This year's The State of the State finds the UK government amid the complex and politically-charged challenge of leaving the EU. But while exit issues may dominate headlines, public services face more local and immediate challenges as they cope with rising demand, ongoing budget pressures and heightened concerns over social inequality.
3. Introduction
The State of the State report provides a unique,
independent analysis of the UK public sector. It is
produced in collaboration with think tank, Reform,
and the insight is informed by interviews with public
sector leaders and an analysis of government data.
About this year’s report
This year’s The State of the State finds the UK government amid the complex
and politically-charged challenge of leaving the EU. But while exit issues may
dominate headlines, public services face more local and immediate challenges
as they cope with rising demand, ongoing budget pressures and heightened
concerns over social inequality.
The report is constructed around three distinctive perspectives – the citizen
lens, the public sector leader lens and the business lens.
The citizen lens examines public attitudes towards the state,
informed by a survey of more than 1,000 UK adults from
every region and country of the UK.
The public sector lens explores how its leaders see their
challenges, informed by interviews with more than 45 senior
figures from England, Northern Ireland, Scotland and Wales.
The business lens reflects on what businesses want from the
local public sector, informed by a survey of more than 1,000
UK businesses.
01
4. 65.6 million
UK population
45.7 million
Electors
6 thousand
Public sector organisations
5.4 million
Employed by the public sector
Government in numbers
Figure 1.
Government will spend £802 billion
in 2017-18 (figures in £ billion)
Government income will be £744 billion
in 2017-18 (figures in £ billion)
Industry, agriculture and employment
Public order and safety
Health
Social protection
Housing and environment
Transport
Debt interest
Other
Defence
Personal social services
Education
23 32
34
36
37
46
48
50
102
149
245
Source: Spring Budget 2017, HM Treasury
Government income will be £744 billion
in 2017-18 (figures in £ billion)
Health
Social protection
Housing and environment
Transport
Debt interest
Other
Defence
Education
Council tax
Excise duties
Corporation tax
Other (non-taxes)
Business rates
Income tax
National Insurance
Other (taxes)
VAT
30
32
48
52
54
80
130
143
175
This year, the government is
expected to borrow £58 billion.
This financial year the government will spend £802 billion
and raise £744 billion
How government will spend
£802 billion in 2017-18
How government will generate
£744 billion in 2017-18
02
5. Deficit elimination goes on
Globally, the 2010-15 UK government stood out in its commitment to austerity measures compared to
relatively modest reductions elsewhere across the G7 nations. This year, the UK’s deficit is expected to
come down to £58.3 billion.
Public finances
Figure 3. The path of deficit reduction
Source: Office for Budget Responsibility
£billionat2016-17prices
0
20
40
60
80
100
120
140
160
180
‘21–‘22‘20–‘21‘19–‘20‘18–‘19‘17–‘18‘16–‘17‘15–‘16‘14–‘15‘13–‘14‘12–‘13‘11–‘12‘10–‘11‘09–‘10
Forecast
The path of deficit reduction
The summit of the debt mountain
Official forecasts suggest that government debt
could peak in this financial year at £1.8 trillion
representing 88 per cent of GDP. Government debt
comes at a price; this year the government will
spend £41.5 billion on interest.
Is this the end of austerity?
While public attitudes towards austerity have
hardened, the UK’s deficit still stands at £58 billion
and government debt has reached £1.8 trillion. The
government remains committed to eliminating the
deficit and paying down debt, and so a blend of
continued austerity and tax adjustments may be
required.
Public spending in the G7Figure 2. Public spending in the G7
Source: IMF World Economic Outlook, April 2017
PublicspendingasapercentageofGDP
30
35
40
45
50
55
60
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
France
Italy
GermanyGermany
Canada
UK
Japan
US
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6. Citizen lens
The citizen lens examines public attitudes towards the state, informed by a survey of more than 1,000 UK adults from every region and country
of the UK. This lens revealed:
Attitudes towards
austerity have shifted
Support for austerity has halved since 2010
from 59%to 22%
The number of people experiencing austerity has risen
from 27%to 33%
People are uninformed, unconvinced and
unprepared for their own social care
Many wrongly believe social care is free and
provided by the NHS
55%believe it is their responsibility to fund
their care yet only 35%have taken steps
to prepare financially
Support continues to grow for
extending public services – even
if tax rises are needed
The number of people with the view that services
should be extended despite tax implications has grown
from 59%in 2016 to 63%in 2017
Citizens trust government
with their data – as long
as certain rules apply
More people trust government
with data than companies
56%trust government with their personal data
31%trust companies with their personal data
04
7. The public sector lens explores how its leaders see their challenges, informed by interviews with more than 45 senior figures from England,
Northern Ireland, Scotland and Wales. This lens shows:
Public lens
Demand is as much of an issue as austerity
“We’re seeing demand growth outstripping the
growth in resources and outstripping the ability of
business-as-usual savings to bridge the gap.”
Inequality has risen to the top of the agenda
“Everything boils down to having a resilient and inclusive
economy. Inclusivity has become everything.”
Exiting the EU has brought uncertainty – but limited
consequences to date
“People in the media talk about challenges in the workforce. We have
a number of staff anxious about the situation, but not overly so.
The uncertainty is the position. It’s not the thing, it’s the vacuum.”
The boundaries between the public and private sectors
continue to blur
“We need to pause and think about how we want to
transform the public sector with the private sector.
If not, we will have an ever decreasing circle.”
Digital has changed the public sector’s world
“As the world gets more technologically connected, the ability
to affect our lives through tech-related crime gets bigger.”
05
8. 40%reduce
business rates
The business lens reflects on what businesses want from the local public sector, informed by a survey of more than 1,000 UK businesses.
This lens finds:
Collaboration between businesses and
councils is critical to local economic success
Businesses tend to think that the local public
sector does not understand its needs
Most businesses know little or nothing about
what the council does to support them
Businesses are split on their confidence
in councils to attract new business and
investment
Top 3 local business priorities
for councils
Figure 25. Biggest obstacles to local business success
Which two or three, if any, of the following would you say are the biggest obstacles to the success
of your business in general?
Base: 1010 UK businesses (online)
31%
28%
22%
21%
20%
15%
11%
11%
10%
6%
4%
Competition in the market in your area
Late payments/cash flow issues
General regulations/red tape
Taxes
Staff recruitment and skills
Competition from online businesses
Lack of support from government/council
Availability/cost of suitable premises
Accessing finance
Planning/building regulations
Local infrastructure
Top obstacles to local business success
Business lens
28%invest
in town centres
27%invest
directly in local
infrastructure
06
9. Northern Ireland
Much of 2017 has seen Northern Ireland at the forefront of political and economic uncertainty in the UK – uniquely exposed to Brexit and without
a sitting executive. Economically, the country has remained resilient however, numerous factors – not least the border, the strong agri-food sector
and high levels of EU funding – could make Northern Ireland’s economy particularly exposed to Brexit uncertainties in the year ahead.
Factors contributing to increased uncertainty around Brexit
0.3 per cent
first quarter economic growth – higher than UK-wide growth
2.4 per cent
estimated annual growth compared to the UK rate of 2 per cent
High levels of EU funding
The border
Strong agri-food sector
Absence of an Executive has created a leadership vacuum
“Whitehall is listening and they are
reading the material we’re sending in.”
“Without ministers, we’re seeing a slow
degradation of public services.”
“I worry that the civil service has not been
recruiting and we’re getting pretty old…
we’re stagnating as an organisation.”
07
10. Scotland’s maturity as a devolved administration has been rapid. Since devolution twenty years ago, the Scottish Parliament has become embedded
in national life, a dynamic political landscape has been established and the Scottish Government has exercised its independence by charting its own,
distinctive course.
Scotland is a significant
beneficiary of EU funding.
While the country is home to 8.5 per cent of the UK
population, it expected to receive 14 per cent of EU
funding coming into the UK between 2013 and 2020.
Scotland
Priorities
Demand outstripping supply and budgets
Political uncertainty as a result of Brexit
Talent issues
Inequality issues
“It feels like our financial survival is increasingly
dependent on non-recurring sources of
funding. It’s not sustainable. (NHS CEO)”
“We’ve benefitted hugely from EU funding and
we need to know how that will be replaced.”
“Our real problem is coping with growth.
We have to think through everything
from housing to office supply. Everyone’s
got adult growth. We’ve got that plus
more, without any more money.”
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