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A Better Recovery

Learning the lessons of the corona crisis to create a stronger, fairer economy
Report type
Research and reports
Issue date
Chapter 4: Rebuilding public services

The Coronavirus crisis has exposed the damage that a decade of austerity has inflicted on our public services. While the NHS has held up thanks to heroic efforts from staff, the social care sector is struggling with the devastating impact of years of cuts and neglect. Encouraged by the Secretary of State to do ‘whatever it takes,’ local government has pulled out all the stops to protect vulnerable people, including housing the homeless, and to keep vital services like waste disposal running. It now faces a huge funding crisis, as the cost of additional need and reduced revenue from business rates and other funding streams hit a sector already desperately short of cash.

But the experience of the pandemic has also showed us how much we rely on and value our public services, and the public servants who deliver them. Months of clapping for carers must be followed by years of investment, enabling a secure and decently paid workforce to deliver the services we need now more than ever.

As we emerge from the crisis, government must not only ensure we recover from the pandemic and reward those workers who saved us from far worse, but also undo the damage of the decade of austerity that left us so underprepared.

A pay rise for public sector workers

Four in ten key workers, including many who deliver public services, earn less than £10 an hour. Public sector workers, including those on the frontline of fighting Covid-19, are still being paid less today than they were a decade ago.

In real terms (that is after adjusting for inflation), average public sector pay is still £900 lower today than it was in 2010.

And for many the picture is even worse. For example, in real terms:

  • Nurses and community nurses (NHS band 5) are more than £3,000 worse off today than they were in 2010.
  • Residential care workers employed by local government are nearly £1,900 worse off.
  • Ambulance services drivers are £1,605 worse off.

Public sector workers need a pay rise

  • Government must reward workers for the huge sacrifices they have made by awarding them fair pay rises that restore what they have lost through ten years of cuts and slow growth.

A new settlement for social care

Social care workers were already facing some of the worst working conditions in the UK. More than seven in ten care workers and home carers – that is, over half a million people - earn less than £10 an hour and a quarter of the social care workforce are on zero-hour contracts. Even before the pandemic, there were 120,000 vacancies in the care sector and staff turnover was 30 per cent.

The way social care is delivered is broken. Decades of outsourcing means the market is hugely fragmented, with local authorities currently commissioning to over 20,000 different providers. This drives down costs below sustainable levels, encourages short-term contacts that may not deliver the care a person needs and removes democratic accountability.

Care workers have been at the forefront of tackling the virus, with responsibility for caring for some of society’s most vulnerable people. Yet they have continued to be treated as the poor cousin of the NHS, battling rising infection rates as NHS beds are reserved for younger patients, and facing some of the most acute shortages of PPE and testing. Decades of fragmentation and privatisation have come to a head, as ministers have struggled to get a handle on the crisis in social care. With care providers left to fend for themselves, competing with each other to procure PPE in a sellers’ market, overstretched local authorities have been forced to step in to help coordinate the crisis response.

The pandemic has pushed the social care system to the brink and exposed the weaknesses of a fragmented and underfunded sector; this must mark a turning point to establish a new settlement for social care . [1]

A new settlement for social care

  • We need an integrated health and social care system that is democratically accountable, has genuine parity of esteem with the NHS and is able to enforce sector-wide standards for both service users and workers.
  • The government needs to work with unions, employers, commissioners, and providers to develop a care sector workforce strategy that supports standards, productivity and workforce development. This requires investment in training and formal skills accreditation to enable proper career progression, and a pay and grading structure to fairly reward their complex skills – the only way to ensure workers are valued – and paid – at the level of other comparable public services.
  • The government must make good its manifesto commitment to deliver long-term funding for the social care sector to offset the damage done by cuts to essential services and austerity.

A new funding settlement for local government, the NHS and across public services

Local government

After a decade of public sector cuts that have pushed local authorities – and the essential services they provide – to crisis point, the extra pressures created by the pandemic, coupled with drying up income streams, are tipping councils to the verge of collapse. The decisions government makes as we emerge from the health crisis to deal with an economic crisis could be make or break for many local authorities.

In November, TUC research found that local councils had been forced to cut billions of pounds from essential services due to reductions in funding from central government. It showed that in 2010/11, upper tier and unitary local authorities in England were spending a total of £49.3bn on key services such as social care, waste management, libraries and transport. But in 2018/2019, following years of funding cuts, spending had fallen to £41.4bn. This works out to 20 per cent (£135) less being spent on services per person. [2]

The government introduced a range of new powers and duties for local authorities in the Coronavirus Act 2020, including for social care, housing rough sleepers, fire and rescue and educational functions to protect vulnerable children. The government has promised local authorities £3.2bn to support them to carry out these additional responsibilities. But survey responses from more than 50 councils suggests this figure [3] would only cover one quarter of the estimated financial impact of the crisis for councils with adult social care responsibilities. [4] Councils are also losing vast amounts of income due to a reduction in use of their assets, such as car parks and commercial properties. This shrinkage will likely last beyond the immediate lockdown period, having further knock-on effects on council budgets. With inadequate emergency funding and catastrophic losses to their income streams, councils have warned that unless funding gaps are met, many will have no choice but to declare bankruptcy. [5]

Demand for local authority services was already far outstripping the resources available to deliver them before the pandemic. In September 2019, the New Economics Foundation published research, commissioned by the TUC, which projected that, under the current spending plans, local authorities would face a funding gap of £24.5bn by 2024/25 if they were to try and provide the level of service provision available in 2010. The North West, the most deprived region, will face cuts of £535 a head by the end of the period. [6] Any funding settlement for local government must be based on need, ensuring a fair and equitable distribution of funds that does not favour one structure of council over another, and seeks to tackle deprivation and inequalities in all areas of the country.


While the NHS has been relatively protected from austerity compared to other public services, current funding levels fall far short of what is needed.

In the March 2020 budget, the Chancellor announced an extra £6bn of health funding over the course of this parliament. This represents an increase of health spending of 3.4 per cent in 2020/21. This is just about enough to maintain pre-Coronavirus crisis levels of service but does not address long-term staff shortages or the backlog of essential capital spending and doesn’t allow for investment in service transformation under the Long-Term Plan. It falls short of the four per cent annual increase that the Institute for Fiscal Studies has estimated is necessary to allow services to improve. [7]


Under current spending plans announced in the spring budget, 80 per cent of state schools will have less funding per pupil next year than in 2015 when schools began to face real terms spending cuts.

Measuring the increased costs that schools face in terms of pay, pension, national insurance, national minimum wage, apprenticeship levy and non-staff spending over the lifetime of this parliament, analysis by unions representing school staff found that, even with the announcement of more funding for schools, it is estimated that a further £9.7bn funding will be required in order to address shortfalls across core school funding, pupil premium, early years, 16-19 and high needs education.

This has a very real impact on pupils and staff in schools across the country. According to a survey by the National Governors Association in 2019 [8] :

  • More than three quarters of respondents said that they are not confident that funding pressures can be managed without any adverse impact on the quality of education provided in their school.
  • 78 per cent of governors said their school did not have enough funding to meet the needs of their SEND pupils.
  • 16 per cent said their school had reduced pastoral support due to funding constraints and 61 per cent did not have enough money to support pupils from disadvantaged backgrounds.
  • Over half said that their school had reduced the number of support staff and just under a third had reduced the number of teaching staff.

If we are to equip young people to meet the future demands of the UK and its economy, investing in our schools must be a priority. Additional funding for schools has been announced but falls short of what is needed. We need a long-term funding settlement that provides additional funding for schools that meets the scale of the challenge.

Adequate funding of public services

  • To address the chronic under-funding of our public services, the government must deliver a new funding settlement for the NHS, local government, education and across public services.

Ending the outsourcing of public services

Trade unions have long-held concerns about the policy and practice of public procurement and outsourcing in the UK. In many cases, the contracting-out of public services and public procurement has led to damaging price-based competition and a race to the bottom on pay and employment standards, the dysfunctional fragmentation of supply chains and the off-shoring of large parts of our productive capacity.

The Covid-19 pandemic has brought this into sharp focus. Years of marketisation and outsourcing has led to a precarious, two-tier public service workforce and fragile supply chains. The dangers of a two-tier workforce are exemplified by outsourced workers being forced to choose between following government advice to isolate and being able to put food on the table. Decades of outsourcing and offshoring in the name of cost-cutting have created fractured and unwieldy supply chains, the true cost of which has been felt not just in suppliers’ ability to inflate prices, but in the stark failures to provide PPE for frontline workers, with often tragic consequences. The integrity of our public services has been weakened, putting the safety and security they offer the public at risk.

We need to put the public interest back at the heart of public service delivery. A new approach to commissioning and public procurement must make in-house provision the default, unless there is a demonstrable public interest case for other forms of provision. Where services are commissioned, this must be done in a way that promotes high service delivery and employment standards and be subject to transparency and accountability requirements.

We need the following measures:

  • Public sector organisations should adopt a policy of all service provision being publicly managed ‘in-house’ by default and only outsource where there is a strong public interest for doing so. Existing contracts should be reviewed with a view to renegotiating and/or terminating such contracts where this is demonstrably in the public interest.
  • All commissioning decisions should be based on a public interest test, with clear, measurable “make or buy” criteria to ensure the delivery mechanism chosen best promotes:
    • a public service ethos
    • accountability to service users and elected representatives
    • value for money in the round
    • quality service standards
    • long-term sustainability of the service
    • high-quality employment conditions, pay and pensions
    • integration of services.
  • Where there is a public interest case for going to the market, a social value procurement strategy should be put in place across the public sector and voluntary agreements and charters, promoted by trade unions and others, used to promote high quality service delivery and decent employment standards.
  • Public procurement practices must deliver greater accountability and transparency in our public services. All providers of public services must be subject to the Freedom of Information Act and be required to make full details of contracts, supply chains and company information public.
  • A comprehensive list of all significant contracts across the public sector should be compiled and a clearing house created to evaluate their performance - this could be a public services commission, an enhanced National Audit Office or a new regulator.

[1] Kathryn Mackridge (November 2019) Three Ways To Solve The Social Care Crisis

[3] Only £1.6 billion of additional government support had been announced at the time of the survey in April 2020

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