Coalition of cuts

20 May 10
The Con-Lib marriage of convenience will usher in a revolution in service provision, predicts Philip Johnston. And it will hurt. But then, no-one promised the public sector a rose garden
By Philip Johnston  

20 May 2010

The Con-Lib marriage of convenience will usher in a revolution in service provision, predicts Philip Johnston. And it will hurt. But then, no-one promised the public sector a rose garden

Coalition politics might be a rarity in national government but at regional and local level it is commonplace. ­Scotland was run by a Labour-Liberal Democrat partnership for several years after devolution; Wales is a Labour-Plaid Cymru grouping; Birmingham City Council, one of the country’s biggest local authorities, is a ­Conservative-LibDem tie-up.

So what’s the big deal? I say this slightly tongue-in-cheek. Clearly, this is a new political landscape but the idea that we are witnessing something unique is preposterous. It is also a bit hard to swallow the suggestion that this is the start of a new politics, a different way of doing things.

As in local government, the national coalition is born of expediency. Had David Cameron’s Tories won another 20 seats we would be hearing nothing about ‘an historic new direction’ and Nick Clegg would not have his shiny ministerial car and an office ‘the size of a tennis court’, as Michael Heseltine, a previous deputy prime minister, once called his billet in Whitehall.

There is something familiar, too, about the personnel of the new coalition. Communities and Local Government Secretary Eric Pickles held the opposition local government portfolio before moving to be Tory party chair for the election. He also cut his teeth as a radical leader of Bradford City Metropolitan District Council before ­becoming an MP.

I remember interviewing him for the Daily Telegraph in 1988 after the Tories won control of Bradford in the late Thatcher years – an unexpected breach of an inner-city Labour bastion, the birthplace of the Independent Labour Party no less. The headline for the article was ‘The Bradford Revolutionary’. Pickles was a forerunner of the sort of market-led reforms that councils across the country soon had to adopt.  A programme of cuts, job losses and privatisation was pushed through by the new Tory council. Emphasis was placed on good, efficient management and departments were given the freedom to do their own thing.

The article concluded that Pickles was a career politician who would one day find himself behind a ministerial desk. Now that he is, the upheaval that he oversaw in Bradford all those years ago will look like a picnic compared with what he and his colleagues responsible for other public services will have to deal with.

During the five-day interregnum after the election, there was much talk of a ‘progressive coalition’ between Labour and the LibDems. The assumption was that the Tories were somehow antediluvian in their outlook. Yet apart from a visceral antipathy to proportional representation – which is shared in equal measure on the Labour benches – the ­Tories have far more in common with the LibDems when it comes to localism, civil liberties and letting people run their own affairs. The past 13 years have seen greater centralism than at any time in our history, which was severely criticised by both partners in the coalition.

They also share a belief in: freeing schools, which will mean bypassing local authorities in many cases; elected police commissioners; removing the dead hand of Whitehall on local enterprise; and setting light to the great pile of regulations that has been suffocating much of the public sector for years.

If localism and the Big Society mean anything, it is that communities and their representatives must be trusted to get on with it and to have faith in those who elect them. The reforms coming down the track over the next few years include abolishing regional planning and the regional development agencies, and ­enabling councils to work closer together across authority, city, county and regional boundaries, rather than tinkering with structure.  
The big question now is whether the local Tories and LibDems, who together run two-thirds of all councils, will share in this vision or will end up clashing with their coalition masters in London. We have already heard rumblings from Tory chiefs like Paul Carter in Kent about the implications of Education Secretary Michael Gove’s free school plans. Carter fears it will mean less money for the maintained sector.

Gove plans to bring forward an ­enabling measure in the first session, to begin what he hopes will be a transformation in schools by allowing local communities to set up their own if they wish, cutting out local councils.
He denies that maintained schools would have their budgets cut because money would be saved by cutting out waste and bureaucracy from the ­Department for Education (formerly the Department for Children, Schools and ­Families). But this is just fanciful.

Education budgets will not be ring-fenced – so unless massive savings are found by abolishing quangos and slashing administrative jobs, then the front line will start to suffer. Councils are also going to have to get used to the idea that they will not be the exclusive provider of local services. They won’t like it.

But there is a wider issue that needs to be addressed, which goes far beyond whether existing structures and funding streams work. A complete reinvention of government is needed. How can services continue to be provided at the same level, or staffing remain at current complements, if deep cuts need to be made in public spending to reduce the fiscal deficit?
From now on, everything has to be seen against this grim financial backdrop, and yet it was the reality that hardly dared to speak its name during the election. The fact that we have coalition government for the first time in more than 70 years makes no difference to this reality. Had Labour been returned with a thumping majority or the Tories elected outright, the future of public services would have to be completely reviewed. Gordon Brown might have gone through the campaign seeking to differentiate between a Labour Party that would sustain service and Tories who would slash and burn. But he was deluding himself and the country, perhaps wilfully so.

The coming years will see a revolution in the way public services are provided in the UK, simply because it is unavoidable. This debate has been going on principally in think-tanks and academic institutions, only rarely intruding into the deliberations of the people who will be required to implement the reforms. The argument during the local elections, if it could be heard at all, tended to centre on the familiar themes of taxes, spending and services. There was little or nothing about wholesale reform.

There have, of course, been big changes over the years with the creation of arm’s-length Whitehall agencies, performance regimes, market-testing and the like. But there has been little discussion about ­taking the state entirely out of the provision of services, as it was taken out of ­industry in the 1980s and 1990s.

Inevitably, this is going to affect frontline services, even though our ­political leaders keep saying these will be defended. Other heavily indebted European Union countries – Portugal, Greece, ­Ireland and Spain – have all been forced to announce plans that the UK might have to follow.

Portugal has introduced universal means-testing for benefits and is cutting the costs of the public sector workforce. Ireland has announced pay cuts and pension freezes in the public sector and the Greeks are facing huge cuts.

True, the coalition parties have talked about the need for change; what they have avoided is acknowledging how far-reaching it will be or the detail of how it might be achieved. Their election manifestos contained a good deal about the merits of greater local decision-making and the devolution of power. Even if Cameron seemed reluctant to talk much about the Big Society after the launch of the Tory programme at the beginning of the campaign, the ideas that it encompasses will be hugely influential on the way local government operates.

It is imperative, therefore, to examine realistic options for savings in public services if the impact of the cuts is to be contained. One approach that took the fancy of the last Labour government is the Total Place initiative, which is well known inside the public sector but almost unheard of outside it.
The new administration will need to develop this local funding co-ordination programme in the coming years. But it is not radical enough on its own because it is about making relatively modest efficiency ­savings against total spending of around £80bn a year.

What we really need is a complete rethink of how services are provided and what government does and why, as happened in Canada a few years ago. Again, while the political situation will make it more difficult, such an approach is going to be needed whether the politicians like it or not because they have no option.

In the mid-1990s, Canada was in very much the same position we are now, running a budget deficit of 9.1% of gross domestic product and with public debt of 70% of GDP and rising. Its currency was weak and it faced the real prospect of being crippled by debt if investors lost further confidence.
Faced with bankruptcy, Canada began by trying many of the approaches often talked about by British parties. Between 1984 and 1993, the Canadian government implemented 15 initiatives to control or reduce expenditure, thereby testing to destruction the notion that ­‘efficiency gains’ were the way out ­because over this period the ­accumulated debt tripled.

The Canadians realised a new ­approach was needed: the reinvention of government. A special programme review was established, pushed through by a Cabinet minister and departmental chiefs, to decide what government should do and what it could afford.

Spending that could be delivered in some other way than through the public sector, or was not essential, was cut. Although this was carried through at national level, it clearly had an impact at the regional and local level. It changed the way the country and the people looked at what government should and could do.

Some of the reforms we have heard about are a start. They include the Tory proposal to let local authorities keep above-average increases in business rate revenue to encourage local growth and LibDem ideas for greater devolution and grassroots innovation.

The top-down, ‘Whitehall knows best’ approach has been expensive to implement and wasteful in its imposition. Even Labour now acknowledges that the excessive focus on targets and performance indicators has stultified local decision making and the tax rises and extra funding have not produced the improvements promised. The future cannot be the same as the past with a bit less waste.

As Ben Lucas, director of the 2020 Public Services Trust, points out, the need for significant reform – merely to cope with the huge additional pressures of an ageing population and the greater diversity in society – seems not fully to have been understood. ‘We face some pretty big choices about the sort of ­society we want to be and the sort of public services we want to have,’ says Lucas.

More than 20 years after Eric Pickles was taking on vested interests in ­Bradford, public services are still ­provided in much the same way as they were then, albeit with a greater emphasis on the citizen as consumer. Twenty years from now, what government does will be fundamentally different – not because of coalition politics but because of financial realities.

Philip Johnston
is assistant editor of the Daily Telegraph

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