27 July 2007
An intense focus on outcomes is essential if the public sector is to deliver real value, says Geoffrey Filkin. Here he argues that government can achieve better performance — without committing extra resources
All democratic governments need to show they get value from taxation. But this is especially true now. New Labour has won the argument that good public services matter and it has greatly increased the resources committed to them — but it has not convinced the public that it has delivered as much improvement as voters would like.
The new prime minister will also want to get better value and outcomes from public service expenditure because this matters to our economy. With public expenditure at over 40% of gross domestic product, poor public service productivity damages our competitiveness. Public services also matter in human terms, helping people to be healthy, skilled and to feel safe in their neighbourhoods.
Gordon Brown's government will need to do more to improve outcomes and to convince the public it is able to do so. But for most services there will no longer be significant increased resources over the Comprehensive Spending Review period of 2008 to 2011.
Yet more money will be needed because of changes to demographics, technology and people's lifestyles. The challenge is how to improve services and outcomes without these increased resources. Last week's announcement of fewer, but more cross-departmental, Public Service Agreement targets is welcome but more action will be needed.
The Public Service Reform Group argues that a new start is needed to recast the relationship between state and citizen so that the public realm can be renewed. The group was formed in 2005 to develop fresh thinking on public services by bringing together people who have been at the heart of public service strategy over the past decade. It calls for a shift in the balance of power from the central state towards people and their communities.
The central theme of our book, Public Matters – the renewal of the public realm, is that there is a need to rethink the role of the state as an enabler of individuals and communities rather than as the solver of all problems.
This requires a review of all government policies and programmes, asking difficult questions:
- Is this policy something that the central state ought to focus on?
- Is it achieving its desired outcomes?
- Is it still a priority?
- If its outcomes are poor, should it be stopped?
- Would it work better if decentralised?
- If still needed, is there a convincing strategy for improving its outcomes?
The CSR2007 is carrying out baseline reviews of some services but the government will need to review and challenge all the major elements of its expenditure up to that 2011 date. It must cut some under-performing programmes, decentralise others and focus relentlessly on transforming policies that need to be led centrally but are delivering poor outcomes. This process should seek to free resources for investment over the next three to four years, which is important given that we cannot expect much to come from increased taxation. This portfolio review is commonplace in business but rare in government. Ministers will need to lead on this as a common responsibility.
Next, it is necessary to move beyond the Gershon-style efficiency agenda. Efficiency gains are necessary but woefully insufficient. Most departments have met Gershon targets by reducing head counts or supply costs but have not changed their policies and programmes to make them better.
However, the performance of every London borough is significantly better than ten years ago. This is not the case for central government departments, which use a system defined more by survival and the minimisation of risk than by improving value. Sir Michael Bichard's chapter in our book explores some of these elements. We will not get significantly better outcomes for the public unless these fundamental performance characteristics of the system are addressed and ministers give the issues much more attention than at present.
So we suggest that Gordon Brown promotes better outcomes and value from public services and reviews all existing programmes as a priority for government. This has to be a collective goal, not something the Treasury presses for and departments defend against. Ministers must lead the process and be held to account by the prime minister for what they achieve.
We argue for the better use of competition, but not for its own sake. Competitive pressures stimulate improvements in performance and this is the aim, not to externalise services for the sake of it. Government should establish competitive pressures on delivery organisations and systems wherever possible. It should aim to make public sector delivery units operate on a trading basis and reward them according to their success in delivering the outcomes that the public values.
Next, the method of competition matters. Government procurements tend to define the inputs and then choose on lowest cost. But paying slightly more to someone who can deliver better value is often better; the problem is that the current form of competition does not sufficiently stimulate these types of radical changes and responses.
The Public Service Reform Group will be studying how to change current procurement and market engagement to one that can buy outcomes. This would reward deliverers according to the outputs and outcomes they achieve. It's the outcomes that the state wants to buy and getting better ones by paying a premium can be very good value. We will explore how and where such a system could be developed.
To achieve this, we also need more effectively joined-up services and policies, and more public involvement in their delivery and in the necessary choices and trade-offs. These actions cannot be taken primarily by the central state. The announcement last week of the new PSAs fits the bill but we have to develop the role and capacity of local government. The new government has not yet shown how this is to be addressed, and this is problematic as the public still distrusts local government, despite the improvements that have been made.
But we cannot avoid the need to think through how to devolve more, and to do so in ways that retain the incentives to get good value and good outcomes for our money. We will not deliver good public services from the existing top-down system.
We will have to wait until October to see the results of the CSR2007 but it is clear already that it will no longer be possible to improve services by increasing expenditure at the same rate as the past eight years. The system will have to learn how to get much better value from existing resources.
Geoffrey Filkin is chair of the Public Service Reform Group and was a government minister from 2001 to 2005. Public matters — the renewal of the public realm is published by Methuen this month
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