22 February 2008
Three-year spending plans that happen every two years; greater accountability promises that actually sideline Parliament — Comprehensive Spending Reviews are looking more like science fiction than a rational tool for public sector planning. Colin Talbot explains
Here's a question for Chancellor Darling – when will the next Spending Review be? A simple enough question, but one that the Treasury is currently unable to answer and that Darling will probably not answer either in his March 12 Budget statement.
Let us recall. In 1998, the government published its first 'Comprehensive' Spending Review. This contained 'firm' plans for the next three years' public spending, with greater year-end flexibilities, which would allow government departments to plan more strategically.
In 2000 came the next 'Spending Review' – the 'comprehensive' had been dropped and it came only two years, not three, after CSR1998. This was, of course, not related to the fact that if it had been SR2001, it would have been announced in July 2001, after the planned spring 2001 general election. As it was going to include another big increase in public spending, the government wanted to get it in before the election rather than after, when it would do no political good.
So now we had 'three-year spending plans reviewed every two years', that is, until the last one. Somewhere after SR2004 was announced in July 2004 the three-year plans suddenly became just that – three-year plans. This change of course had nothing to do with the date that Tony Blair was going to step down as PM or where a SR2006 would have been in the likely electoral cycle. The fact that CSR2007 didn't get announced until October, when it was due in July, also had nothing to do with the change in premiership.
So analysts, parliamentarians, public managers and, of course, the great British public are left to speculate whether the next Spending Review will be in July 2009 or July 2010? I'm sure they talk of little else down the Slug & Lettuce on a cold winter's night. But while this probably doesn't excite much interest, even among the London commentariat, it is important for two reasons.
The first is practical – it matters for strategic planning purposes when decisions are going to be taken. If public sector managers are to plan ahead, it would help to know what the spending cycle is going to be.
The second problem, however, is in many ways far more serious. It goes to the heart of problems with not only the New Labour project, but the general malaise of modern British politics (and other advanced democracies). It is the problematic tension between rationality and politics.
The whole 'spending review' project has been deeply rationalist and managerial. It uses arguments about strategic planning, about 'delivery' and 'performance', about the more effective use of resources, that at one level seem unassailable. It fitted into a wider picture being pushed by the early New Labour government of a far more rational – modernised – approach to public services.
This is set to increase because the three main political parties are now locked in an arms race over 'who would manage the public sector best'. This has largely replaced the ideological battles of the 1970s and 1980s over the size and shape of the public domain. While there will still be plenty of political argument over the details, all three parties agree on the broad shape of the modern social-market state in Britain.
Both the Conservatives and Liberal Democrats have committed themselves to sticking to Labour's spending plans for the first couple of years if they were elected. And neither plans any radical contraction or expansion of public spending and taxation. So the argument moves from 'how much?' to 'how well?' we spend public money.
This argument becomes more important for another reason. While there might be a broad consensus about how much we should tax and spend, demands and expectations about what ought to be achieved for this spending continues to rise.
Some of these arguments are well rehearsed, the most notable being an ageing population putting bigger demands on pensions, social and health care, linked to the inflation in health-care costs. But expectations are rising as fast as needs. Again, all three main parties are pumping out promises about the quality of services. In fact, it is an interesting question how much expectations of public services are rising 'spontaneously' and how far because of political rhetoric.
All of this puts much greater pressure to produce, in the pithy US phrase, 'more bang for the buck'. But saying it and doing it are proving two very different things.
Take the health service. The government claims to have saved £5.5bn a year through the 'Gershon' efficiency programme but the Office for National Statistics has calculated that NHS productivity has declined by between 2.5% and 2%, depending on whether you factor in quality improvements or not.
The discrepancy is partly explained by a certain amount of fiddling with the efficiency savings figures, but mainly by something more worrying – efficiency savings in some areas might not only have failed to improve overall productivity, they might even have worsened it. The Commons Public Accounts Committee pointed out last year, for example, that the efficiency 'saving' of almost £1bn from faster throughput (earlier discharge) of patients ignored the fact that readmission rates were escalating, with a reasonable assumption that the former might have something to do with the latter.
What this shows is that even rational, managerial improvements in public services are far harder to achieve than most politicians – of all stripes – are usually prepared to admit. Instead they often remind me of Captain Jean-Luc Picard aboard the Enterprise, ordering his number one to 'make it so'. Making it so in complex public services is not, unfortunately, that easy.
Now I don't think anyone (except a few weird anti-rationalist social scientists) would argue that we should not attempt to make the processes of deciding how to spend public money as well-managed, rational, evidence-based, performance-accountable and efficient as possible. But in a democracy these processes have to be both political and managerial/rationalist, and it is on the political side that the present government has performed so badly.
The Spending Reviews – and their associated Public Service Agreements – were supposed to change the way in which government accounted for itself to 'Parliament and the people', as the original CSR1998 documents put it. But the government has striven not to involve Parliament but to ensure it is restricted to its traditional, weak scrutiny role. While there have been some feeble attempts to open up the Spending Review process, even within Whitehall there are complaints about lack of consultation and involvement with the Treasury.
The government claims to want to improve citizen involvement in both democratic processes and shaping public services. But at the same time it uses the language of 'customers' to assert that all people really want is a decent service, and they don't care how they get it. All the research suggests that this isn't true: people care about public services not just in terms of what they personally can get out of them, but also in terms of issues such as procedural fairness, equity and even their altruistic effect on society as a whole.
For public service reform to really work the government needs to involve people as customers, citizens, users and taxpayers, and not just appeal to their rational self-interest. Julian Le Grand, sometime government adviser and London School of Economics professor, described this duality in people's attitudes as being like 'knights' and 'knaves' and suggested we had to cater for both motives.
One important way to do this is radically to democratise the whole spending and performance process, from Whitehall down to town halls, schools and hospitals. But just as a 'fish rots from the head', this has to start at the top by turning the Spending Review process into a truly open, democratic and consultative engagement with 'Parliament and the public'. Improve the management, sure, but it's the democratic element that really matters most for public services – and incidentally will probably help improve their management too.
Colin Talbot is professor of public policy and management at the Herbert Simon Institute, Manchester Business School. He will be taking part in the Public Finance/Deloitte pre-Budget debate on February 27
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