Rules that favour spending on physical infrastructure over the public sector workforce should be overhauled
The UK’s public services are in a state of near-collapse. Increased spending on health, care and social security is desperately needed, as the latest shocking poverty figures make painfully obvious. But while the NHS regularly tops voters’ lists of concerns, and a majority of the public favours higher spending, most people do not pay much attention to the technical details of government accounting. In the run-up to an election and spending review, this should change. Rules as well as figures require scrutiny. Rachel Reeves’s commitment to the principle that a Labour government should borrow to invest – but not otherwise – should concern everyone who wants to see the NHS, and the public realm more generally, restored.
So should the Treasury’s definition of investment. Traditionally, this refers to capital projects such as new transport links, hospital buildings or energy infrastructure. The point is that these are understood to provide long-term benefits that extend beyond service users to the wider economy. By contrast, and according to international accounting conventions, public money spent on salaries and other running costs comes under the heading of day-to-day (or current) expenditure. What this means, in practical terms, is that it is sometimes easier to get funding for a big scheme such as HS2 than for pay packets.
