Economy and Infrastructure

Re-evaluating public service reforms

Chris Painter, professor emeritus at Birmingham City University, explores the paradox of reform principles persisting despite mounting evidence about their limitations.

This article critically revisits a number of public service reform principles in light of evidence assembled over time.

One of the abiding themes since 2010 is, of course, fiscal austerity: public spending retrenchment relentlessly pursued to tackle the budget deficit that burgeoned following the 2007-08 global financial crisis (GFC). 

The cumulative effects of cutbacks have reached a critical juncture, with organisational stress in public services leading to deterioration in their timeliness, quality and eligibility. Parallel cuts in taxation and welfare (including to the new Universal Credit gradually being rolled out) are having a regressive impact too, presenting the prospect of a renewed child poverty crisis. Austerity has, moreover, contributed to volatile political behaviour, albeit with cultural war overlays.

Signs of strain are unmistakeable, whether in NHS trusts, policing, prisons, schools or social care. Local authorities are even struggling to fulfil statutory service obligations, their financial sustainability drawing critical attention from the National Audit Office.   

Yet the pain inflicted by fiscal retrenchment, even in broader macroeconomic terms, appears counterproductive. The GFC and protracted downturn in economic activity thereafter, compounded by austerity measures, permanently damaged the UK’s long-term growth prospects despite global economic recovery.

The extent to which the Theresa May government relents in the face of mounting political pressures on a near-decade of squeezed public finances awaits the chancellor’s 2018 Autumn Budget and Spending Review planned for 2019 (assuming it lasts that long!). Finding more sustainable funding solutions for health and (on a slipping timescale) social care is a priority. A ‘birthday dividend’ for NHS England fell short of average historic increases prior to 2010, however, notwithstanding the demographics of an ageing population. A long queue for preferential additional resourcing is indeed developing, evident from recent speeches by departmental spending ministers. Further clarity on transition from a grant-dependent to a more financially independent local government system is also awaited.

Outsourcing: high-stake risks

The collapse of Carillion in January, as a major beneficiary of government contracts, reawakened debate on outsourcing as a default policy option. It also highlighted overdependence on a small group of large outsourcing and construction companies such as Capita, G4S and Serco – including the aforementioned Carillion.

These companies became more vulnerable as margins were squeezed in a climate of government austerity. This applies with a vengeance to the predominant independent social care home and domiciliary care markets, where the very viability of businesses is affected by local government funding cuts.

Increasing vulnerability of the outsourcing industry underlines the importance of exit strategies and contingency planning for service continuity. Local authorities that have transferred swathes of service provision to private companies, particularly where this involved a dominant provider, are especially exposed. The challenge is even more problematic where in-house capacity and expertise has withered.

The political risk is reversion to the opposite ideological dogma. Nonetheless, it does posit the question of how ‘hollow’ government can be allowed to become before its efficacy in acting collectively on behalf of society or a local community is fatally eroded. 

Residualised public provision: broken markets

This principle is inextricably bound up with that question. For example, in housing, structural change has shifted the balance from social renting and home ownership to a lightly-regulated private rented sector. Younger demographic groups have borne the brunt of these changes, raising serious issues of intergenerational equity. The notable dysfunction is a growing shortage of affordable housing both for renting and purchase.

Contributing to this structural change in the housing market since the 1980s has been the Right to Buy (RTB) policy for municipal tenants. Many former council properties have subsequently been sold to private buy-to-let landlords as profitable rental investments. Local authorities in England have not come anywhere near to replenishing this depleted social housing stock, increasingly regarded as a residual safety net.

Hence the demand for local authorities to retain all their RTB receipts for reinvestment and for the Treasury to remove the current cap on what they can borrow for housebuilding, as opposed to the piecemeal concessions so far made. Otherwise, little prospect exists of meeting ambitious affordable housing targets and correcting current imbalances in the market. The May government’s social housing green paper, commissioned in the wake of the June 2017 Grenfell Tower fire disaster, is thus awaited with interest.

Managerial accountability: necessary, not sufficient

Managerial accountability has been a cardinal principle of public service reform. Thus, schools are judged on results encapsulated in Ofsted grades and performance measures published by the Department for Education (DfE). Academies which are the  DfE’s direct responsibility, constituting over 70% of secondary schools, are also subject to bureaucratic oversight through regional school commissioners, with the Education and Skills Funding Agency thrown into the mix for good measure.

Yet concerns persist about effective regulation of the independent trusts overseeing many of these academies. There is lack of transparency around governance and financial management of public funds. Even more troubling is attenuation of wider structures of public accountability. Because of the fragmentation of educational provision, local councils face difficulty with holistic approaches to strategic planning, so ensuring that the needs and interests of all pupils are taken on board.

Meta-performance: political intelligence failures

Then there is a growing tendency to set politically-driven and overarching targets that reshape decisions in particular policy sectors or even across a broad sweep of government. This is the realm of meta-performance. It has proved problematic given its often arbitrary character.

Into this category fall the fiscal targets set by the Cameron/Clegg Coalition government. Elimination of the deficit on current spending was belatedly achieved in 2017-18. Even the latest revised target for reaching overall budgetary balance by the mid-2020s looks elusive. Indeed, fiscal retrenchment has been so drawn out that austerity fatigue set in!

The political promise also made by the Coalition government to reduce net immigration to tens of thousands suffered a similar fate. Collateral damage caused by the ‘hostile/compliant’ policy environment accompanying this pledge, crystallised by the Windrush scandal affecting migrants from Caribbean Commonwealth countries legally in the UK, overwhelmed May’s successor as home secretary in April 2018. 

This record raises questions about the likelihood of reaching future milestones, such as the government’s five-year target for three million new apprenticeship starts in England between 2015 and 2020, pivotal to its post-Brexit agenda for boosting workforce skills. Initial effects of the 2017 apprenticeship levy-funded reforms have seen the numbers moving in precisely the wrong direction. There is scepticism too, as highlighted earlier, about the government’s aim of increasing housing supply to 300,000 new homes a year by the mid-2020s.

It all undermines the credibility of performance management systems.

Evidence, however, vies with the drivers of political narratives. This applies even more so as nationalist demagogic rhetoric gains electoral traction. Since the 1980s, ‘traditional public administration’ has been eclipsed by ‘managerialism.’ The irony is that the patronage and endemic corruption the former set out to eradicate is once again rearing its ugly head in this changing political firmament – with instability even a hallmark of a British government still struggling to come to terms with its Brexit negotiating dilemmas.

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