New Chancellor’s Emergency Statement and the Public and Social Sector

The reversal of proposed tax cuts is quoted to be worth around £32billion per year. This will be supplemented by a requirement for Government Departments to revisit their existing plans for budgetary efficiencies and, to try and find even more savings, which will trickle down and impact local public service delivery. 

So, whilst there remains continued support for the Growth Plan, which in itself creates opportunities for public and social sector organisations, we will need to wait and see what impact today’s announcements will have when the Chancellor announces its fiscal rules and OBR forecast on 31 October. 

“Whilst we wait for the end of October, the markets are expected to render judgment by the end of this week.  Announcing a U-turn in terms of taxes and spending is providing some welcome short-term support for the Pound and UK long-term bonds...We believe that the UK is in a much stronger position than other countries. It has much lower debt, a broader economy and a great track record in keeping spending from getting out of control. For lack of a better word, it has ‘street credibility’, accumulated investor goodwill. There is damage for sure, but if British governments exhibit prudence and willingness to reconcile with their largest trading partners, we think that this damage can be reversed.” George Lagarias, Chief Economist.

In the meantime, the ongoing concerns around inflation and interest rate hikes remain. In particular, the rising cost of major capital schemes, maintenance of public buildings, as well as demand-led pressures on social care, rent affordability and winter pressures on health care.   

For many, it’s not really a matter of whether cost reductions will be required, but,  how much and, critically, how far can you go?  The almost inevitable impact is going to require challenging and difficult decisions over cost priorities and service provision as part of the 2023/24 budget setting process.   

Amongst it all, whilst the reversal of the National Insurance Contribution increase of 1.25% (in place since 6 April 2022) will still take place from 6 November 2022, the off payroll workers legislation (IR35 reforms), will NOT be repealed from 6 April 2023. Public sector entities will therefore still be responsible for undertaking employment status for tax assessments, where workers are engaged via intermediaries under this legislation, and will remain liable for any underpayments of tax and NIC arising. 

So, to what extent are public services being asked to deliver the impossible? We know cost pressures are piling up, whilst financial reserves dwindle. Hard choices are going to be required – that much has been true for as long as public services have been  transitioning out of Covid.  Will we see increased innovation and collaboration across the public and social sector to improve outcomes? Or, will we see increased service and organisational failures? Fiscal responsibility is going to be the watchword if we are to see sustainable public services. 

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