Can public sector productivity deal with the deficit?

A roundtable discussion with Rt Hon Danny Alexander, Chief Secretary to the Treasury, kindly sponsored by arvato UK

March 2015

Speaking participants

Forewords

Andrew Haldenby, Director of Reform

Andrew-haldenbyThe task of public service transformation will continue in the 2015-20 Parliament, no matter the shape of the next Government. The January 2015 Reform seminar with Rt Hon Danny Alexander MP, held in partnership with arvato, made a number of recommendations that would see process accelerate.

Danny Alexander explained the context of the Government’s reforms so far. The basic goal is to improve public services to aid the wellbeing of citizens. This Government has had to achieve that goal at the same time as tackling the deficit on the public finances. As a result the Government has aimed to deliver “more for less” i.e. stronger public service productivity.

The Chief Secretary explained how the Government’s focus had shifted from “easy wins”, such as freezes on public sector pay, to more radical reform. The Troubled Families programme seeks to replace many disconnected (and expensive) public service inputs with a single, ideally early intervention. Similarly, the Better Care Fund aims to take spending from the traditional silos of NHS and local authorities and spend it wherever it does most good, often to improve the care for frail elderly people in communities. These are far-sighted programmes which seek to reduce unnecessary demand for public services in future. Danny Alexander also spoke of the potential of early intervention into mental health, and improving the quality of technology across the criminal justice system.

Debra Maxwell set out practical success criteria for reform projects. She also emphasised how technology can improve services at the same time as reducing costs. She noted however that citizens will have to feel a sense of empowerment before they grasp new opportunities to engage with services. At the same time public service leaders need to deliver a culture of innovation and collaboration in their own organisations.

The discussion highlighted specific themes of the speakers’ remarks. Many attendees agreed with the Chief Secretary’s wish that public services could plan ahead, and budget ahead, for a number of years. There was positive recognition that the public sector has responded well to the costs savings required so far, in particular local government. One remaining question would be how to drive thinking across the traditional silos in government. One attendee focused on the role of Ministers in giving their officials a “licence to innovate”.

Debra Maxwell concluded by asking what will be the step change to lift the UK public sector to a new level of productivity. Danny Alexander identified the removal of traditional silos around budgets and a new ability for public services to think long term. The 2015 Spending Review can make a major contribution by focusing on those two areas. Productivity is the right idea for public services for years to come, given the need to improve outcomes at a time of fiscal pressure.

Debra Maxwell, Managing Director of arvato UK

Debra Maxwell, managing director arvato UKAs a long-term partner to a range of UK public bodies, we’re well aware that the challenges explored in this discussion are far from new, but nor are they exclusive to the public sector. Creating the right conditions and culture to boost productivity is something all sectors of the UK economy have been forced to consider since the financial downturn and there are lessons from the private sector that can be applied.

Helping organisations achieve this is fundamental to our business: in one way or another productivity is always a driver behind an organisation’s decision to outsource. That might be because handing over services to a partner allows in-house teams to focus on more strategic opportunities, or because an outside perspective is a valuable thing when significant transformation and change is required.

Naturally, austerity has brought the issue into sharper focus for the public sector. Ensuring that budget cuts don’t result in less being done, or a decline in front-line services, means the need to drive out inefficiency is more pressing than ever.

At arvato we approach that challenge from a back-office perspective. It’s perhaps there that you find the purest examples of how increased productivity can allow budgets to be re-focused.

For example, working on a global scale with Microsoft (we currently process 90 per cent of its global revenues), we’ve delivered savings in excess of $40 million through one of the most significant outsourcing transitions in the company’s history. Microsoft came to us with a challenge to help improve its contract-to-invoice operations across four lines of business. Its processes had become fragmented, and this lack of consistency was adversely impacting productivity. We worked together to bring about a major transformation, taking in six global locations, 1,100 employees and more than 4,000 processes.

These last two details are crucial. That project was only successful because the business was willing to embrace meaningful change. That included looking at every process involved in its back-office and also considering new ways for employees, separated by significant geographies, to work in unison and share one working culture.

Too often when efficiency is the target, technology is treated as a panacea, rather than an enabler of change. In reality, the elements that sit alongside technology—people, process, culture—are often the most important factors and should not be overlooked.

The insights of frontline staff must be taken into account if public sector productivity is to be increased. Listening and responding to the views of teams on the ground is crucial. For this reason we always approach transformation by setting out to embed a continuous improvement culture with employees, in tandem with investing in training and incentivising them to embrace change.

We’ve found going a step further and empowering employees to take part in a transformation process can have a significant impact. Our approaches have included training employees in Lean Six Sigma—a set of techniques for process improvement developed by Motorola in the 1980s that’s now used across many industries—or allocating them with smaller-scale improvement projects to oversee independently.

Of course this willingness to change and collaborate has to extend throughout the entire organisation for it to be successful. It’s perhaps here that the public sector still faces some of its biggest challenges, but we do see progress being made.

We see it in our role as the Cabinet Office’s partner for ISSC1—a keystone of the Next Generation Shared Services strategy, which is delivering major back-office transformations for a number of central government departments. We see it in many of our local government and NHS partnerships, with committed teams willing to change how they work and embrace new technology.

We also see it in the discussion that’s summarised in this report. It’s clear that there is no shortage of appetite and ideas ready to be put on the table and I hope this report serves to stimulate further debate.

Introduction

Andrew Haldenby

Good afternoon, everybody. Happy New Year. A very, very warm welcome indeed on a cold day to this Reform/arvato UK seminar, “Can public sector productivity deal with the deficit?” My name is Andrew Haldenby. I am the Director of Reform which is an independent, non-party, think tank whose mission is to find a better way to deliver public services and economic prosperity in the UK. This is the fourth meeting that we have held with Rt Hon Danny Alexander MP in this Parliament. We held one right at the beginning when the new Chief Secretary came in to find out what the possibilities were for opening up public services. We held two in the Treasury just before the spending round to discuss how different public service budgets could come together to make the whole thing work better. And now—it’s rather nice—we have come full circle, and will have your views right at the end of the Parliament.

And Danny, we’re absolutely thrilled that you’re here. As I said before, at Reform we think the Chief Secretary’s job is the best job in government. Can you imagine being the person who has to think about public spending and public services every day and get paid for it? Absolutely tremendous. You being here is very, very special for Reform. Thank you so much.

The subject is also a fascinating one. As Nick Clegg said in this Parliament, this is going to be the first scarcity election. The pressure on the public finances has never been clearer. Whoever wins the election will have to continue this new path to public spending discipline. And so public services are once again at the top of the political agenda.

Given the deficit which will stand at around £75 billion as the next Parliament begins, the idea of getting greater value for money out of public spending clearly seems to be one of the ways to have better public services even, as I say, in this period of fiscal discipline.

Let me just close the introductory remarks by then thanking you all so much for coming and for giving up your time. This is exactly what we are trying to do at Reform, to bring together voices from within government: ministers, officials, private sector, and media experts. I’m extremely grateful to you all. And my final thanks go to Debra Maxwell, the Managing Director of arvato UK, and her team here for making today possible by sponsoring this event.

For those who don’t know, arvato is an international company with a huge range of experience both in improving private sector and public sector organisations from a particular standpoint which I’m sure Debra will explain. We have been lucky enough to work together throughout this Parliament and the involvement of private companies in this question is a fundamental one. Debra, thank you very much for today.

Opening remarks

Rt Hon Danny Alexander MP

The fiscal context

It’s nice to have a chance to reflect and to listen on some of the most important issues that will be facing whoever is in government in the next Parliament, whichever party or, more likely, combination of parties forms the next Government. And I’m pleased to hear you say that the Chief Secretary is the best job in government. I don’t have that much to compare it to, given that I was only Secretary of State for Scotland for 17 days. A friend of mine said I was the youngest, shortest serving, and most successful Scottish Secretary in history.

I am now the second longest serving Chief Secretary, and I’m the longest serving not to have a formula named after me, so any suggestions for how to resolve that particular issue before we finish would be welcome. And I believe I’m also the longest serving Liberal Minister in the Treasury since Lloyd George, albeit that probably says more about how many ministers we’ve had in the Treasury since Lloyd George than anything else.

What I would like to do is to set out what we have been doing in this Parliament, what needs to be done in the next Parliament, and reflect on one or two of the issues I have found frustrating in this period by looking at some of the principles and ideas that we might apply to these questions. By which I mean ensuring that we continue the job of sorting out the public finances whilst maintaining and ideally improving the quality of the public services that people receive.

That’s the balance that we are trying to seek, and I will leave to others around the table the debate around how one defines and measures public sector productivity. I’m sure that’s a debate we can have, but I’m not going to trespass on that territory. I’m sure there are many others who would wish to.

Going back to 2010 when we formed the Coalition, and when we hosted our first seminar, we were in a position as a country where we had the largest budget deficit anywhere in the European Union. There wasn’t a clear plan to deal with it. The previous few years of rapidly rising expenditure and flat, and often falling, productivity had disproved the myth that more money necessarily equals better services for people.

There were quite a lot of quick wins that could be had as well as many, many, very difficult choices. We set ourselves the goal of trying to focus as much as we could on efficiency, and on reforming the way services are delivered in order to maintain the outcomes that people wanted.

People around this table I’m sure will have different judgements on how we’ve measured up against those two goals. Certainly working closely with Francis Maude and his team in the Cabinet Office—and Ollie is here from the Cabinet Office— we have made good progress on the efficiency agenda with what, I dare say, to many of the companies around the table, would have seemed pretty simple stuff—aggregating our procurement, rationalising our property portfolios—as well as some really difficult things that required a lot of heavy lifting, such as reforming pension provision, dealing with issues in public sector pay, and so on.

The numbers published and audited by the National Audit Office suggest that on efficiency we have made the sort of progress that we expected to make and that, by the end of this Parliament, we’ll have found about £20 billion of savings from that agenda. We published a document at the time of the Autumn Statement last year which was looking at—jointly with the Cabinet Office—how much more we can improve the way government works; improving the efficiency of central government and spreading some of those benefits to the wider public sector.

It’s an odd distinction but central government likes to distinguish between central government and the wider public sector. Of course they’re all organisations that spend public money but, nonetheless, many of the things that we’ve done to improve central government purchasing and negotiating aren’t, at the moment, shared with local government except on an opt-in basis. Or, indeed, with any other organisations in our public services, like the health sector—where responsibility is devolved—you don’t necessarily see the same degree of focus on basic, administrative, cost saving.

Very recently, we had a parliamentary debate on the updated Charter for Budget Responsibility. It’s quite important people understand this because the Charter specifies the agreed nature of the task in the next Parliament, albeit some parties—especially the Conservative Party—argue that one should go on reducing the size of the state beyond the point that was defined in the new Charter.

What the Charter stipulated—George Osborne and I devised this Charter but it was interesting to see Labour also sign up to it albeit with, , their fingers crossed behind their backs—was a commitment to eliminate the structural deficit by the financial year 2017-2018.

We’ve already set out budgets—I did this in the spending round in 2013—for how much government departments will have to spend in the year that starts in April 2015 through to March 2016. That’s part of this Government’s remit. And so that Charter commits to two further years of fiscal consolidation at the end of which, on the current numbers, the structural deficit will be eliminated and our debt will be falling as a share of our economy. There is, from that point onwards, a much wider range of options put forward by different parties about what we would do.

For the purposes of this conversation I want to focus on that timing. Roughly speaking, the numbers require another £30 billion of fiscal consolidation to achieve that objective. Now it’s worth saying a lot of the analysis of this is based on the assumption that all of that is found from departmental expenditure. That isn’t necessarily the case at all.

Rt Hon Danny Alexander MP and Andrew Meaney

£30 billion of fiscal consolidation

The Liberal Democrats argue that there should be a significant amount of that work done through tax measures, particularly targeted at the wealthiest, in order to ensure that the burden of consolidation is shared across society and that those with the broader shoulders bear the greatest share of the burden. The Conservative Party argue not for tax rises but for welfare cuts. Again we can go into the politics of that, but that obviously has the effect of reducing the burden on public budgets just as tax rises do. Inevitably, whatever government we have, I suspect there will be tax rises alongside whatever mix of cuts in departmental spending is chosen.

Nonetheless, the overall figure on the current numbers is around £30 billion. At the Autumn Statement we set out a couple of things that we thought could make a contribution. The first was the document on further efficiencies that I referred to, which set an ambition for efficiencies to contribute about £10 billion. Some of that will be found within protected budgets like the NHS, but there are still potentially £7 or £8 billion of real savings available from improving the running costs of government

That does mean getting into some areas that are challenging but important for government too: adopting modern technology, for example. , we have an extremely good organisation in the Government Digital Service who really have started to shift thinking in Whitehall about the role that technology can play in the delivery of public services.

Those are choices that are not simple, because of course they also have consequences for existing service provision. But, when you look at some of the changes that are being made in the way that you assure your identity with government now, or how you apply for certain forms of registration—the Public Guardian’s service is now done online—there’s a whole number of things which show that very substantial savings can be made, and the service, if anything, is better for the public rather than worse.

Government IT projects have a chequered history, to say the least. I’m sure there are people around this table who know this better than I do. There is probably almost a recoil when governments start saying “let’s apply technology to try and solve some of our problems.” But that’s a significant area. Likewise property: though we’ve done quite a lot in this Parliament, there’s a lot more that could be done to rationalise the property that we use and so on. There’s more we could do to tackle tax avoidance, and we said in the Autumn Statement we could find a further £5 billion.

But what I want to focus on now is what more can we do to reform. To that end we hosted at the Treasury, working with PwC over the course of last autumn, a series of seminars looking at different areas of reform that could drive greater productivity.

I just want to mention a few things I drew out of that process because it’s relevant to this conversation. First, technology: we had a seminar that looked at the criminal justice system and how technology could be better applied. From the way in which police officers go about their business on the streets, to the administration of the court system, the handling of prison records, and the transferring of one individual’s records from one institution to the next. It’s clear that there is a lot that one could do.

If we look at the burden of costs for social security, the investment in mental health provision is something which could be very important in reducing the number of people who need to go into the benefit system for reasons of mental ill health. People stay in work. They get back to work more quickly. It’s an area that my party is focused on. As well as a good social objective, there are real public sector public spending reasons to look at that.

Likewise early intervention. Early intervention has been a frustrating discussion for a long time for me because there is a lot talked about it and few things have been done. Of course, the savings tend to yield over a much longer timeframe. Nonetheless, you see an alignment between what feels like the right thing to do and, over time, getting better value for money in the services that we deliver.

Efficient, integrated public services

Finally I want to reflect on my biggest frustration, looking at government from the perspective of Chief Secretary, which is the way in which the government operates in these silos, causing duplication. You get unnecessary bureaucracy. You often get individuals falling down gaps between public services and becoming more costly and burdensome as a result.

What I am probably most proud of in this government is the Troubled Families programme, where we’ve invested £450 million or thereabouts over a number of years, targeted at the 125,000 most troubled families in the country. Some of them are, cumulatively, when you look at all the different services that are interacting with those families and the people involved and so on, costing the country £100,000-£200,000 every year.

We set ourselves some goals in that programme, on a payment-by-results basis, working with the local authorities to focus on 125,000 families and set some measures of turnaround to do with school attendance and employment and crime and social behaviour. On those measures, about 85,000 of those 125,000 families have been turned around so far, which is based on an approach that just seeks to have one individual interacting with a family, as opposed to lots of services.

In Greater Manchester they reckon this has saved about £32,000 a year, per family, spread across a number of different organisations. Of course, the accountants will then get frustrated because they can’t work out quite which organisation to allocate the savings to. Obviously, if you can’t work out which organisation to allocate the savings to, for some people it’s not worth making the savings, which is why I get frustrated with the silo mentality.

That’s a good example, and on that kind of local service reform we need to go a lot further. Joining up the delivery of public services at a local level seems to me to be an area where we can make real progress towards more efficient public services, getting the right outcomes for people more efficiently and at less cost.

Another example, and it’s a topical example, is in the field of health and social care. For a long time—probably for decades, but certainly as long as I can remember in my time in politics—people have been rightly saying that the gap between the health system and social care system is an area that causes all sorts of problems: there’s an overlap that should be joined up.

This year—and we decided it back in 2013 in the Spending Review, and we’ve been working since then to implement it—we’ve put in place something called the Better Care Fund which is effectively a giant pooled budget between health and social care, determined at a national level and then delivered through agreements in each and every area of the country.

Health organisations, social care organisations, and others, have been working on these plans, and we’ve now got to a position where we have good plans in most areas of the country. They start to be implemented in the 2015-2016 financial year, and will genuinely create the right sort of incentives so that you don’t get the current situation, where people rightly complain that the lack of social care provision keeps people in expensive hospital beds for longer. A lack of effort in public health means that people end up with more serious conditions.

The Better Care Fund is the first really serious attempt that’s been made in Cabinet to join these two services up. There is quite a lot more to do in that area, but joining up services at that sort of level is right.

Rt Hon Danny Alexander MP, Andrew Meaney, and Professor Alison Wolf

Rt Hon Danny Alexander MP, Andrew Meaney, and Professor Alison Wolf

The principles for further reform

I just wanted to make a couple of other points. What do all these things have in common? One commonality is decentralisation of power. The idea that a man or woman in Whitehall knows best has long since been thrown out of the window, or ought to have been. Of course central government has a very significant role to play. But, as some of the work done through the city deals has shown, devolving budgets and empowering people helps those closest to the problem to take the right decisions for their area.

Back in 2010 we made reductions in lots of budgets including local government. But in local government, when we came to power, there were 110 different ring-fences imposed by central government on local authority budgets. People would say, “they’re getting all this money,” but, within that, there were 110 different areas where central government said “you must spend this much on this area.” We reduced that to seven. Now one could say, “that is seven more to go,” but it’s something which gave local authorities a great deal more flexibility about how to spend their, admittedly reducing, budgets. I’d like us to go further on that.

And then, lastly, there is an important point about long-term planning. In 2010, we set out budgets right the way through to 2014-2015. Departments have budgets for four years. In some areas we’ve gone further. Our infrastructure programme now has budgets right the way out to 2020-2021, so the Highways Agency can plan ahead and get better value, and more roads per pound, than we get at the moment. There are other areas of public spending that would benefit from that.

Local authorities have made the case to us that they would like to have more certainty about their budgets over a longer timeframe. And I hope that whoever is responsible for the Spending Review following the 2015 General Election will put in place those longer term budgets for a wider range of areas.

Local service reform, decentralisation of power, and longer term financial planning are three things that would help to deal with the remaining deficit in a way that is more productive, and leads to better public services rather than worse public services. And that, in the end, is what we should all want to achieve. Thank you.

Lead reply

Debra Maxwell

First, a quick introduction because I don’t think arvato is necessarily that well known an organisation. We’re part of the Bertelsmann Group, which includes companies like Penguin and Random House. arvato is the outsourcing arm of the group. I’m Managing Director at arvato UK, and we include companies that do everything from supply chain management, to financial solutions, to business process outsourcing.

I used to work in the public sector. Some 10 years ago I headed up Surrey County Council’s shared services programme, which I believe was the first in local government at the time—so quite ground-breaking. It’s very interesting that some of the topics that I’ll touch on today were being discussed 10 years ago when we first started on the shared-services journey.

I then moved over to the private sector with arvato and spent most of my time in large global organisations, so working with the likes of Microsoft and Google to do what a lot of the big government programmes are doing at the moment: big, back-office transformations. More recently, I’ve worked in our public sector business in the UK. The main piece that arvato gets associated with at the moment is the big Independent Shared Service Centre 1 programme with the Department for Transport, Driver and Vehicle Licensing Authority, Maritime and Coastguard Authority, and others. While I don’t have such a broad perspective as the Chief Secretary, on the productivity question, we look at it really from the back-office perspective.

The first thing to note is that we talk about productivity and shared services and efficiency agendas like they’re something brand new. Everybody is doing it. We talk to private sector companies, public sector organisations — everybody is doing it. And, significantly, the market in the UK is so big that it becomes very, very attractive to look at what can be done.

We still see multiple programmes, as Danny alluded to, which are not as successful as they could be. We have programmes where there are contracts going out into the market that still look exactly the same as they did 10 years ago. While I might be repeating the same things that everybody talks about all of the time, I want to remind everybody about what we think are the five key things that are going to enable these programmes to work, and to deliver some of the efficiencies that we talked about before.

First, technology. Technology is always the buzzword that everybody uses. We talk about technology in such broad terms. In the past, particularly in the outsourcing world, technology programmes have been seen as the thing that delivers the significant savings that are available within these contracts. If we continue to just look at technology, rather than looking at the elements that behind it, future productivity is going to be very difficult, and in fact almost impossible, to deliver.

Secondly, we are still not looking at process properly: we quite often lack an understanding of how open citizens will be to change. For example, in our local authority contracts, it’s sometimes very difficult to make change happen because process is seen as something that needs to remain intact. If we just look at private sector examples like the Metro Bank: here’s a bank that has a completely different concept to what everybody has been used to on the high street for many, many years, yet we’re starting to see a significant move to different ways of operating, and it should be no different for the government.

Thirdly, people. We talk about streamlining workforces and empowering employees. We talk about operational decisions being pushed down. Yet, from our perspective, there is not enough time and investment in on the ground training; this is absolutely critical for transformation to take hold.

Fourthly, culture. I find it very interesting that innovation, while seen by business leaders across all industries as being the biggest revenue growth driver, still lacks emphasis in the public sector. Outsourcers are making the investment, but there’s very little that supports innovation. Funds are not available to intrinsically change the culture of an organisation to be more innovative.

Finally, just very briefly, we talked about collaboration. Whilst, for example, in ISSC1 we’re starting to see a step change in the collaboration that we’re getting amongst government agencies, it is still really important that we work really hard on forcing a degree of collaboration because, without a real push, we find it very, very difficult to drive collaboration in order to deliver these big efficiency programmes.

From an outsourcer’s perspective, can it be done? Absolutely yes. I still think there is significant work that needs to be done on changing the culture, the way that we innovate, and the way that we invest in these longer-term programmes.

Debra Maxwell, arvato UK

Debra Maxwell

The external perspective

John Thorpe

From a National Audit Office point of view we are taken with the long-term planning idea. Planning to deliver efficiency is really quite important. Perhaps, in the consolidation that we have seen, some of the savings—whilst we have audited them and we can agree that they have been delivered—were unplanned. Sometimes we got the sense there were obvious savings to make. But, if the next round of saving is to be delivered, there needs to be much more sophistication in the planning of how that is to be achieved.

In welfare, some of the processes that we see in the benefits area are 15 years old or even older. The information environment has moved on quite significantly, and you certainly wouldn’t design those processes in the way in which they’re operating today. Now there are new resources available; for example, income information coming out of HMRC through Real Time Information.

John Thorpe

John Thorpe

Professor Alison Wolf

Productivity is either doing what we do for less or it’s doing more for the same, and they’re very different things. It’s still true that, if you want to do it for less, just slashing a budget is probably the most effective thing to do. But I want to suggest that doing more for the same is quite detailed, quite individual, and it’s very difficult to come up with general examples.

What has been missing from this conversation is small institutions and small suppliers, because that’s where you tap the innovation. That’s where you often get a huge amount of productivity. But it’s also incredibly difficult to manage. Two obvious examples: individual budgets to use services are fantastically successful. But the minute you start getting scandals, you’ll get regulation.

The other one which I’m very close to is devolving powers to small academies and free schools. Again, there are real problems. I just want to give you an example because government does still have a very active role, and it’s how you incentivise government departments to do this well. It’s a success story about insurance for small schools where the current ministerial team at the Department for Education basically created an insurance oligopoly. It was a textbook example of where government could go in, organise risk sharing, and get more for less.

The stuff described so far is what we already do quite well in this country compared to, say, Japan and many other countries. Where it becomes hard to set general rules, and where you have to think about incentives inside organisations, is in the small suppliers. To give you the other side of the coin, GPs have got less efficient.

Professor Alison Wolf

Professor Alison Wolf

The view from Whitehall

Stephen Aldridge

My background is particularly in local government, which has responded to the challenges that it’s faced over the last five years incredibly well. It seems overall spending reduced by about 14 per cent, in real terms. Central government support has fallen much more. We don’t have good aggregate measures of the outputs and outcomes of local government, but the evidence we do have suggests that it’s been able to respond remarkably well.

Many people will be familiar with the evidence on public satisfaction with local government services, which has held up. There is other data which is consistent with improved performance. In the social care area, for example, it’s interesting that most people who are still receiving care services report higher levels of self-reported outcomes. Obviously we don’t know necessarily what’s happened to those people who are no longer receiving services. But it is a pretty positive story.

I don’t think there is any one reason why local authorities have responded so well. The fact that they do face quite hard budget constraints is important. Alongside that, we’ve given them more spending flexibility, and other freedoms, so they have had the ability to do things differently.

There are a number of ways in which they’ve responded. They’ve reconfigured services. They’re proactively tackling problems rather than being entirely reactively. There has also been an increase in the use of data. You see that in the Troubled Families programme: a better understanding of who the clients are, what their needs are, and what the appropriate interventions are.

Thinking about how we use outsourcing and competition intelligently is quite important. In the prison sector, for example, there is evidence that the right sort of outsourcing and good cost benchmarking can drive better outcomes, not just in the outsourced activities but the entire estate.

Questions remain: where we’re mutualising public services, how does that feed back on the quality of services in those things that aren’t mutualised? How many local authorities are also thinking about how they can be more innovative in generating new sources of revenue to make better use of their assets?

Stephen Aldridge

Stephen Aldridge

Oliver Robbins

We take an interest, in the Cabinet Office, in the extent to which the civil service and the wider public sector is encouraging, and enabling, innovation and culture change. The two things I’m worrying about at the moment are whether we are doing enough to support platforms for cross government efficiency and productivity.

The Chief Secretary was kind enough to refer to a few that have been piloted in this Parliament. Some are going very well indeed. But, as he said, one of the challenges is how far you drive those across the public service. Can that kind of thinking be applied to things which have not in the past been seen as formal professions with a capital P? Areas like procurement, where it just makes sense to start by collecting together everyone who is a procurer and asking them whether they’d work together.

Secondly, the Chief Secretary referred both to the Better Care Fund and Troubled Families. An area I’m very interested in trying to support over the next few months concerns other user-driven areas of public service, where the kind of research that is done—and can easily be done—quickly points to where people fall between the gaps.

The frustrating thing is that, quite often, we know where those gaps are and why people are falling through them. We’ve just never been asked to come up with the answer before. Facilitating that kind of cross-cutting thinking and innovation will be key to bringing down the deficit next Parliament.

Professor Alison Wolf, Oliver Robbins, and Hannah Sibley

Professor Alison Wolf, Oliver Robbins, and Hannah Sibley

Catherine Frances

We’re interested in the question of user groups and places, where we know that people repeatedly access public services—and for valid reasons—but you can see that, from the perspective of the user, or any providers or commissioners, it would feel irrational that somebody is coming back repeatedly.

The Better Care Fund and Troubled Families programmes are two very different models, though they have a common theme of integration. The Treasury are interested in hearing from people about which mechanism suits which context.

Richard Harries, and Catherine Frances

Richard Harries, and Catherine Frances

The private-sector perspective

Andrew Meaney

You mentioned the Highways Agency, and I’ve been working on transition in the Highways Agency for the last year or so. Much as in the rail model, it seems to me extremely sensible to set long-term budgets for as long as you legitimately can—and legitimately from a democratic perspective. What’s clearly difficult is that the Highways Agency has got a capital spending allocation up to 2020-2021, but a resource spending allocation up to 2015-2016. This split has its reasons but is potentially problematic for infrastructure.

Efficiency is, by definition, translating inputs into outputs. Effectiveness, however, is something that happens before that, after you’ve taken the decision about what you’re going to produce. Often the biggest savings are at that point. It’s deciding what we want to do, being sensible about that, making sure that we’ve got the right outcomes in mind, and trying to design delivery mechanisms to achieve the outcomes. We must not simply do what we’ve done many times before.

Stephen Ibbotson

I have been a finance director for 25 years. I did a lot of insourcing and outsourcing projects, and I don’t think there was 1 year in those 25 when we weren’t cutting budgets in some way or the other. I got the biggest bang for the buck by eliminating silos. By breaking down silos, you gain efficiency, and often effectiveness, because people are working on the same thing in the same way. When you do that, you have to make sure you’re measuring and monitoring, and the rewards and recognition are appropriately allocated to make sure that you get full buy-in.

Andrew Haldenby and Stephen Ibbotson

Andrew Haldenby and Stephen Ibbotson

Keith Sharp

One point about IT projects. Everybody smiles a little sadly when they hear about government IT projects. That’s because you hear about the ones that didn’t work. There are many that are working very well, and we should try to focus on good news. The Cabinet Office in this Parliament has done a lot of work to rationalise and refine the way in which procurement is done. It’s incomplete, but there have been some good steps taken to understand what the private sector needs in order to serve the public sector well.

Longer term planning is always welcome. Businesses try to plan long term, and sometimes we can’t quite see why governments don’t. The fact that this is now being addressed is to be welcomed. If we can overcome some of these cultural issues, the opportunity for improving public services is there through digitalisation, transformation, and strategic use of technology. It will mean job losses in some instances but the goal of more-for-less or more-for-the-same, is a powerful one.

Keith Sharp

Keith Sharp

Neil Sherlock

Danny talked about decentralisation of power, and longer-term thinking about budgets in the next Parliament. That’s exactly the direction of travel that’s needed to encourage people to think about reform and change over a longer period.

When I was in Government and spending time on city deals, many of these were relatively short term and some of them took quite a lot of negotiation. Setting out a framework across a five-year parliament gives people the incentive to think about things over a longer period of time. Having a sense of the budget and looking at sensible involvement of the private sector and the third sector could help those to succeed. That could open up, if one could start that very early in the Parliament, sensible change that worked to a timeline.

Neil Sherlock

Neil Sherlock

Gill Hall

I really liked Danny’s comments about the Troubled Families and the way that you put the citizen, or the people you are trying to help, at the centre of the transformation. There is enormous value to be gained by putting the citizen at the centre of the service, and also by looking at the transformation from the outside, instead of looking outward from your administration.

One of the real challenges, from my experience of government over the past five years, is that civil servants know where all the innovation is but they are often quite risk averse. People need to be given permission to innovate. Something that Ministers can do from inside government is to give permission to be creative, and to innovate.

My second point is that one of the things that you can do strategically—from the centre, but also in departments—is think about where your core capabilities lie and make decisions about keeping these in-house. For anything that’s not core, and particularly where there is a thriving private sector market outside, should these things be outsourced or should we go into a kind of joint-venture partnership? For example, the Debt Market Integrator that is just about to be measured.

Concluding remarks

Debra Maxwell

If we want to continue the pace of change as it is at the moment—and there have been significant improvements, significant changes and significantly new ways of thinking—everybody needs to agree on the next big step. If we’ve come this far in one Parliament, what’s the big step-change that’s required to get us to the next level, to deliver the bigger outcomes? I haven’t seen any sign that we know.

We need to start thinking about how you change, what investment needs to be made in really changing the culture, what new technologies are going to be looked at in future? We must start to think about intrinsically what the technology is. We know who our partners are going to be. But what is going to create that big step-change?

Danny Alexander

Thank you, it was a good discussion and some good points made. The point about local government having done a good job so far is absolutely true and is important to recognise. We have some absolutely brilliant, innovative, thoughtful people in the civil service. There are some Government Ministers who make it their business to go around and be rude about civil servants; I don’t think there’s any justification for that. I’ve been fortunate in the Treasury, and in other parts of the Government, to work with some really excellent people. I don’t regard that as an impediment to progress.

Of course, the next stage is going to be difficult because we’ve made a lot of decisions already and this is the last part of the journey. I also think it’s very important and motivating to know that there is some light at the end of the tunnel. In 2010, the scale of the task was truly enormous, and economic challenges and in the intervening years have meant we’ve taken a little bit longer over this process. But the time when we have dealt with the structural deficit is in sight. It’s important to say that once that job is completed, there’s no spending bonanza around the corner, although there will be a change in the overall spending environment. That will be a subject of debate during the course of the election campaign.

The point about long-term planning is really important. If we could get rid of silos, and have longer-term budgets, we could deal with the issues that we have talked about. That said, the longer one plans ahead, the more I have to reserve the right to change my mind because, when you’re looking at things from the macroeconomic perspective, if circumstances change, then you need to be able to adapt. But on balance it’s better to take that risk than the one that we run when people are operating only one or two years ahead. I look forward to whoever forms the next Government taking some of these ideas and using them to make sure that we deal with the deficit wisely in the next Parliament and deliver better public services with the money that we have.

Andrew Haldenby

Danny, thank you. We’ve gathered a whole range of ideas at just the right moment in the electoral cycle so we can now get those on paper in people’s minds. We will all enjoy the theatre of the election campaign but, beneath that, we will all be thinking hard about the underlying issues.

I just want to close by thanking you all so much for coming, for speaking so clearly and brilliantly. Our work on this at Reform will continue. This is what we do. I hope we can keep in touch with everyone here. I’d like to repeat my thanks to Debra and her team at arvato for their support for today, which makes this possible. I hope we will continue our partnership because these things matter and I value your experience. Thank you very much.