Reform blog (page 7 of 7)
Welcome to the new Reform blog. This section includes articles by the Reform team as well as by guest authors. Some of these pieces are written following our events, setting out the details of the discussion and the policy implications while respecting the Chatham House Rule when it applies. Many of these pieces are about our research reports, both published and forthcoming, and some provide comment on important national events, such as the Budget. We hope you find them interesting and informative.
Reform roundtable seminar introduced by Geoffrey Spence, Chief Executive, Infrastructure UK, on 25 January 2012.
By Kimberley Trewhitt, Researcher
Infrastructure is now high on the Government’s agenda. With the UK’s current infrastructure seen by many as a hindrance, rather than a help, to economic growth, the Government has published two National Infrastructure Plans to pave the way for world class infrastructure in this country. Yet funding infrastructure in the current economic environment is a challenge. This week, Reform held a roundtable lunch to discuss the best ways to fund the UK’s future infrastructure needs, under the Chatham House rule.
Two key factors which have led to a contraction in finance for infrastructure projects were identified. First, the debt market has failed, with bonds often unable to achieve the highest investment-grade ratings, and secondly, an increase in regulation, such as BASEL III and Solvency II, has damaged liquidity as banks have shored up balance sheets and insurance companies have reduced their exposure to risk. Political risk and uncertainty in the investment environment damage the confidence of investors. This is true across all infrastructure sectors.
The Private Finance Initiative (PFI) has been a key model for financing infrastructure projects. The Treasury is currently consulting on PFI reform and the future role of this model has become a hotly debated topic. Questions raised at the roundtable included what should a successful PFI project should look like? What is ideal procurement length? Should a project appear on or off balance sheet? What should be done about any profits? Discussion at the roundtable highlighted that the debate has become too focused on the balance sheet, at the expense of ideas such as better procurement.
Procurement does matter, and the UK can do better. In Canada, for example, projects often come on-stream faster than in the UK. To some extent this reflects a trade off as Canadian projects are decided at a central level, with less involvement of local view points.
The discussion highlighted the need to be creative regarding funding solutions. Potential instruments could include user charging for road infrastructure, reducing risks for construction in energy by offering Contracts for Difference and de-risking projects through Treasury support, as with the Thames Tideway project. A greater role could also be played by institutional investors, for example pension funds, and foreign investment. But to secure these new sources of funds the question of political risk must be addressed as, in the final analysis, either taxpayers or users will pay for investments.
Reform-HP roundtable seminar introduced by Rt Hon Chris Grayling MP, Minister of State for Employment, on 24 January 2012.
Payment by results is in danger of becoming the Government’s big idea on public service reform. It had a big place in the Open Public Services White Paper and it is being implemented in the areas of welfare to work and offender management and rehabilitation. A working group has just been set up within government to compare experiences between departments and identify new opportunities.
This Reform seminar was the second in a series of events, sponsored by HP, to debate the latest thinking in the public service reform agenda. The first thing to say is that it is very clear that good, innovative providers are seizing payment by results with both hands. They like the idea that they have freedom to run their services as they wish in order to meet the target. One attendee explained that the focus on results (in this case for rehabilitation for prisoners) had led him to create a new working relationship between police, prisons and probation which clearly promised a better service all round.
One emerging problem is that the emerging variety of payment by results programmes are starting to trip over each other. There are already different programmes for unemployed people variously funded by national government, European funds and local government. In the Government’s view, these schemes are separate and mutually reinforcing (in that each seeks to achieve a particular outcome that helps towards the overall objective of getting someone back to work). In some providers’ views, the schemes overlap and result in multiple payments for doing similar things for the same people. It is easy to imagine the complexity getting worse as new programmes come on stream for troubled families and drug rehabilitation. The trade-off is between greater Government control of activity (and lower spending) and greater freedom for providers to decide exactly what will make the difference in a particular situation. Some attendees suggested that the solution might be local commissioning of payment by results programmes rather than a national procurement.
A remaining question is if we are to pay for “results”, who decides what the right “result” is? In the case of schools (say), I am very happy for schools to get paid by results, but I don’t want Michael Gove deciding for me what should be in my child’s curriculum. This suggests that there is a natural limit to payment by results as soon as consumer choice comes into the equation, which certainly includes education and the great majority of healthcare. Ministers cannot just rely on payment by results to reform public services; they will need to develop the other parts of the open public services agenda, specifically choice and competition in schools and the NHS, which so far has been more difficult.
Andrew Haldenby, Director
Reform-HP roundtable seminar introduced by Sally Collier, Executive Director, Policy and Capability, Efficiency and Reform Group, 19 January 2012
Yesterday a Reform seminar debated “tight and loose” i.e. what is pretty much the Cabinet Office’s most important policy idea: that sometimes efficiency means a tight central grip while at other times it means devolving and decentralising. Speaking for Reform soon after the election, Francis Maude argued that the previous Government had achieved the opposite of what is needed:
“It seems to me that the last Government had this almost diametrically the wrong way round. They didn’t control a lot of those things which fall into my “tight” category [such as civil service headcount, ICT and procurement]. They didn’t control them well at all, and yet there were constant attempts to micro-manage delivery from the centre with a plethora of targets and public service agreements and monitoring and auditing and man marking and regulation and guidance so that everyone here at the front line, you felt that you were, instead of being accountable to the the citizenry you were there to serve, you felt actually accountable to an enormously complicated set of relationships to the centre. This is wrong and doomed to fail.”
The discussion, under the Chatham House Rule and sponsored by HP, turned on where this Government draws the line. There certainly can be benefits to tightness. Both the National Audit Office (NAO) and the Audit Commission have found evidence of the benefits of a tight central grip. This is particularly the case where government buys something simple and easily specified – such as basic commodities – and where it buys at great scale. A fierce drive on costs can also help reform and new ways of working. For example, the Government Property Unit is currently reducing the size of the Whitehall estate. This could improve the productivity of civil servants by moving them into the same buildings (and so improving communication) or encouraging them to be more mobile. In general it was felt that Whitehall had been insufficiently “corporate” in recent years, and that a bit of tightness was long overdue.
But most of the discussion set out of the dangers of tightness elsewhere in the public sector. All rigid procurement rules necessarily exclude some suppliers from competition (and often the more innovative ones). Both the NAO and the Audit Commission have shown that, in other cases, efficiency comes when a part of the public sector has the local nous, flexibility and freedom to solve a problem itself. And in general the centre of government overestimates the benefits of central intervention. For example, central targets are less effective than they seem because they are always gamed (the targets may all be hit yet standards may fall). And central government does not have the data – particularly on costs – to be sure that its intervention is worthwhile.
The concern would be that the tendency of the Government (really, of any government) is to drift to the tight. Even this year we have seen the Prime Minister set a new personal rule for the numbers of visits that NHS nurses make to hospital beds per day. His justification was that the issue was so important that he had to intervene. But clearly that opens the door to much greater intervention as time goes on, and not just in healthcare. The Cabinet Office has been much more convincing on “tight” that is has on “loose”, as the difficulty in producing the Open Public Services White Paper showed. The Government, I think, has to set out more thinking on the “loose” side of the bargain if it is to hold the line.
Andrew Haldenby, Director
Roundtable seminar introduced by Baroness Eaton, Former Chair, Local Government Association, on 17 January 2012.
The Government has made devolution a key priority. The Prime Minister has pledged to end the “Whitehall knows best” attitude to public service delivery with greater plurality, decentralisation and local accountability. Yet while some of the policy milestones have been met, people are still uncertain about how to do it. So to explore the issues, Reform convened a roundtable seminar yesterday, led by Baroness Eaton, the former Chair of the Local Government Association, on the subject of “Letting go: Shifting power from Whitehall to town halls”.
At the heart of the Government’s proposals for decentralisation is the notion of delegating authority to “the lowest appropriate level”. Yet the idea that specific governmental or organisational levels are most appropriate for specific functions misses the point. The real question is the extent to which citizens, the users of public services, are engaged with service design and delivery. This does not mean citizens delivering services themselves (although it can), but does mean civil servants, local commissioners and service providers – including businesses – treating citizens as customers, and designing services with and around them.
Leading councils, such as Hampshire, are showing that it can be done. They are merging budgets and taking the decision to commission services, rather than try to deliver them too, which boosts efficiency and responsiveness. Other simple innovations, like putting complimentary services in the same buildings, have their place too. The Government’s community budgets pilots may move this agenda forward. But as one attendee commented, “the time for pilots is over”. It is time to translate all the rhetoric around shared services, personal budgets and voucher schemes into action.
Really pushing power away from Whitehall comes down to money. And with power comes responsibility, in budgets as elsewhere in life. For years central government has given local authorities money and freedom but come riding to the rescue when they fail. This has created asymmetries of power, which has ultimately left councils dependent on central government support. If localism is to work, Whitehall must trust local government, local government should be free to raise more tax revenue itself, and everyone should hold their nerve when services fail.
The £3.5 billion real terms reduction in local councils’ funding this year represents an unprecedented “burning platform” to change the way local services are delivered. This is not easy, but examples like North Dorset District Council, whose 25 per cent funding shortfall since 2006 has led to radical devolution to communities, show what can be done. In 2010 North Dorset was named as Best Community Partnership in the country.
The discussion was held under the Chatham House Rule.
Will Tanner, Researcher
Roundtable seminar introduced by Paul Minton, Deputy Chief Constable and Chief Operating Officer, National Policing Improvement Agency, 12 January 2012
For the police service, the coming years represent a period of unprecedented change and challenge. The Government’s reforms will fundamentally transform the way in which policing operates at both local and national level, while Chief Constables are having to make difficult decisions in order to meet the 20 per cent funding reduction set out in the Spending Review. Yet it is precisely this changing landscape that is giving rise to a first-principles debate as to what the police actually do, how they do it, and how best the police can meet modern challenges in an age of budgetary restraint.
At the heart of this is the question of the police mission, specifically defined by this Home Secretary as cutting crime. Some have criticised this mission as too narrow for the complex and multifaceted role that police officers fulfil. Yet, as the discussion bore out, it need not mean a narrow and reactive approach to policing based on simply “catching criminals”. In fact, those around the table argued that the way to cut crime is to identify and understand its root causes, and then apply a preventative focus and early intervention. As one attendee said, the best way to cut crime is to reduce demand.
The implications of such changes for the police service itself are profound. If the police are occupied with more preventative work, then what is meant by the “front line” and the “bobby on the beat” change fundamentally. The second part of Tom Winsor’s review of police terms and conditions, expected later this month, offers a real opportunity. Chief Constables should have far greater freedoms to adapt their workforces in order to deliver a new approach and to respond to changing demand.
Better relationships between police and other organisations would promote early intervention. For many years, some police leaders have argued that localisation will threaten the efficiency and effectiveness of national policing arrangements. However, as the roundtable heard, existing examples of collaboration and inter-operable solutions within the 43 force structure show that there is now fertile middle ground in between centralisation and localism. Police and Crime Commissioners will encourage this co-operation because their own efforts to cut crime in their area will be encouraged by joint working between forces.
The meeting was held under the Chatham House Rule.