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Capacity crunch: the biggest challenges facing the next government

Download the full report by Sam Freedman

Sam Freedman is a political journalist, author and former policy adviser at the Department of Education. He has conducted an analysis of the UK 2040 Options reports on economic growth, health, education, tax and public finances, wealth and income inequality, and power and place. In this report, he draws out the cross-cutting themes that span the UK government’s most pressing challenges.
 

 
The UK is in a bad place – stuck in a loop of low growth and productivity, with underfunded and inefficient public services, record low levels of trust in politics and a general sense of frustration from across the political spectrum, regardless of ideology.

But there is nothing stopping us from turning it around by 2040. That’s the timeframe that the UK 2040 Options project is looking to: it has commissioned analysis in topic areas that will be critical to deciding what our future will look like.

There’s a long list of things we could do, it’s just that the nature of our political system makes it so hard to do them. Only by tackling head on these broader cross-cutting political challenges can politicians steer us through our current problems to a more optimistic future. And they need to get on with it, because the list of demands on the state is only going to grow.

  • By 2040, there will be much higher healthcare, social care and pensions costs due to an ageing population. Chronic health conditions are projected to affect a substantially greater number of people.
  • Decades of underinvestment in capital and infrastructure risk driving future costs in acute crisis management even higher. We can already see this playing out in the NHS and the criminal justice system, among other examples.
  • There is a growing number of external risks, including worsening global security following the Russian invasion of Ukraine, growing tensions in the Middle East, and concerns about China. The effects of climate change will increase and we have learned the hard way the need to be prepared for pandemics.
  • The rise of the ‘regulatory state’ has meant a big, and largely undiscussed and unplanned, increase in regulatory costs for public and private institutions. There is ongoing pressure for further regulation across multiple sectors – often with good cause.

The UK isn’t unique in this regard. Countries across the world are facing similar challenges, but there are elements of the UK’s political set-up that make them particularly difficult for us to deal with.

  • The UK is uniquely centralised. This puts huge operational pressure on the centre, while leaving local government weak and unable to raise its own funds. There are major regional disparities in wealth and productivity that are, in part, driven by this lack of power at regional or local level.
  • The UK has a constitutionally extremely powerful executive combined with weak central institutions that struggle to use this power effectively. Government ministers rarely last more than a year or two. Attempts to reform the civil service have been half-hearted at best and it has been left largely as originally designed.
  • The Treasury is unusually powerful for a finance ministry and essentially holds veto power over everything that happens in government, meaning it sets the de facto strategy.
  • The UK has a highly centralised political culture that is caught up in a super-fast media cycle. This leads to a focus on communications at the expense of policy, which paradoxically creates a loss of trust with the public.

Managing demand for services will require the state to spend more upfront. Some of this can be achieved through better taxation but mostly it requires growth through improved productivity. It will also need more efficient public services through greater investment in infrastructure, technology, and prevention. This is well known and has been for a long time. There isn’t a shortage of ideas about how to do these things, but our structural constraints keep getting in the way. To tackle them effectively, politicians need to confront the ‘meta’ cross-cutting challenges of the way our state works.

The UK needs:

  • more effective central institutions that are able to support ministers in decision-making, rather than the haphazard collection of structures that have evolved over centuries
  • more capacity at regional and local level, with more operational functions devolved to them and more ability to decide strategy for regional economies and services
  • more effective engagement around democratic trade-offs, through greater transparency and accountability, as well as exploring new ways to assess the public-preferred routes through difficult trade-offs
  • a clearer framework for regulation, risk and prevention, rather than the entirely arbitrary and poorly evaluated and costed approach we take at the moment.

There are many different approaches politicians could take to create a new political settlement. But we will only get to 2040 in good shape if we have one. What we have now isn’t up to meeting the challenges we face.
 
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