are becoming more complex, workloads already becoming unmanageable for many – and in the absence of a workforce strategy to ease pressure on staff – it appears highly unlikely that this workforce will be sufficient to meet demand. 

The workforce situation in the other services is less clear. However, although strike action is only ongoing in hospitals, the ability of the government to agree future pay deals will have a big impact on recruitment and retention across all the services covered in this report. The ease of doing that will depend on inflation and the health of the wider economy. 

Funding settlements are now worth less due to higher pay awards and inflation 

Budgets for the 2022/23–2024/25 period were originally set at the 2021 spending review. Additional funding for the NHS, schools and adult social care was then announced at the 2022 autumn statement. However, the value of these cash settlements has been eroded over time, due to higher than anticipated pay awards and inflation. 

The 2021 spending review anticipated that public sector wages would increase by 2–3% annually across the spending review period. However, the government has been forced to make substantially higher pay awards as a result of inflation and industrial action, as covered above. For example, the cost of the improved offer to nurses, ambulance staff and other NHS workers (those on the Agenda for Change pay scale) ⁵ NHS, ’Agenda for change – pay rates’, April 2023, retrieved 17 October 2023, www.healthcareers.nhs.uk/working-health/working-nhs/nhs-pay-and-benefits/agenda-change-pay-rates  was an additional £2.7bn in 2022/23 and an approximate ongoing cost of £1.3bn per year from 2023/24 onwards. ⁶ Brown F, ’NHS pay rises will cost £4bn and will be funded from ’areas of underspending’, govt says’, Sky News, 17 March 2023, retrieved 17 October 2023, https://news.sky.com/story/nhs-pay-rises-will-cost-4bn-and-will- be-funded-from-areas-of-underspending-govt-says-12836167  In March, when this deal was agreed, the government did not state how it would be funded. 

In July, when the government accepted the recommendations of pay review bodies (PRBs) for other public service workforces, it said it would not borrow to fund these. This means that these will have to be paid for either through increased revenue, or by cutting spending. The government has stated that some of the funding will come from increases to visa fees and the immigration health surcharge. ⁷  
Hassan B N, ’Why are UK visa application fees rising? Rishi Sunak announces change‘, Evening Standard, 14 July 2023, retrieved 17 October 2023, www.standard.co.uk/news/uk/why-uk-visa-fees-cost-rising-b1094477.html  However, most will come from reallocating existing spending, either from within departmental budgets or elsewhere across government. 

The increase in teachers’ pay will also be funded from the existing DfE budget for 2023/24 and 2024/25, with the government stating that this is to come from reprioritisation of underspends ⁸ The Education Hub, ’Teacher strikes: Everything you need to know about the 2023/24 teacher paya ward’, Department for Education, 13 July 2023, retrieved 17 October 2023, https://educationhub.blog.gov.uk/2023/07/13/teacher-strikes-everything-you-need-to-know-about-the-2023-24-teacher-pay-award  – expected to be partly from the National Tutoring Programme – rather than cuts to school budgets. This use of a one-off allocation to fund an ongoing liability will store up problems for the next spending review. 

At the time of the 2021 spending review, the OBR projected that the GDP deflator (the measure of inflation used by the government to assess real-terms increases in departmental spending) would be 2.2% in 2023/24. By the 2022 autumn statement this had risen to 3.2% and the latest forecast from the OBR is that it will be 2.5% – though this is likely to prove too low as inflation has recently proved more persistent than expected in March 2023. As a result, spending allocations are now less generous than they were (see Figure 0.10). 

Some services are facing even higher sector-specific inflation than this. Interviewees told us that the unit costs of adult social care packages are now much higher than they were a year ago. According to a survey of directors of adult social services, this has been driven by increasing complexity of care needs, staffing costs and wider inflationary pressures. ⁹ Association of Directors of Adult Social Services, Spring Survey 2023, 2023, p. 17, www.adass.org.uk/media/9751/adass-spring-survey-2023-final-web-version.pdf  Similarly, we heard that the unit cost of residential children’s social care placements has also risen substantially, with increased demand and limited capacity putting local authorities in a weak bargaining position with private providers. 

The inflation-driven rise in interest rates could also reduce spending on local authority-provided public services. In recent years, some local authorities took out loans to finance commercial investments, hoping that those would then generate a future stream of income. ¹⁰ Gilmore A, ’Debt refinancing a major concern for Croydon Council as interest rates rise’, Room151, 27 June 2023, retrieved 17 October 2023, www.room151.co.uk/151-news/debt-refinancing-a-major-concern-for-croydon-council-as-interest-rates-rise  Those with variable-rate or short-term loans that need to be refinanced will face higher interest rates, increasing annual repayments, and reducing the funding available to front-line services. Some private sector providers will also be affected. The Competition and Markets Authority has identified that some of the largest providers of residential care services for children are owned by private equity firms and carry high levels of debt. This risks a “disorderly failure of highly leveraged firms” that could affect the placements of children in care. ¹¹ Competition and Markets Authority, Children’s social care market study final report, 22 March 2022, retrieved 17 October 2023, www.gov.uk/government/publications/childrens-social-care-market-study-final-report/final-report  The loss of these providers could push up prices even further. 

Parts of local government and the NHS are already running deficits 

According to government figures, local authority usable reserves in England increased from 45% of service expenditure in 2019/20 to 63% in 2021/22. However, data issues mean that some councils’ reserves are likely overstated ¹² Institute for Government interview.  and the precise figures depend on how the distribution of emergency business rates relief at the beginning of the pandemic is accounted for. 

Comprehensive data on reserves in 2022/23 will not be published until the end of this year. However, there is extensive evidence that many local authorities have run large deficits in recent years. For example, Kent County Council overspent its 2022/23 budget by £44.4m, with the additional money coming from reserves. ¹³ Gilmore A, ’Kent County Council reports nearly 45m budget gap’, Room151, 3 July 2023, retrieved 17 October 2023, www.room151.co.uk/treasury/kent-county-council-reports-nearly-45m-budget-gap  Bradford Metropolitan District Council overspent by £32m in 2022/23, largely due to higher- than-expected children’s social care costs. The council’s director of finance noted that remaining reserves would likely only be sufficient to cover 2023/24 and that “reserves are reducing at an unsustainable rate.” ¹⁴ Gilmore A, ‘Down £100m in one year: Bradford’s reserves drop at ‘an unsustainable rate’, Room151, 4 April 2023, retrieved 17 October 2023, www.room151.co.uk/treasury/down-100m-in-one-year-bradfords-reserves- drop-at-an-unsustainable-rate  In this financial year, Kirklees Council has agreed to draw down £25m from reserves to partially fill a £43m budget deficit, ¹⁵ Marlow A, ‘Kirklees Council has ‘no option’ but to save £19m to address its £43m budget shortfall’, Dewsbury Reporter, 23 February 2023, retrieved 17 October 2023, https://www.dewsburyreporter.co.uk/news/people/kirklees-council-has-no-option-but-to-save-ps19m-to-address-its-ps43m-budget-shortfall-4038447  and East Sussex County Council is spending £5.6m from reserves on road repairs. ¹⁶ BBC News, ‘Council to dip into reserves for road repairs’, 30 June 2023, retrieved 17 October 2023, www.bbc.co.uk/news/articles/c0wvkd0lx31o  Reserves can only be used once and are not a long-term solution to persistent deficits. 

Three quarters of local authorities also had cumulative deficits on the part of local authorities’ education budgets reserved for schools spending in 2021/22, largely as a result of their spending on statutory special educational needs and disabilities (SEND) support, with the combined deficit totalling £1.4bn.* Local authorities with large deficits can access funding from central government through ‘safety valve’ deals. In exchange for additional funding, local authorities are required to eliminate their in- year deficits by taking action to reform their SEND provision – which in some cases can include moving learners from the independent special school sector, where the cost is higher, to state provision. Since 2020/21, some 34 local authorities have entered into such agreements, with the DfE committing nearly £1bn in return. ¹⁷ Booth S, ‘Council SEND deficit bailouts hit £1bn as 20 more issued ‘, Schools Week, 16 March 2023, retrieved 17 October 2023, https://schoolsweek.co.uk/council-send-deficit-bailouts-hit-1bn-as-20-more-issued 

In the NHS, at least 14 integrated care systems (ICSs), out of a total of 42, ended 2022/23 with a budget deficit. ¹⁸ Anderson H, ‘Revealed: the 14 ICSs admitting they will end the year in deficit‘, HSJ, 27 February 2023, retrieved 17 October 2023, www.hsj.co.uk/finance-and-efficiency/revealed-the-14-icss-admitting-they-will-end-the- year-in-deficit/7034308.article  Many will run a deficit in 2023/24 as well. At the July meeting of the NHS England board, the chief financial officer reported that 15 had submitted a deficit plan for 2023/24, with a total forecast overspend of £720m. ¹⁹ Kelly J, ‘Financial performance update’, NHS England, 27 July 2023, retrieved 17 October 2023, www.england.nhs.uk/long-read/financial-performance-update 

^{* In December 2022 the government announced that local authorities could keep these deficits off their balance sheets until 2025/26, www.lgcplus.com/services/children/send-deficits-kept-off-budgets-for-another-three-years-12-12-2022}

Most services have not had adequate funding to return to pre-pandemic performance levels by April 2025