While ministers impose tougher constraints on the financial sector, a government paper promises to reduce the regulatory burden on the public sector.But this policy could already be a dead duck
‘Light-touch regulation’ was very fashionable until recently. But after the banking debacle and the Turner report, it is a distant memory for the private sector. The government maintains this is still its policy aim for the public sector — but is this situation viable?
Before New Labour came to power in 1997, Tony Blair and Gordon Brown conducted their charm offensive with big business and the City of London to convince them that capitalism would be safe with New Labour.
There had been much deregulation of the financial sector in the 1980s and early 1990s. The so-called ‘Big Bang’ of 1986 enabled the City to ditch many of the checks and balances that had stabilised financial systems since the 1930s.
This was the era when the public were making a fast buck from privatisations of state assets, house price inflation, buying council houses on the cheap, and from the de-mutualisation of building societies.
In the early 1990s, the New Labour ‘project’ included a campaign to reassure members of the public and the City who were benefiting from this wave of speculative profiteering that a Blair-Brown government would not spoil the fun. As fellow New Labour architect Peter Mandelson would later remark: ‘We are intensely relaxed about people getting filthy rich’ under the Blair government.
When Labour did win in 1997, it kept its word — the policy of ‘light-touch’ financial regulation continued and even deepened. Nor was the financial sector the only beneficiary. The former public sector utilities, such as gas, electricity and trains, also basked in the sunshine of fairly minimalistic controls.
The story in the public sector was almost the opposite — from the very start, New Labour set about creating or extending a system of heavy-handed regulation and target setting for the public services. The growth of the ‘audit society’ and ‘performance culture’, which had been pioneered under the Tories, grew by leaps and bounds. By the early 2000s, there was virtually no part of the UK public sector that did not have to report on its performance. Most were also subject to external inspection for performance, quality or standards — sometimes by several sets of ‘quality police’ at once.
So, at this time, we had the situation where the de rigueur regulatory regimes for the private sector, especially finance, was ‘light-touch’, while for the public sector it was more like a big clunking fist.
The expansion of performance management in the public sector, however, met strong resistance. Professional groups — especially doctors and teachers — complained bitterly about the distorting effects of targets, league tables and inspections.
Some academics joined the fray, pointing to possible perverse effects from ‘gaming’ and measurement problems of targets, performance indicators and inspection regimes. Actual evidence and serious analysis of the balance of benefits and problems was harder to come by, but the campaign had its effects anyway.
By the mid-2000s, the government was already starting to talk about ‘earned autonomy’ and ‘self-sustaining’ improvement systems. This meant the government would take a much less top-down, mandated and imposed role. This change in policy has gradually gathered pace and the official government position was outlined in the recent Working together paper.
It is (supposedly) very much more about ‘bottom-up’ choice, competition, online criticism and personalisation. Top-down targets have (supposedly) been slimmed down while greater freedoms have (again, supposedly) been devolved to the front line. I say ‘supposedly’ because there is, as yet, not a great deal of evidence that the changes are real, but the rhetoric has certainly moved on.
Can this apparent change of tack in the public sector survive the clamour for hard-touch regulation in the private sector? It seems unlikely. There is already a campaign to constrain pay for senior public sector managers.
Accusations are surfacing of ‘feather bedding’ public sector workers with secure jobs, above average pay and good pensions, while the rest of the workforce is suffering pay cuts, job losses and pension losses. Calamities such as the deaths at Mid Staffordshire hospital and Baby P fan the flames.
However unfair some of these accusations are, the mood is clearly changing. The comparison between ‘hardball’ private sector regulation and ‘soft-touch’ policies in the public sector will surely emerge. We can expect an increase in the clichés about bowler-hatted civil servants, unaccountable quangos and public sector waste.
The dire state of the public finances and debt will add very real pressure to squeeze the public sector ‘until the pips squeak’. Self-generating, bottom-up, light-touch improvement in the public sector could be dead before it even gets started.
Colin Talbot is professor of public policy and management at the Herbert Simon Institute, Manchester Business School
