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The big picture: Using funding trends to understand the response to COVID-19

12 February 2021
  • This blog looks at some long-term spending trends and their implications for understanding the COVID-19 response in Wales and comparing around the UK. 

    We’re in the middle of a global pandemic and you’re putting out a blog about public spending since 1999? What are you thinking?

    My short, wanna-be-Yoda-like answer is: “to understand why we are where we are and where we are going, we must look at where we have come from.” The philosopher Søren Kierkegaard puts it better: “Life can only be understood backwards; but it must be lived forwards.”

    We often see the COVID-19 pandemic as a story of numbers at a point in time. Daily cases, patients in hospital, intensive care occupancy and deaths. Weekly averages of cases per 100,000. And now, on the flip side, the positive story is one of daily and weekly numbers of people receiving vaccinations.

    Behind those numbers lies a story of capacity. Of staff capacity: to deliver tests, to care for patients and to administer vaccines. It’s also a story of physical capacity: hospital beds, wards, morgues, vaccination centres.

    Of course, the pandemic story is not just about NHS capacity. Social care has faced the brunt of the pandemic, as it cares for many of the people most vulnerable to the virus.

    Schools have also been at the frontline: first to open and last to close. Schools are having to adapt their staffing and physical capacity to continue to provide education and accommodate the children of key workers while keeping pupils and staff safe.

    That’s all well and good, but what has capacity got to do with spending trends since 1999?

    The bottom line is that capacity costs money. The capacity in place across public services when COVID-19 hit reflected patterns of spending decisions going back over time.

    There have been significant increases in spending during 2020-21 to support the response to the pandemic. We’ll know more about the scale and nature of that spending when the Welsh Government publishes its third supplementary budget for 2020-21.

    However, as a general rule, staffing capacity and physical infrastructure is difficult to muster up quickly. Nurses, teachers, doctors and other professionals take years to train and develop. Normally, buildings take years to build. During the pandemic, the NHS has used existing infrastructure, some in the private sector, to create temporary field hospitals. But these are of little use if there are not sufficient staff to treat people in their walls.

    That, in a nutshell, is why it’s important to look backwards at where we have come from and the track we’ve been on; and to use that to inform thinking about what a better, more resilient future may involve.

    To help set out some of this wider context, we have updated our Public Spending data tool [opens in new window]. That tool is based on an Office for National Statistics dataset, comparing spending trends in Wales, Scotland, England, and Northern Ireland.

    OK, so what do these longer-term patterns of spending tell us?

    When we first reported on this dataset in 2019, the Auditor General described some of the trends as ‘interesting and perhaps unexpected’. Why so? Well, although our data tool compares spend across all four nations, in large part it’s the comparison to England that’s of particular interest.  

    Why single out England? There are many reasons, the most pertinent being that the Barnett formula makes spending in England the benchmark that determines funding for devolved services.

    Wales gets more funding per head of population than England. At present that equates to around £1.20 to spend on devolved services for every £1 spent in England on equivalent services.  

    The ‘interesting and perhaps unexpected’ aspect is that higher levels of funding have not been matched by equivalent levels of spending on the biggest areas: health and education. As the chart below shows, at no point over the period of devolution has spending on health or education compared to England matched the relative level of funding. Early in the last decade spending on health per head of population almost reached parity with England, despite Wales having much higher levels of health need. Spending per head on health has grown faster since then.

    Funding levels and spending on health and education per head of population, compared to England (England = 100)

    Line graph showing funding levels compared with England
    Note: The red line shows the relative funding level compared to England, for example in 2017-18, Wales had £1.20 funding for each £1 for equivalent services in England.
    Sources: ONS Country and Regional Trends dataset (spend); HM Treasury and Welsh Government Fiscal Framework (funding)

    The flip side is that spending in Wales has been significantly higher than England, per head, on services other than health and education. For example, spending per head in Wales on economic development and culture and recreation has been consistently and significantly higher than England and the relative funding.

    The Welsh Government has, of course, been free to set its own spending priorities over the period of devolution. Indeed, that is the whole point of devolution – the ability to make different choices to reflect local needs.

    However, when we evaluate how well public services have delivered on policies, programmes and priorities, we have to be mindful of the fact that these big spending choices shape the context and the practical constraints on public services. This wider context is particularly important where we seek to understand and compare public services’ performance across the UK.

    So where can I see more about these important longer-term spending trends?

    Glad you asked. You can see these trends in our updated Public Spending data tool [opens in new window]. We are also preparing a new Picture of Public Services report which will aim to summarise some of the key issues for public services, looking at: resilience pre-pandemic, the pandemic response and key challenges and opportunities for the future as public services look to recover from this period of crisis.

    About the author:

    Mark Jeffs is an Audit Manager in the National Studies Team. He currently manages a range of value for money studies, including studies on the supply and procurement of PPE during the COVID-19 pandemic, fuel poverty, Brexit and our Picture of Public Services work. He has been with Audit Wales and predecessor bodies since 2004.