Since its defeat in 2010, public service reform has been the black hole in Labour’s internal debate. Next week, at last, we can expect some colour, with Ed Miliband’s first major speech on the subject, Jon Cruddas entering the fray, and Liz Kendall launching the IPPR’s report on the ‘relational state’.
Over the past three years, we have heard a lot about what Labour is against in terms of public services – cuts, the Tories’ hugely wasteful reorganisation of the NHS, and Michael Gove’s free schools – but precious little about what it is for. There are some honorable exceptions: Kendall has been energetically pushing the case for new thinking about social care, both in terms of what the state should provide and how it should be delivered. Lucy Powell has spent her first few months as shadow childcare minister upping Labour’s tempo on the subject. And, since being elected to parliament in late 2012, Steve Reed has brought to Westminster the zeal he showed as leader of Lambeth council for pushing power out of the town hall to local communities.
But what is the big picture we should be looking for Labour’s leader to paint next week?
First, we need to hear something about Labour’s priorities. As the Institute for Fiscal Studies warned this week, despite the economic recovery, whoever wins the next general election will be forced to make the deepest cuts since 1948 to Whitehall, local government and welfare spending. Indeed, as the IFS went on to suggest, we still have not seen the worst of austerity: by the end of this financial year 60 per cent of planned spending cuts will be yet to come. Demographic pressures will add to this challenge. Because of the rising number of people over 65, even if the NHS budget continues to be frozen in real terms, real age-adjusted health spending per person will be nine per cent lower in 2018-19 than it was in 2010-11.
Nonetheless, as Patrick Diamond notes in the latest issue of Progress, at the end of the current spending review period in 2017-8, public spending as a proportion of national income will be at the same level as it was in 2003-4, midway through Labour’s second term in government.
Labour thus needs to begin to indicate how it will shift public spending towards its priorities. As Kendall argued in her chapter in The Purple Book in 2011, investment in schools and hospitals was given priority by the last Labour government. The next should prioritise investment in childcare and social care. As the experience of the Nordic countries suggests, high-quality universal childcare is a win-win: for the Treasury, women and their children, and society as a whole. It increases the female rate of employment, thus helping to underpin the sustainability of the welfare state at a time when the population is ageing; shrinks the gender pay gap and helps more women provide for their retirement; and reduces child poverty while boosting social mobility. Similarly, investing in improved social care services not only increases the wellbeing and independence of elderly people, it also helps relieve heavy financial pressures on the NHS by delaying the need for costly high-intensity or institutional care.
If Labour wishes to be bold, it must also be politically brave. Since the early 2000s, for instance, spending on pensioner benefits has risen by 37 per cent. Means-testing benefits such as winter fuel allowance, free TV licences and free bus travel for affluent elderly people would raise over £2bn per annum. Although this would be a largely symbolic move – shifting this £2bn would still leave the government to find another £5bn a year if it wanted to create universal, Nordic-style childcare – it would dramatise that Labour is willing to fight for its priorities by taking on a politically powerful section of the electorate: wealthy pensioners.
Second, we need to hear something about Labour’s philosophy. We have heard much from the Labour leader about the new kind of capitalism he wants to create. And we have recently been told about his inspiration: Theodore Roosevelt, whose ‘trust-busting’ took on the great oil and railroad monopolies in early 20th century America. Now we need to hear from him about the new kind of state he wants to build. For, while Miliband is surely right that public trust in the banks and energy companies is at rock bottom, the voters’ faith in government is not much higher, either. This poses a particular challenge and responsibility for the left; for the right, in fact, suspicion of the efficacy of state action merely serves its ideological ends. As Bill Clinton argued in the early 1990s after the Democrats had been defeated in three successive presidential elections, ‘those who believe in government have an obligation to reinvent government to make it work.’
There is, indeed, a political and philosophical link between this agenda and Miliband’s desire to change the way the British economy works and who it rewards. Politically, as my introduction to The Purple Book argued, there is strong evidence to show that public concern about concentrations of power in the economy is mirrored by a lack of belief that the state can operate as a counterweight. Thus, for Labour to win its argument about reforming the market, it first needs to prove that it is capable of reforming the state. The philosophical link is one that Cruddas instinctively understands. As he told the Local Government Association last year: ‘Our country has suffered from decades of excessive centralisation in the market and the state. People feel that their opinions are ignored and their interests as workers and citizens excluded.’
By talking about his reform agenda in terms of power – and the need to bust concentrations of it in both the state and the market – Miliband can show that Labour’s concern with vested interests goes beyond the boardrooms to the public sector bureaucracies. Statism has dominated Labour’s discourse for much of the postwar period, now it Miliband’s chance to disinter the party’s ‘decentralist tradition’, that of: the cooperative and mutual movements; of the municipal ‘gas and water socialism’ of the interwar years; of GDH Cole, Robert Owen and the Rochdale Pioneers. It is an old tradition that is right for new times: one that replaces the notion that Labour should grab the reins of Whitehall with the idea, as Purple Book author Paul Richards put it, that its task is to ‘create new centres of governance, power and wealth creation, as alternatives to both the centralised state and the private sector’.
Finally, we need to hear something about how Labour will turn that governing philosophy into practical policy. As Nick Pearce, director of IPPR, outlines in the current edition of Progress, Labour should advocate a major devolution of powers to local authorities and city-regions: on economic development, skills and apprenticeship funding, welfare-to-work services, schools commissioning and house building. That should be accompanied by a move towards long-term budgets. Given certainty over spending for a five-year period, local areas can realise efficiencies by integrating services and shifting investment into preventative services.
Some powers will rest well with existing local authorities, some need to go to city-regions. But more power for the big five city conurbations beyond London – Greater Birmingham, Greater Leeds, Greater Liverpool, Greater Manchester, and Greater Newcastle – should not mean more power for unelected quangos. Instead, we need to revisit the question of directly elected mayors with real powers. And, if Labour is serious about giving local authorities more power, ways need to be found to ensure that more of what they spend is raised locally. That must not mean increased taxation but a shift in the balance of taxation from national government to local government.
But, as The Purple Book argued, Labour’s agenda for public service reform must not simply be about empowering institutions, albeit ones that are closer to people. Instead, the party needs to show that it is serious about empowering public services users. The use of mutuals and cooperatives – owned by staff, users and local communities – to deliver new child and social care services, sure start and primary care should be encouraged and incentivised. Micromutuals of personal budget holders should also be assisted so that users can gain strengthened purchasing power through their pooled resources.
Citizens should also have new rights where services are failing. If, for instance, schools fail to meet minimum attainment standards for three successive years, parents should have the right to trigger a competition to bring in new providers. In schools that are officially assessed as poor, parents should have the right to choose an alternative state school, armed with an education credit worth 150 per cent of the cost of educating their child in their current school.
Finally, while some on Labour’s frontbench now decry the alleged ‘marketisation’ of the NHS over which the last government allegedly presided, we should not forget that the positive impact of patient choice and managed competition. Studying the effect of Labour’s policies, Zack Cooper of the London School of Economics concluded: ‘Publishing data on how hospitals are performing, and allowing every patient in England to go to the best hospitals in the country, improves standards across the NHS.’ Moreover, research by the University of York showed Labour’s approach had not harmed the vital principle of equity, either.
Given the wrangling over academies, foundation hospitals and patient choice which marked Labour’s time in office, Miliband’s apparent desire to avoid the subject of public service reform was understandable but it was also misplaced. A party serious about power cannot stay silent about its vision for the nation’s public services.
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Robert Philpot is director of Progress. He tweets @Robert_Philpot
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The Tories big failure on the NHS was not “marketisation” but the lack of introduction of greater patient choice in the new commissioning processes. The only way the NHS can survive in the long term is to reduce the cost of acute care by allowing/encouraging providers, including GPs to offer a far greater range of clinical services that are currently monopolised, unnecessarily, by acute trusts.
Which clinical servicdes are monopolised by acute trusts? I see no clamour form the private sector to rush into stroke care at ts most critical period. Are the private sector geared up to cope with the first 48 hours of cardiac arrest? And which GPs exactly would want to handle acute services proper to hospitals? Yes we need to ensure what can be done at the first level by GPs is so done, but they should not assert a right to do what is more properly done in centralised hospitals with the full range of supporting services.
I would have thought the big failure – I don’t allocate blame, others can do that – is to introduce the internal markets which involve massive exercises in artificial book-keeping – to what end, exactly? Go back 50 years and there were fewer accounting clerks, monetairsing each stage of an NHS encounter.
The biggest problem in our public services is that in the rush from the Man In Whitehall Knows Best, we have also destroyed the lines of accountability which local and national public civil servants running public services directly entailed. We have created arms-length bodies to run housing, education, parts of the NHS, etc. and disempowered local authorities whilst still leaving them with responsiblitiy, and cheered through referendum hoops.(despite council tax only provising a small minority of council revenue). In short, refusal to let go of power from the centre is the biggest block to sensitive local services, not the biggest aid to making them more sensitive.
You make some good points.
Specifically on the NHS my definition of “acute” is obviously different to yours. Yes GPs or the private sector won’t run A&E or organ transplants but hospitals do so much more – too much. Lower level clinical interventions can easily be farmed out to other providers including GPs – who will do them if they get paid for them.
On the localism point I agree. All I would say is politics is a continual cycle of people arguing for local powers, local powers being exercised, differences in outcomes recorded, “postcode lotteries” abound, local and national media go crazy, Ministers get nervous and then grab back the powers in order to standardise outcomes.
Take council tax. Mr Pickles has said he wants localism but refuses to allow councils to apply tax increases this year. How is that localism? But if Council A applied a 5% increase and council B next door a zero increase all hell would break loose.
So to argue localism good centralism bad is, sadly, missing the point.
All hell would break loose? Not necessarily. The Council A might pay the price at the polls for doing so or might win plaudits for maintaining public services. The bigger problem is that if council tax only provides 18% of your revenue, even a 25% increase in council tax only increases overall revenues by 4.5%. So the price politically may not match the benefits.
I was told something 30 years ago that is still very true. Them ore we get league tables of performance or spending, the greater the tendency to convergence. No local authority wants to be at the bottom of the table and strives to rise to the centre. Equally, oddly perhaps, those at the top of the table query why they are spending more per person than other authorities and whether the price paid for being top of table is worth the cost. So depsite the powers to be divergent and innovative, what actually transpires is convergence and conformityl This trend is worsened by big corporate contractors who have a uniform style. As a result, local government – if we are frank – does not always attract the brightest and best to its ranks, elected or paid, because the scope for ‘ownership’ of a distinctive service is quite limited. Add to that the vulgarity of pavement politics which puts a higher premium on the visible – issues like potholes, broken pavements, road sweeping – than the invisible like what goes on inside schools or education support services, or in care for the elderly or vulnerable children, and the blame culture where the media acts like a ratpack rather than contrbuting to intelligent investigation, and you have all the formulae for deterring participation in local government services.
Well your assessment might be accurate but if it is an argument for less transparency and fewer informed choices for local taxpayers, parents etc then I am afraid you will be in a minority.
No I don’t argue for that (although I do think league tables rarely help informed decision-making – for example, the Value added column in school league tables is usually ignored by the media which cannot grasp its significance) but simply observe a behavioural consequence of assembling national and comparable data.
Funny you should mention the municipal ‘gas and water socialism’ of the interwar years; of GDH Cole. My father worked with Douglas Cole and, when he – my father – stood for election to Kensington Council in 1937, he pointed out on his election address that the municipally produced electricity of next-door Hammersmith was cheaper than that of privately-produced electricity in Kensington. So much for the inefficiency of socialism.
Robert Philpot’s article requires detailed comment and analysis, which I am not able to produce just now.
However, just this afternoon, in a discussion with a friend about research, appropriate medical treatments and so on, the friend commented as follows:-
“Anthony, it’s worse than that. Doctors in the UK receive financial incentives to mis-prescribe statins. I see some of the horrible results in my work”.
Doctors may be no more lazy, money-grubbing and incompetent in their work than the rest of us, but I can see no way how “competition”, “decentralisation” and the rest are going to alleviate the concerns of my friend.
Her statement epitomises what is wrong with the health service and other public services. They are not services, but machines for individuals to make money from the rest of us at the expense of the COMMON GOOD. The individual member of the public is just a number, for whom the care as an individual is unimportant.
It is not beyond the wit of man to devise accounting and reporting systems that can wipe out the dire consequences of PFI and the rest and I would suggest that that is part of the way forward for the public services, as well, of course, as ensuring that the doctors do their job properly and that the exercise of their profession is not perverted by financial incentives.