18 June 2004
CBI director general Digby Jones has demanded that all savings achieved by Sir Peter Gershon's efficiency review are independently audited so that ministers' claims of success can be verified.
Jones gave enthusiastic backing to the government's drive to ensure that the extra billions of pounds being pumped into public services deliver maximum value, but he claimed the credibility of the review rests on complete transparency.
The business leader told Public Finance that ministers should demonstrate their commitment to openness by publishing Gershon's report in full when his findings are outlined in the imminent Spending Review. He said, too, that it should outline how the savings would be achieved.
'I don't know if Gershon is going to be published or not, but our attitude is – all right, let's see it then. And at the back of Gershon there should be a table that says, this is how the savings will be realised.'
External audit and evaluation of Gershon's quest for £20bn in savings and the outcome of that process is 'critically important' as the only way to ensure the savings are real and accepted as credible, Jones said.
Earlier, he had some tough words for the government when he addressed CIPFA's annual conference in Brighton on June 16. He argued that ministers should produce detailed implementation plans tailored to different parts of the public sector, containing milestones against which progress could be measured.
This would prevent 'cosmetic changes being made in order to meet targets rather than systemic inefficient practices within the public sector being weeded out'.
He added: 'I am sure that no CIPFA member would accept claims of efficiency gains without substantive proof, and the taxpayer should not be treated any differently.'
Jones emphasised that companies providing public services should also open their books to independent auditors.
'This is a two-way street. Business can't say, we'll get involved but, by the way, we can't be judged,' Jones said. 'Business welcomes increased transparency, openness and accountability.'
Jones used his summit speech to launch a stinging attack on public sector unions opposed to the government's efficiency drive, accusing them of being 'Luddites' who are hindering necessary reform.
He attacked the 'vested interests' who, he said, refused to acknowledge the need to improve efficiency and productivity in the delivery of public services, and were trying to cling on to the certainties of the past.
Jones insisted that the government take a tough line with those in the public sector opposed to the Gershon review. 'The pioneering parts of the public sector that are saying they're up for this – great. The ones that aren't should be made to comply, frankly,' he said.
Raynsford cool on radical change to balance of funding
Nick Raynsford has indicated that the Balance of Funding review is likely to focus on reforming existing revenue-raising methods rather than recommending the creation of new ones when it reports next month.
The local government minister, addressing delegates immediately after chairing a review meeting on June 16, hinted that reforms to local government finance would focus on overhauling council tax and business rates.
He appeared to all but rule out creating a basket of new local taxes, saying: 'I don't think anyone on the review felt they could make a substantial contribution to shifting the balance.'
He was also lukewarm about a local income tax, focusing on the 'very formidable obstacles' that would have to be overcome, not least the 'incentive for tax avoidance'.
But Raynsford indicated that the government would consider ending the link between business rates and inflation, conceding that there 'was a case' for re-examining it. Nor did he hide his enthusiasm for a reformed council tax, claiming that there were a 'number of reform options' to make it less regressive.
Raynsford made clear that the timetable for the shake-up would stretch beyond the next general election. He told Public Finance that changes would require detailed preparatory work and, while careful not to reveal when the election would be, he said that even a maximum five-year Parliament would not be enough.
'The kind of changes that might be envisaged would require a longer timetable,' Raynsford said. He intimated that any reforms would be introduced alongside the council tax revaluation, due in 2007, to minimise disruption. 'There is a window of opportunity at the time when revaluation takes place.'
Treasury could be banking on overestimated tax revenues
Chancellor Gordon Brown has projected a substantial rise in the number of top-rate taxpayers to cover his public spending plans for the next few years, but Treasury officials might have overestimated the revenue involved, a leading fiscal expert warned this week.
Robert Chote, director of the Institute for Fiscal Studies, told delegates in Brighton that one of the least recognised effects of the chancellor's projections for the UK economy has been an implicit increase in the number of higher rate taxpayers from the current level of 3.5 million people to around 4.3 million by 2008.
Chote believes the large numbers involved, tucked away in the Treasury's own Budget projections, partially undermine Labour's claim that it has not and will not oversee a rise in income tax.
'At the end of the day, this is still a tax increase, but I don't think people have realised that yet,' he told the audience on June 16.
The possible 800,000 increase in higher rate taxpayers – the result of 'fiscal drag' – will be partly used to underpin the government's increases in public services spending.
Chote points out that the Treasury has effectively spent the cash that would be generated by the rise – despite the fact that the numbers haven't yet materialised – as part of the department's public services commitments in the next Spending Review period.
But Chote reiterated the IFS's belief that the Treasury might have overestimated its tax revenues, claiming 'we're more pessimistic'.
He was attempting to place the Treasury's commitments in the context of the next general election. The IFS sees the debate over the 'tax and spend' agenda as a key election battleground.
Earlier, Chote indicated that the main parties' drive for increased efficiency across the public services – by tightening purse strings at all departments with the exception of health and education – could be more difficult than politicians envisage.
Commenting on leaked details of Sir Peter Gershon's efficiency review, which could outline plans for 80,000 job cuts across Whitehall, he said that would require 'a serious reversal in the upward trend' of staff numbers.
Strachan says he is 'huge fan' of the Gershon approach
The Gershon review of public sector efficiency could be a 'very positive force for change', Audit Commission chair James Strachan told this week's CIPFA conference.
'A lot of people just focus on the cost-cutting implications of the review, or see it as an adjunct to SR2004,' he told Public Finance. 'But, however irritating its implications might be for some, its long-term impact is likely to be very positive.'
This is because it will help people in the public sector behave differently, encouraging services to become more customer-focused, he said.
'I'm a huge fan of the Gershon approach,' he said. 'It will help align targets and incentives to what people actually want. Observing how people from other sectors, public and private, do things is what really changes work methods.'
Strachan's observations on the 'wastefinder general' came in the context of a wide-ranging speech on public services reform, where he pointed to important progress in meeting government targets in health, education and crime.
Acute care waiting times, and cardiac and cancer care, had made significant advances, he said, as had educational attainment by the age of 16, and reported levels of crime. 'But it is still a mixed picture, with problems such as chronic health care and rising levels of antisocial behaviour causing great concern.'
A number of 'lubricants' would help smooth the path of public service reform, Strachan told delegates. These included more delegation of funding and decision-making, better integration of services at local level, better co-ordination of strategic regulation and less structural – but more behavioural – change.
NHS managers not prepared for impact of payment by results
There will be 'panic' in the NHS shortly before the payment by results system is rolled out across acute hospitals in April, a former health minister has predicted.
Lord Hunt told the CIPFA conference that payment by results was a hidden yet potentially traumatic change to the culture of the health service and one that managers were largely unprepared for.
He said most NHS trust boards had failed to grasp the impact the new system was likely to have. 'It cannot be seen as a financial issue. It is much more fundamental than that.'
Hunt acknowledged that political sensitivity played a part in the government's reluctance to talk more loudly about payment by results. 'The government is anxious about not introducing the old, crude internal market and there is a reluctance to "talk turkey",' he said.
But the ex-minister warned that a funding system based around the acute sector could militate against the integrated care agenda and result in patients being looked after in settings not necessarily suited to their needs.
'These perverse incentives have to be monitored,' he said.
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