The 2020 Public Services Trust Blog

Will Hutton’s article in Sunday’s Observer is definitely worth reading – as is the report it cites, from the Commission on the Measurement of Economic Performance and Social Progress.  He talks about how Professors Joe Stiglitz and Amartya Sen have led an investigation into a set of indicators for wellbeing and sustainability, that measures wellbeing across a variety of dimensions (some economic, some non-market). As the report puts it, developing

“a statistical system that complements measures of market activity by measures centred on peoples well-being and by measures that capture market sustainability. “

At the root of the exercise is a conviction that a true measure of national wellbeing cannot be captured by GDP – not necessarily a new argument, but fair play to Nicolas Sarkozy for actually starting a process to find an alternative set of measures.

Whether Sarkozy succeeds in pushing these new indicators at the multinationals in which he has any influence, the intellectual weight of Stiglitz and Sen (the Waddle and Hoddle of development studies) should force a few people to re-think the value of certain economic activities we might assume serve a higher national purpose.  It should also remind us that the informal, ‘soft’ contributions people make to society – caring, supporting, communicating – should be valued (and therefore measured) as well as consumer spending and economic productivity.

A multi-dimensional measure of wellbeing and sustainability would also force us to unpick some potentially uncomfortable assumptions about our liberal market economy.  Will Hutton suggests that ‘the question that would be asked of banks after the credit crunch is how they promote economic performance, social progress and well-being’.  And if Lord Adair Turner’s recent comments are anything to go by, this would require some pretty creative thinking.

Goran Persson has been in town this week, hosted by the Institute for Government. He was the Swedish Finance Minister and then the Swedish Prime Minister from 1994 until 2006, a period during which public debt was halved. When Persson became Finance Minister public debt was running at 80% and threatening to derail Sweden, by pursuing a determined strategy of fiscal prudence he brought debt down to a more comfortable level of 40%.

Not surprisingly, his experience is of interest to those who are faced with the same political challenge in Britain. More surprising, however, is that although Persson was a leader firmly in the tradition of Swedish social democracy, it was senior Conservative politicians and advisers who seemed more interested in what he had to say than their opposite numbers in the Labour Government.

Whilst much of what Persson had to say will have been music to Conservative ears, there were some messages which may well have furrowed brows.  They will have been reassured to hear Persson’s emphatic view that faced with debt levels of this scale, debt reduction should be the number one priority.  They will have been especially pleased to hear his view that the risk of not cutting debt quickly is greater in terms of the damage it could inflict on the economy through higher interest rates and escalating debt charges than the risk of stalling a fragile recovery through the removal of fiscal impetus.

But of more concern to Conservative strategists will have been his message that it is important to be very specific in the run-up to the election, with detailed manifesto plans setting out how debt will be reduced.  As a social democrat he was also very clear in his view that pain should be shared equally and that this necessitates progressive tax rises.

But the most striking lesson of all, which is also true for Canada, whose debt reduction approach in the same era has already generated much interest in Britain, is that the debt reduction strategy was successful because this was the single overriding imperative for government.  Here an incoming Conservative Government could be faced with a big strategic dilemma.

Before the credit crunch the progressive Conservative project was to rebuild ‘Broken Britain’ through reforming public services and moving towards a localised, choice based, outcome orientated post-bureaucratic state.  Examples of this approach include the free schools policies of Michael Gove, a refocusing of offender management towards a more liberal emphasis on rehabilitation; and giving Councils a new power of general competence, with referendums on city mayors.

But since then we have had the banking collapse and the credit crunch.  The Conservatives have effectively led the charge against the Government on public sector debt and George Osborne has dubbed the new world we face as “the era of austerity”.  Oliver Letwin, the Conservative manifesto chief, in his interview with BBC News Online maintains that both progressive reform and debt reduction will still be central to Conservative strategy.

But it is very difficult in politics to ride two horses at once. Whitehall and the media tend to respond only to one policy direction at a time, and the Conservatives could run the risk of either looking confused or causing confusion if they try to run in two different directions simultaneously.

The Whitehall assumption will be that the post-bureaucratic state is just interesting froth and senior civil servants are already beginning to prepare for what they see as being the priority for a new government – managing a programme of across the board cost-reduction. The Whitehall establishment is much more comfortable with this strategic priority than they are with fundamental reform. They know how to cut, just as they know how to spend, the processes already exist. Reform to the state is a very different matter, not least because it would take power away from the centre of Whitehall.

If the Conservatives are serious about both wanting to reform as well as cut, then they will have to develop a strategy and narrative which links the two into one overall approach.  Labour tried to do this with the mantra “invest and reform”, but this was more a message than a strategy and the link between the two was never entirely clear, so that reform became a much more serious component of the approach after 2005, by which time the rate of investment increase was starting to slow.

A strategy of ‘cut and reform’ is hard to deliver for two reasons.  It’s a difficult sell because the motives behind reducing the role of the state will be much more questioned at a time of cuts than of increases in spending.  And it’s hard to make long term reform stack up when the emphasis is on cost reduction, because the reform elements of a Conservative programme would in the short term be at best cost-neutral, even if in the long term they may generate savings.  When you need to generate savings of between 10-14% across all government departments, apart from health and oversees aid, this could be a big problem.

Yet it is vital that politicians across all parties start to address Britain’s dilemma of how to simultaneously cut costs and recast public services and the welfare state. This is because whilst debt may seem the biggest issue at the moment, the longer term challenges facing Britain are arguably far more daunting.  These are how to respond to an ageing society with a big rise in chronic health conditions to manage, how to cut carbon emissions by 80% over the next four decades, how to reverse social polarisation and how to stay economically competitive in a world where economic power is moving east.  The challenge for any future government which wants to stay in power beyond one term will be to develop a vision and strategy which combines fiscal stability with creating a more resilient society, based on a new settlement between citizen, society and state.

I went to a seminar this morning co-hosted by 2020 Public Services Trust and ACEVO called “Personalisation in education and welfare – next steps”. The point that particularly struck me was one raised by Matthew Pike about using personalisation not only for remediation but also for extension and enrichment.

I think most people agree that tailoring services to meet individual need is a good idea. But there is a problem in the way personalisation is currently conceived. Alison Wolf made the point that the state’s default position is generally a top-down approach to service delivery. Only when this doesn’t achieve the outcomes sought is the question of personalisation explored. So people who have been unemployed for less than 12 months receive a standardised service from a monopoly provider, and children who are getting average or good grades at school are left in the standard classroom.

Unfortunately, this use of personalisation simply to remediate a problem that cannot be solved through the uniform delivery of a service drastically reduces its scope for improving outcomes across the spectrum. Matthew brought some statistics to the table which really hammered this home to me: while 20% of children are not attaining acceptable standards at school, and many of them do receive some sort of additional service to try to raise their level of achievement, 40% of children are considered gifted in one subject, the majority of which do not receive any encouragement to go further.

In fact, speaking from personal experience, many of these “gifted” children are actually discouraged from advancing beyond their year level. I spent one year of primary school in Britain at an age when most of the children in my class were still learning the alphabet. Having previously been educated in Canada where reading is taught at an earlier age, I was already reading short novels. I remember being taken as a class to the school library to pick out a book and perusing the shelves containing longer story books and being told off by the teacher that “Those shelves are not for Year 2 pupils!”

I do believe that personalising services is one way of avoiding situations like that. I also recognise the issues surrounding personalisation, one of which is that it may potentially increase pre-existing inequalities. Personalisation, which is fundamentally about people receiving different services according to what they think they need, entails people making decisions and pursuing what they think is best for them, and some groups are more motivated or better equipped to do this than others. But rather than limiting the use of personalisation to remediation and lifting up the tail of the bell curve, why not use it to enrich and shift the whole curve to the right?

I’ve just got back from Reform’s launch ‘Tackling the fiscal crisis: A recovery plan for the UK’ by Vince Cable MP. In this well reasoned and balanced pamphlet, the Deputy Leader of the Liberal Democrats argues for a bold approach to cutting the public deficit by 8% within 5 years.

Vince Cable’s ideas are based on the premise that a public deficit of 13% is too high. Moreover, it is a structural deficit – the increase in public spending of 40% since 1997 has been built on the “unstable and impermanent” UK financial sector and housing market. While he accepts that tackling the stock level of debt (as a proportion of GDP) is not a matter of immediate urgency, Cable asserts that the deficit and debt levels need to be reduced as soon as it is timely to do so (i.e. when it will not jeopardise recovery).

Meeting a challenge of such scale must not be rushed, argues Cable. It must be done right. He offers five principles for change:
1.  Zero-based budgeting – nothing is sacrosanct; departments will have to defend every aspect of spending.
2.  Democratic accountability – Parliament should be able to scrutinise public spending plans before they are implemented, not just after via the National Audit Office.
3.  Localism – local government should be free from excessive central government bureaucratic oversight. They should be given revenue raising power, especially over business rates.
4.  Transparency – public spending by the civil service and quangos should be readily scrutinised.
5.  Public sector reform – focus should be on value for money and outcomes, not input targets or meaningless talk of ‘efficiency’.

Whilst all these principles are right and laudable in theory and Vince Cable offers some sensible policy suggestions as a result, they pose considerable problems in practice.

For example, zero-based budgeting has the potential to lead to siloed rather than strategic resource allocation, as each department tries to defend his own (possibly for reasons of salary incentives and empire building rather than the public interest). Decentralisation has proved notoriously been talked of, tried and failed, largely a result of the centralised UK political culture. And what of the implications of cutting back education or NHS spending? As one member of the audience asked this morning, will we be going back 10 years to long waiting lists and people lying untreated in hospital corridors? Or, as Vince Cable himself acknowledges, might the quality of public services fall under the guise of so-called productivity gains (e.g. via doubling of class sizes, or reducing the number of HE tutorials)?

Whilst going further to inject sense and honesty into the debate than has been offered by the other two main parties, the overwhelming critique I have of this paper is its limited reference to the growing demand for health care, social services and education (see my blog yesterday). If we take these into account and – as Vince Cable argues – we have to tackle the national debt and deficit sooner rather than later by cutting public spending, our situation looks even graver still.

Courage will be needed to tackle this head-on, and it must start with a fundamental change in the relationships between the citizen, communities, local and central government. We need to be bold to avoid this otherwise impending black hole for public services.

According to yesterday’s poll by YouGov on behalf of Policy Exchange, the primary public concern is to reduce the size of the national debt. Speaking last night on BBC Radio 4’s Westminster Hour, the Director of Policy Exchange said that people are no longer willing to stomach tax rises to combat the spending deficit and welfare payments top the list of prospective cost cuts.

However, as Will Hutton argued in the Observer yesterday, the size of the national debt should not our primary concern. Although the views of the public should be taken into serious, meaningful account, scare tactics about arbitrary and abstract debt levels cloud the debate. Hutton reminds that “since 1750 the national debt has always been proportionally higher than [80%], except for two 40-year periods – one at the end of the 19th century and the other from the 1970s until now.” In fact, “[p]eriods when the over-riding preoccupation has been lowering the national debt have coincided with industrial, economic and strategic decline. So it will again.” Cutting welfare and spending on public services to reduce debt is an attempt to solve an imaginary problem. Doing so will make the genuine reality a whole lot worse, particularly as unemployment continues to bite.

Instead of cutting debt soon and fast, we should invest in transforming our public services so that they are fit for the needs of citizens now and in the medium to long term. Our research has shown that while the fiscal situation is critical and should inform much of the context and impetus for reform, there are other significant drivers: climate change, an ageing society and the rise of chronic health conditions to name just three. The costs of meeting the demands upon our public services are increasing and the current model of delivery is buckling under their weight.

Now is not the time to cut spending for the sake of an arbitrary magic number – our economy can and will thrive at a debt level of 80% or even 100%. Instead, let’s seize the day and dare to think the unthinkable – a radical re-imagining is needed to deal with the bigger issues at stake.