Public sector reforms come and go. Each one is always promised to make the real difference. Every year a new government White Paper declares with certitude that their reforms will deliver the necessary step-change in productivity, unlock new innovations or put right an earlier wrong.
Most public finance professionals are deeply sceptical of people making bold claims about public service reform. If we all believed the utopists then government would quickly find that it is spending money on programmes that have very questionable rates of return.
A good example from recent history is the Troubled Families initiative. This flagship welfare programme aimed to bypass local bureaucracy by instating a key worker who would deal with each family’s issues in a holistic way. Just over a year ago the government said it had saved the taxpayer an estimated £1.bn. Ex-post analysis has however is since reported to have found that the programme has had no discernable impact on unemployment, truancy, or criminality.
The disappointment of the Troubled Families initiative serves as a reminder of just how difficult public service reform is. But before we write off starry-eyed reformers we should at least acknowledge that there are some serious issues with our current system of government: the mechanics of our Whitehall bureaucracy with its preference for scale, standardisation and hierarchy makes it very difficult to deliver the types of successful reforms that can get a grip on our entrenched social problems.
A recent paper released by Policy Exchange explains how decades of centralised government has cultivated management orthodoxies that inhibit wholesale reform to the public sector. Many budget processes for instance favour short-term cost management rather than strategic service reform; the public sector’s preference for managing projects at scale increases the risk of failure and waste; departmental silos preserve outdated service models that cater to institutional rather than people’s needs; and the central control of public sector pay means employees are treated as a cost to be managed, rather than a strategic asset.
So what practical changes might we consider making if we want to give reformers the management tools they need to succeed? The paper puts forward a number of ideas to stimulate new thinking.
The government might consider separating the Treasury’s budgeting function from its financial and economic briefs, as previously recommended by NESTA. This could encourage greater long-termism in spending decisions and would separate departments spending plans from the merry-go-round of announcements made during the Treasury’s twice annual budget statements.
Also, the Cabinet Office should commission research into the cost interdependencies between different public services, examining how failures in one service (e.g. criminal justice) drives cost in another (e.g. welfare). A stronger evidence base will enable reformers make a stronger financial case to the Treasury for funding new prevention schemes.
The government should also use the devolution agenda as a way of piloting innovative financing models like ‘invest to save’. Non-cyclical elements of the welfare budget, like the payments for people claiming disability benefits who want to return to work, are good candidates for these models. The government could ring-fence local authority’s estimated future expenditure for these benefits, perhaps up to the value of one year, and then devolve the pot of money to fund employment support programmes that help people back into work. The Treasury could monitor the impact of these schemes and any cash savings accrued in the welfare bill should be shared between central and local government.
Building on the decentralising idea behind academy schools and new ‘Reform Prisons’, the government should consider giving other public sector organizations full operational and budgetary independence. Jobcentre Plus, for instance, could be given greater flexibility over how they choose to pay and deploy their workforce, change the way it manages claimants, and experiment with new ways of delivering employment support.
