Every day, another public service or utility goes bust or threatens to. Birmingham City Council. Thames Water. The railways. The Royal Mail and Post Office. Now a string of universities. And that’s on top of an NHS with record waiting lists and deficits, and a school system with a large proportion of buildings described as a “critical” risk to pupils’ safety.
It is the worst systemic crisis of the public services for a generation, and it comes at a time of record state debt and a huge squeeze on both capital spending and projected public spending on services.
It is already clear that there will be no uniform response to this crisis. At one extreme, the rail industry has been bailed out by the state and is on the way to full nationalisation, with few cuts to existing services. The NHS is also receiving budget boosts to just about keep it going on its “free at the point of use” model, albeit with lamentably poor service quality as funding fails to keep pace with costs and demands.
At the other extreme, there are now mass redundancies and service cuts taking place in a steadily growing number of local authorities and universities which have either gone bankrupt or are threatened with it. And huge cutbacks in capital funding, including in the transport sector, of which HS2 is only the most high-profile casualty.
Standing back, however, there are four discernible trends, which explain the differing responses and are likely to continue under the coming Labour government. First, there is no desire—or money—to reverse all the Tory privatisations, even where there is an ongoing financial crisis. Rail is the exception to this trend, but even this exception is more apparent than real. A large proportion of the sector is already owned by the state, and moreover, the private train companies in England have been operating as the direct agents of the Department for Transport since the collapse of the previous private operator model during Covid.
Secondly, deficits and emergency funding injections will be passed to consumers, rather than the government, wherever it is politically possible. Expect council tax, and water and other utility bills, to continue rising steeply for years to come. The most politically difficult issue will be whether or not to unfreeze student tuition fees, which have been capped at £9,250 a year for seven years. I suspect it may prove easier to allow overseas student numbers to continue to increase, maybe by taking overseas students out of the classification of immigration numbers.
Third, expect a series of hand-to-mouth fixes to deal with individual crises outside the politically protected areas of the NHS and rail. This is already happening in local government, where radical austerity cuts packages are being imposed in councils like Birmingham which have gone bust. A series of university mergers may be needed to deal with failing institutions. Among the most politically difficult issues is likely to be the universal service obligation of the Royal Mail, which is causing a financial nightmare as postal volumes fall yet the need for a daily delivery system remains.
Fourth, the one service which will ultimately be protected, whatever it takes, will be the NHS. The NHS’s tax-funded model without charges combines “maximum nationalisation” with “maximum political and public commitment”. And I have little doubt that the failure to deal with NHS waiting lists will be seen as one of the key reasons why Sunak suffered such a catastrophic loss of popularity—and in due course, the election.
So Labour will have to find a huge slug of new tax-raised money for the NHS, one way or another. Nigel Lawson once said that the NHS was the closest thing the British have to a religion—and I doubt we will lose our faith any time soon.
