16 November 2007
Wales has rejected the Blair-led notion that the private sector should be a major service provider. Andrew Davies, minister for finance and public service delivery, talks to Alex Klaushofer about applying this approach while spending carefully and seeking efficiency
'Challenging, but not surprising' is how Andrew Davies describes Wales's settlement in last month's Comprehensive Spending Review.
It's an interesting time for Davies, Labour AM for Swansea West. He became the Welsh Assembly government's minister for finance and public service delivery in July, after a few months in the interim role of minister for social justice and public service delivery. As the new man in the job following the Assembly elections in May, which brought in a Labour-Plaid Cymru coalition and the separation of the National Assembly and the Assembly Government as law-making and executive bodies, he's a key figure in Wales's expanding devolution arrangements.
But the post also carries the more pedestrian responsibilities of making the figures add up, as Wales's share of the slowdown in public sector spending starts to bite. Following 5.5% annual growth for the first eight years of the Assembly's lifetime, its average year-on-year increases – depending on whether you listen to Westminster or Wales – now lie at 2.4%, or 1.8%.
Plaid Cymru, Labour's partner in government, dismissed the award as 'the worst financial settlement for Wales since devolution', but the minister's own assessment is less political, and more managerial. 'The settlement is very much in line with our planning assumptions,' he says, adding that discussions with the Treasury had alerted his team to the shape of the outcome before the announcement.
'It wasn't as if we formed a coalition government, had a costed programme and then thought, “Oh gosh, we're not going to have enough money”. Even before the Assembly elections, we knew it was going to be a much tighter settlement, because we knew public finances generally were going to be much tighter.'
Davies believes that in comparison with the devolved governments of Scotland and Northern Ireland, Wales's deal – which will ensure an annual budget increase from £14.1bn to £16.1bn – is still a good one. 'When you put that in context, when the Assembly was set up we had a budget of £7bn, so it's already been doubled,' he says. 'If you add up the annual increases over the next three years, the total additional cash we will get will be £3.64bn, which is over half what the original budget was. So, yes, growth will be significantly less, but the amount of investment we'll be able to make will be considerable.'
The CSR is the basis of the coalition's first draft budget, published on November 5 amid a chorus of warnings about funding gaps from Opposition politicians and the Welsh Local Government Association. Under the budget, which will be scrutinised by the Assembly ahead of a final document in the new year, public expenditure will rise by £3.64bn over the next three years, an increase that includes £1.2bn for health services and a rise of 2.2% for local government from £3.8bn to £3.99bn.
As we talk in Davies' office in the Assembly building overlooking Cardiff Bay – which is tiny by Whitehall standards – it becomes clear that he takes an even-handed, calm approach to his brief. This is perhaps facilitated by his varied background before entering politics: a career in the private sector; lecturing in politics and history in higher and further education; and practising as a counsellor both from his home and for the bereavement charity Cruse. Born in Hereford to Welsh parents, he settled in Wales in 1970.
Quietly spoken yet forthcoming, Davies insists that Wales's plans for public service reform will continue, along with the programme laid out in 'One Wales', the coalition's four-year power-sharing agreement.
He doesn't fear the kind of crisis that beset the NHS in England, with the slowdown in spending growth and headlines about cuts and trusts in deficit. 'Public expenditure in Wales is significantly higher than in England – 14% higher per head,' he says. 'We certainly don't think we're being complacent, but health will get a very significant share of our investment.'
At the same time, he obviously sets great store by careful spending, talking with enthusiasm about the efficiency savings to be gained through better procurement, such as a new drive to get schools in Wales to make economies of scale by buying facilities and equipment through collaborative agreements.
Despite his low-key approach, it is possible to detect the makings of a vision of a peculiarly Welsh public service agenda. He is, after all, serving his ninth year in the devolved government, which has overseen a 'bonfire of the quangos' merger, a free prescription scheme, and free bus travel for disadvantaged groups. It has also seen off Private Finance Initiative schemes in the NHS.
'It is different,' admits Davies. 'Our view is that, for historical and cultural reasons, there's more benefit to be gained by having a collaborative rather than a competitive model of delivery for services.'
It's a public sector philosophy that, in contrast to the national, Blair-led agenda, saw Wales reject the private sector as a major service provider. 'I think our view is that in education and the health service, private sector provision is very, very small – and has been historically, which is very different in many parts of England,' says Davies.
'It just reflects the situation as it is today, where the bulk of the health service is delivered through the public sector and the overwhelming majority of education is delivered through the public sector. I don't detect a huge demand from either providers or local citizens to move to a different model.'
One example of the Welsh model in practice is the £120m Broadband Wales Programme, launched in 2002 to give state aid to businesses and communities that were struggling to afford the latest IT connections.
'There is a need for public sector intervention where the market has failed,' explains Davies. Equally symptomatic is the use of 'citizen-focused' rather than 'customer-focused' in his and the Assembly's vocabulary to describe the state to which public services should aspire. 'We have very deliberately used that word “citizen” because it comes with all sorts of strong historical and political meaning attached to it. The customer is a much more passive recipient, whereas citizen is much stronger,' he says, adding that the term reflects the fact that 'we live in a democracy and citizens have an active role to play more widely in civil society, but also in the way that services are designed and delivered'.
But, for the most part, it seems that pragmatism rather than politics informs the Davies approach. 'When it comes to the delivery of public services, we take a very pragmatic view,' he says. 'We've been criticised for the fact that we won't use the PFI. We've said we will use the PFI where it makes sense. In the health service, we've ruled it out, because we felt it didn't give us the outcomes we wanted.
'But that isn't to say in other areas, whether it's developing roads or whatever, we won't involve the private sector – in fact, we do.'
Yet he stops short of claiming that there is a distinctively Welsh set of public service needs. 'I don't think there are,' he says. 'I think the needs and expectations are common right across the UK. People want good public services – good, accessible health care; education for the children; and lifelong learning.'
One difference between Wales and England that the minister is sure of, based on his experience of working with Whitehall over the past decade, is in the two countries' governance arrangements. A key factor is the smaller scale of government in Wales, which gives the Welsh Assembly the edge, he argues. This is particularly the case when aiming for the 'joined-up working' that characterises so much of current practice in regeneration and anti-poverty initiatives.
'It struck me very early on that the machinery of government in Whitehall is huge, and individual government departments are massive. Getting different departments to work together is a huge challenge,' he says. 'Whereas for us, we're smaller – 6,000 people. The relationships we have with local authorities, NHS trusts, the public and private sector and the third sector are more dynamic – we can do things. We can be strategic, but we can also be much more directly involved in delivery.'
Davies has been 'very taken' by the capability reviews that have assessed Whitehall departments, and plans to draw lessons from the weaknesses in collaborative working they identify by introducing cross-department policies and pooled budgets.
The other notable advantage Wales has over Whitehall is the continuity it allows its politicians. Following a stint as minister for Assembly business from 1999, he spent five years as economic development minister – aka 'minister for enterprise, innovation and networks' – a role that allowed him to design and set up a new department from start to finish. As a result, he finds experiences such as John Reid's, who had nine ministerial jobs in 10 years, unenviable.
'Whereas I've been a minister for eight years, and I've had three jobs,' he says. 'I think one of the problems of Whitehall is that you have such a frequent change of ministers that the continuity breaks in terms of seeing things through from policy formulation to delivery.'
So, in the longer term, could these differences allow Wales to go off and steer its own course in public sector reform, with the introduction, for example, of tax-varying powers?
'Possibly,' responds Davies, cautiously. 'In lots of areas, whether education or others, the policy agenda has diverged quite substantially. In terms of tax-varying powers, I've always been very agnostic. If you look at the economic statistics, we are one of the poorer parts of the UK, and if we were to have tax-varying powers, given the fairly narrow tax-raising base, you could have a position where the tax burden in Wales would be higher than in other parts of the UK, which
I think both in terms of the individual taxpayer and overall macro terms would be regressive. I don't think I could support that, as someone who's a socialist.'
And with the last word – so softly spoken that I barely hear it – the Davies brand of pragmatism and politics come together.
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