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The Prime Minister and the Leader of the Opposition have said that they will cut public spending and protect front line services. They are wrong for two reasons. The basic cost of front line services means that the deficit cannot be sufficiently reduced without tackling the front line. Research for this paper indicates that the public sector workforce needs to reduce by at least One million people (15 per cent of the total) if the structural deficit is to be eliminated, over a period of years. Jobs will fall by the greatest amount in the services that have seen greatest increase, such as the NHS. The rates of natural wastage are so high that relatively few redundancies will be needed, although some will be.
Contrary to popular perception, the great majority of the public sector workforce are front line workers. Of the 1.4 million people working in the NHS, for example, only just over 200,000 provide administrative support. Since 1999, the central civil service has grown by 5 per cent compared to a 30 per cent rise in the NHS headcount.
More importantly, if public services are to improve radically, as all Parties want, then the front line needs to change radically too. Measures such as sickness absence and staff morale show that the public sector workforce performs significantly worse than the private sector. “Performance management” has meant answering to central targets rather than the real management task of achieving an outcome within a budget. Financial management is extremely weak. The root cause is a lack of accountability, whether to the users of services, to local electorates or (for senior civil servants) to Ministers. Tackling the deficit means changing the public sector fundamentally, from unmanaged, bureaucratic, monopolistic and secretive, to managed, accountable, competitive (where possible) and transparent.
Both Government and Opposition have rightly called for radical reform of public services that makes them accountable to their users. But with the exception of policing, both have fought shy of the actual policies that would deliver it. Both have pledged to hedge around reform of education and in particular health with limits and constraints. Opposition to change in the health service is especially misguided since it is the biggest budget of all and the service most in need of change.
It has to be different this time. The next government will have to achieve the radical reform which has eluded every other post-War government. A key lesson is that governments must seize the day and begin reform on day one when their political capital and mandate are at their highest. The challenge is so great that the next government should focus on the following key priorities in its first year:
Only a united Cabinet can take through the programme of change across Government that is needed. An unequivocal demand for more for less from Ministers will support public sector managers who want to do the right thing. That means an end to spending commitments and opposition to reform, such as pledges to protect the NHS from change or make the NHS the preferred provider of care.
For senior civil servants, this means putting appointments in the hands of Ministers. For all public sector workers, it means an end to the culture of a job for life through transparent fixed term contracts and the end of generalised recruitment, such as the civil service faststream. It means greater transparency over salaries, contracts and performance for every public sector worker and an end to the civil service monopoly of advice to Ministers. And it means removing barriers to competition and private sector delivery. The Bernard Gray review of the Ministry of Defence is a fantastic example of how independent advice can help Ministers understand the costs of departments and how to reduce them. Ministers need to repeat that for every department.
The NHS is the largest budget (£110 billion per year). Allowing costs to rise in the NHS defeats the purpose of making savings elsewhere. Good NHS managers are ready to reduce costs and improve access by shifting resources from expensive hospitals into more convenient local settings, but face political opposition. The NHS needs to be fundamentally depoliticised by giving people freedom to choose where their share of the NHS budget is spent, in practice by giving them choice of Primary Care Trusts.
Good public sector managers are ready to achieve more for less. They take for granted that costs can be reduced by 20 per cent without reducing quality of service, by redesigning the front line. But they need political leadership to explain to the electorate the consequences of greater efficiency in the public sector, and to allow managers to manage. Ministers and their Shadows are not yet making that case for change. They still confuse the performance of services with their inputs, such as the size of the workforce.
In fact, reform will be positive for the public sector workforce. The current model traps public sector workers in low productivity employment. Reforming the front line will increase productivity and allow sustainable higher wages in the long term.PDF DOWNLOAD