Author Archives: GK Strategy

By Ioan Phillips, Analyst at GK

If Boris Johnson’s name is linked to any political idea, then it is ‘cakeism’ – the belief that it is possible to govern without making trade-offs. On devolution, the PM’s cake is in danger of toppling over.

Coronavirus has stalled government plans to devolve more powers to English regions while highlighting the limitations of centralisation – especially in healthcare delivery. Health devolution is already under way in places such as Greater Manchester, London, and West Yorkshire. However, the Government is yet to develop a coherent vision as to how this should be applied across England. Expect then to see pressure from local government for greater decentralisation in this area – both in terms of policy-setting and procurement powers.

The pandemic also threw into sharp relief the impact of a decade of austerity on England’s councils. Funding cuts made by central governments meant many struggled to provide vital services, or deal with increased demand for them arising from coronavirus. Although the Government told councils to do “whatever it takes” to protect communities, whether this rhetoric is backed up with a substantial long-term funding uplift remains to be seen. Uncertainty over future funding (particularly regarding the form the UK Shared Prosperity Fund takes), coupled with reductions to income streams as a result of coronavirus, suggests councils will seek to consolidate or enhance existing revenue sources amidst the deepest recession in 300 years.

Over Hadrian’s Wall, the perceived missteps of the UK Government in dealing with the pandemic has brought Scottish independence back to the fore. Polls regularly put public support for it at 50% and above – a recent survey found 53% of Scots in favour. The governing SNP is also polling at record levels. The psephology points to a majority for pro-independence MSPs at next year’s Holyrood elections. This shift in constitutional sentiment has stirred the UK Government into action. A ‘Union Unit’ has been established in Downing Street; the PM frequently challenges the SNP on devolved matters, while Whitehall is said to be planning a spending programme intended to show Scots the advantages of staying in the union.

At the same time, the Government’s framing of post-pandemic economic recovery in strongly unionist terms in its new white paper on the UK internal market is fermenting new tensions with the devolved administrations. Although the UK’s four governments all accept the development of a series of ‘common frameworks’ to harmonise standards and regulation, the UK Government believes it should have sole responsibility for the terms of future trade deals. But the devolved administrations have responsibility for many of the areas – including controversial aspects, such as food standards – that will be covered by future deals. Once the deals are concluded, there is a risk that the devolved administrations could simply refuse to implement parts of them.

The internal market is just the latest example of how the Government is setting itself on a collision course with the devolved administrations. This trend is here to stay – and with it, greater political contestation of policy-making and regulatory powers. The Government’s reluctance to devolve further powers to national legislatures is in sharp contrast to its regionalist ‘levelling up’ mantra. The long-term sustainability of this devolution dualism is questionable, though.

GK Strategy works with many firms operating within what look set to be fluid fiscal, political and regulatory frameworks in the years ahead. Using our extensive knowledge of policy, political, and regulatory trends, we can help investors and businesses to address risks and identify business opportunities at a local, regional or national level.

For more information, please contact Martin Summers, Head of Investor Services, on Martin@gkstrategy.com.

By GK Account Manager and social care policy expert, Jack Sansum

For successive leaders and political parties social care has been politically toxic. From Labour’s 2010 “death tax” to the Tories 2017 “dementia tax”, during the past 22 years, the question of how to improve social care has been explored in 12 “white” or “green” papers or major government consultations, four independent reviews or commissions and numerous parliamentary inquiries.

Indeed, it is now over a year since Boris Johnson stood outside Downing Street promising to “fix the crisis in social care once and for all”. While Johnson previously planned talks within the first 100 days of his administration, aimed at finding a cross-part solution to the issue, the COVID-19 pandemic has turned a medium-term policy goal into an urgent priority.

COVID-19 and the need for a “clear plan”

The COVID-19 crisis has laid out in stark terms the need for social care reform. There have been more than 25,000 excess deaths among care home residents, with care workers having the highest death rate of any occupational group.

A recent report by the Parliamentary Accounts Committee, highlighted that the crisis has revealed the “tragic impact” of delays by successive governments to reform the social care sector. The Committee found that problems in the sector have been compounded by a lack of leadership, accountability, and centralised control for social care. They have called on the Government to publish a “3-point plan” by September, ahead of a potential second wave of COVID-19 infections.

A “Big Bang” blueprint for reform

Reports from Whitehall indicate that Johnson is determined to deliver on his commitment to “tackle the injustice of social care” and to put in place a new funding system to “give every older person the dignity and security they deserve”.

Johnson has drafted in David Cameron’s former policy chief Camilla Cavendish to help finalise these plans, while Rachel Wolf, the policy adviser who co-wrote last year’s Conservative manifesto, has been brought into the Department for Health and Social Care (DHSC) to oversee a “Big Bang” blueprint for reform.

Once such reform could see social care being brough under the control of NHS England, taking responsibility away from councils in England – together with £22.5bn in annual funding. The move, which would swell the health service’s budget to £150bn, would see services commissioned and budgets controlled by embryonic regional integrated care systems (ICSs). However, legislation would be required to implement such a change, with ICSs still to obtain legal standing.

Funding for a reformed system could see those over-40 in the UK pay an increased level of tax to cover the cost of care in later life. Health Secretary Matt Hancock is an advocate of such a plan, however, in order to succeed with plans for reform, Johnson will need to build cross-party consensus with Labour and the Liberal Democrats who are currently seeking assurances from the Government on significant funding increases, changes to immigration rules and the workforce crisis.

A 73^rd year birthday present?

With plans for reform of the sector appearing to finally be back on the agenda in Whitehall, policy proposals are likely to be examined by a new health and social care taskforce and DHSC, providing significant scope for social care providers to shape the structure and mechanisms of the plans.

To engage with the Government’s plans for reform effectively, organisations will need to understand the wider direction of health and social care policy. Health and social care is GK Strategy’s largest policy area and we are expert at supporting organisations who are operating in highly regulated sectors and helping them to navigate complex markets and build relationships with key decision makers.

With the Government signalling its intention to deliver on its commitment to shake up the social care system, there are plenty of opportunities for social care providers to benefit.

For more information or if you would like to speak to the GK team, please contact: Jack Sansum on jack@gkstartegy.com

With the UK and world economy facing unprecedented economic disruption, there has been little peace at Her Majesty’s Treasury for many months now, and the Autumn looks to be just as busy – the Chancellor has promised to deliver a Budget and a multi-year Spending Review, and both (as well as Brexit!) are going to take a great deal of preparation.

The focus of the Budget is likely to be on sustaining and restoring economic growth, in order to prevent a surge in unemployment as the Furlough Scheme ends.  If the economy is sagging again, the Chancellor could consider a reduction in VAT, though the impacts of this might be modest if growth is being suppressed not by consumer incomes but by a second virus surge. Other options include reducing employers national insurance contributions or even (whisper it!) extending the Furlough Scheme for any sectors still “shut down” by COVID-fighting regulations. Extending the Furlough Scheme or “picking sectors” to stay in the scheme are certainly not options the Chancellor wants to adopt, but all bets are off if there is a significant second wave of the virus.

But what about the Spending Review? Given the government is projecting a fiscal deficit this year of mind-boggling size (twice the level of 2009/10, after the financial crisis), you might have thought that the Spending Review would be all about cuts and dividing up the pain. But the Chancellor and Prime Minister don’t want to see a return to austerity – or certainly not yet. They would be worried that spending cuts would drive economic growth back down, and they also appreciate that there is limited appetite for more austerity after ten years of squeezing the public sector. Somewhat surprisingly, therefore, the Chancellor is still planning to set future spending plans (three years worth for current spending, and four for capital spending) in which spending will be rising modestly in real terms – this combination of a massive deficit and higher real spending has only really been experienced previously in war years.

Other than modestly rising real spending, what should we expect from the Review? Well, continued largesse for the NHS and social care, as the government has to write a spending “blank cheque” for COVID related costs and for helping the NHS catch up eventually with the growing backlog of non COVID work. And no doubt there will be significant other public spending pressures from dealing with the pandemic.

But the government can also be expected to use the multi-year settlement to “look beyond” COVID and seek to deliver some of the pledges in its election manifesto. This could include more spending in targeted areas of the education system, perhaps to improve post-16 technical and vocational education and to “level up” opportunity in areas of the country with poor education outcomes. It will also include more infrastructure spending – perhaps targeted towards areas such as the North and Midlands, where the government has both economic and political aspirations. It will be fascinating to see if the Prime Minister’s adviser, Dom Cummings, manages to secure real money and policy substance to back his ambition to spread new science and innovation industries across the country, and out of London and the South-East. How will the government choose to back the “winning sectors” of the future, and can these businesses really be nurtured in the parts of the country that arguably most need the extra investment? And what of the pledge to back the zero carbon businesses of the future? How will that be realised?

The Spending Review also pledges to look at the way in which central government delivers public services and infrastructure. Whitehall civil servants will be looking nervously at what this might mean. Will the civil service be dramatically “re-purposed”? Will more powers be devolved from Whitehall and Westminster?

As well as announcing all the “positives” about extra spending on health, education, science and infrastructure, we need to look at what the government does about some of the more challenging items in the Chancellor’s inbox. Will there be a serious attempt to properly fund social care and to re-consider the split of social care costs between the private and public purse? Will the Chancellor signal a move away from the state pension “triple lock”, which could be very expensive over the next few decades? How can a government so dependent on pensioner votes cut back on future pension related costs?

We also know that in spite of the current growth in public sector wages, the Treasury will want to reduce public sector settlements in 2021 and beyond, to help control public spending and avoid public sector wages moving above those in the private sector. With inflation likely to be very low, private sector wage growth could collapse, requiring some much tougher public sector settlements.

In this year’s Spending Review there will be relatively little of the pain and anguish that have characterised other such reviews since 2010. But with the public sector deficit surging to 15-20% of GDP, the pain cannot be delayed indefinitely. There is a reckoning to come on taxes and spending. But not for now.