The coalition might have lost its first Cabinet minister after only 18 days, but generally it has got off to a good start. There’s been a lot of sunshine politics, not least in the No 10 garden. The themes for the new era have been set out – the Big Society, political and banking reform and localism. But it will get much tougher from now on as the overarching priority of deficit reduction asserts itself.
The government is faced with a big choice. Will it use the Spending Review to both reform and retrench or will it be a straightforward exercise in traditional Whitehall cost-cutting? The latter will be the default position for Whitehall, but to paraphrase Deputy Prime Minister Nick Clegg on public service reform: ‘If not now, when?’
The government is committed to reducing most of the structural deficit, amounting to a further £40bn to £50bn, without any cuts in schools and hospitals and with no decline in public service standards. This is a very big circle to square. The traditional model for cost reduction would allocate cuts equally across the remaining departments, trying to minimise the pain by easy short-term cuts that add to costs in the future. Meanwhile, long-term pressures such as climate change and our ageing society are likely to add another 6% to the public expenditure share of gross domestic product.
There is an alternative. The 2020 Public Services Commission argues that now is the time to develop a new post-Beveridge framework for public services. In our interim report, we proposed three fundamental shifts to lay the basis for a new settlement between citizens, communities, society and the state. These concern culture, power and finance.
In culture, we want a move from social security to social productivity, so that the focus is on building capability, not just on responding to need. For the state, this involves giving more power to citizens, communities and localities, leaving the central state acting more as an enabler than a provider. In finance, this is about linking results to spending, with much greater transparency and a renewed focus on partnership and social insurance funding models.
This is a long-term reform, but one way to build towards it in the Spending Review is to create a new deal between the centre and our major cities and counties. To achieve more for less, we need public services to collaborate and integrate at local level, to both eliminate duplication and better meet local need.
The basis of this new deal would be a form of negotiated autonomy in which cities such as Manchester, Birmingham and Leeds and counties such as Kent and Essex would negotiate a block budget for their area. It would remove much of the ring-fencing around expenditure on services such as tackling worklessness, public health and youth offending in return for these localities committing to get better results with less money.
It’s clear that there is an appetite for this – in London, more power and budgetary control is set to be given to the mayor and the Greater London Authority and the obvious next step is to extend this to other parts of England.
But this cannot just be about managerial devolution, as in London – there must be visible and accountable local leadership. The government has agreed to create elected mayors, so it would make sense to link these to negotiated autonomy for large cities and counties, with more local control over services and budgets.
If the mayoral referendums go ahead without this wider new deal in place then they could be lost – either because they won’t generate enough interest or because they will become a verdict on the coalition’s record rather than on new models for local democracy.
There is a small window of opportunity in which to win the argument for combining deficit reduction with structural reform and it will only be there for the next couple of months. Seizing this will require imagination and leadership from ministers and local government, public and voluntary sector leaders alike. It is far too good an opportunity to waste.
Ben Lucas is director of the 2020 Public Services Trust. He will be speaking at the CIPFA annual conference in Harrogate on June 8–10
