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Coalition public service reforms: Part 2 – pivotal themes

In this second article on the Coalition’s public service reforms, Chris Painter, emeritus professor of public policy and management at Birmingham City University, considers underpinning narratives.

Coalition Public Service Reforms: Part 2 – Pivotal Themes By Professor Chris Painter

In the first part of this evaluation of the Coalition’s public service reforms, key concerns emerged from the substantive policy areas examined. School reform had been promoted to foster institutional autonomy but came to look more like power being drawn to the centre by the Department of Education. Yet that autonomy simultaneously constrained the strategic planning capabilities of local public authorities. 

Similar dilemmas emerged in health. Reform rhetoric heralded decentralisation to GP-led clinical commissioning groups. Yet, top-down initiatives because of public outcries over NHS care scandals created pressures in the opposite direction. 

The imperatives of co-ordinating services also collided with the logic of increasingly competitive markets. 

In policing, governance was at the heart of reform to strengthen responsiveness through directly elected commissioners. There are doubts, however, about the sustainability of this functional model of democratic accountability. The centrepiece of welfare reform, universal credit, demonstrated yet again how far political ambition can run ahead of the administrative, managerial and technical capacity necessary for success, with intentions also compromised by welfare cuts. 

That provides a cue for the first generic theme addressed in this article, threading through the Coalition’s public service reforms: austerity. Other themes to be considered are the ambitions to ‘open’ public services to a range of providers, and ways in which the government machine for delivering services has itself been reconfigured. 

Austerity rules – up to a point 

A defining feature of the Coalition’s mission was tackling the large and problematic budget deficit triggered by the financial crisis of 2007-08, a subject strewn with technical detail. Tackling a ‘structural’ deficit is not synonymous with balanced budget orthodoxy. There is also the respective treatment of current spending and capital investment. 

Suffice to say that the Coalition made much less progress in eliminating the underlying structural deficit than envisaged in 2010, falling short of its original target for 2014-15 by about £50bn, partly because this objective had to be modulated in the interests of economic recovery. Public sector borrowing is not expected to turn into a small surplus until 2018-19, extending the austerity agenda well into the next Parliament.

Also critically important in deficit reduction is the permutation of public spending cuts and tax increases (an equation completed by sale of public assets). Political choices are involved. The burden so far has been borne overwhelmingly by the former. Differences existed within the Coalition about the desirable mix. Conservative medium-term strategy requires an even tighter squeeze on departmental and welfare spending over the next three financial years, an inevitable corollary of which is that public expenditure will fall to one of its lowest proportions of GDP since 1945. 

Public services only begin to share in the proceeds of economic growth from 2018-19 onwards, producing a spending trajectory through to the end of the next Parliament so volatile as to be almost implausible. 

There comes a point when such public spending cuts can no longer be depicted as simply ‘savings and efficiencies’. Calculations by the Institute for Fiscal Studies suggest current plans may result in a fall in the budgets of ‘unprotected’ programme areas of up to 15% on top of those already experienced, amounting to a cumulative cut of a third or more between 2010-11 and 2018-19. A sanguine view is that reduced spending increases pressure for improved performance. But a tipping-point is reached when cuts become damaging. Arguably that point has been reached even before a second phase of austerity kicks in. 

A developing prisons crisis could be discerned as the system struggled to reconcile a rising population with the scale of financial cuts imposed on the Ministry of Justice. It could no longer even be taken for granted that all police forces would send an officer to reported scenes of crime. 

Experts warned that the adult social care system was on the brink of becoming unsustainable, placing local authorities at risk of breaching statutory obligations. Warnings about the cumulative effects of cuts on local government indeed sounded increasingly apocalyptic, with estimated reductions in central government funding already totalling 37% since 2010-11. 

In ‘protected’ areas, as well, the consequences of fiscal retrenchment were taking their toll when combined with demographic trends; hence increasing size of primary school classes, as well as growing waiting lists and lengthening waiting times in the NHS, with mounting demands on both A&E wards and GP surgeries. 

There was deepening gloom within the NHS about its ability to avert a major funding crisis, with hospital budgets rapidly deteriorating. Reconciling quality service with sound financial management was proving increasingly elusive. The sheer scale of the challenge was evident from NHS England’s Five Year Forward View, published in October 2014. Even at the local level, necessary changes remain at an early stage, demonstrable from the announcement by NHS England in March of 29 ‘Vanguard’ projects piloting redesigns of how health and social care services are delivered. 

The evidential base was therefore powerful for arguing that mounting funding issues in public services went beyond predictable cries of anguish invariably accompanying difficult budgetary environments. 

Open public services – a level playing field? 

One of the signature policies adopted by the Coalition was ‘opening’ public services to a wider range of providers, the title of its seminal white paper on reform in July 2011. Because of austerity, however, it meant predominantly traditional outsourcing, a commissioning culture in which cost is the foremost consideration. Broader considerations played a secondary role, despite the Social Value Act. 

It was an approach prevalent in the Work Programme of the Department for Work & Pensions (DWP). The Ministry of Justice followed suit as probation services in England and Wales lost 70% of their caseload to 21 new community rehabilitation companies (CRCs). Operational from February 2015, CRC tenders were dominated by outsourcing businesses, namely Interserve, Sodexo Justice Services and the US corporate-based MTC. Whilst charities, social enterprises and staff mutuals featured in bidding consortia, the concern – just as with the Work Programme – was that such organisations would play mainly a back-up subsidiary rather than primary role. 

Notwithstanding initiatives to remove barriers to new entrants in public service markets, notably for government IT projects, there has been over-dependence on large outsourcing companies such as Atos, Capita, G4S and Serco. Yet the discharge of some contracts left much to be desired regarding the quality of the service provided and even in terms of financial regularity. 

G4S and Serco were subject to investigation for alleged fraudulent billing of taxpayers. Expansion of privately run higher education colleges, able to access student loan financing, also raised questions about misuse of public money. Scandals engulfing independent care home providers such as Southern Cross saw opaque financial arrangements accentuating exposure of residents to high levels of risk.Those experiences cast doubt on the public commissioning process, claims made in tender documents not always being borne out. The 2014 Open Public Services Progress Report, published by the Cabinet Office, acknowledged the need for intensive development training for senior leaders in the public sector. But this patchy record undermined a prime justification for new providers, namely incentivising public service adaptation and improved standards. Besides, conventional wisdom that bureaucracy is inimical to innovation (and market competition its handmaiden) is not entirely evidence-based. 

As Jean Hartley observed in the Public Money & Management journal (May 2014), much more important is being prepared to learn and benchmark. If anything, in recent decades there has been a surfeit of ill-conceived and politically driven public service change. Michael Burton in The Politics of Public Sector Reform (2013) charts the particular propensity for structural change where, because of associated upheaval, costs often outweigh benefits. 

The pace of some outsourcing programmes prevented smooth transitions. It is estimated that the size of this market doubled under the Coalition government between 2010 and 2014 compared with the previous four years of the Labour government, making it second only to the United States. According to figures provided by the Health Foundation, the amount of the health service’s budget used to purchase care from non-NHS providers alone rose to £10.4bn in 2013-14, representing 10.8% of total commissioner expenditure in England, compared with £8.2bn and 8.4% respectively in 2009-10. Even though that didn’t translate into a headlong rush to privatisation that some who were opposed to the competition requirements of the 2012 Health and Social Care Act had envisaged, these statistics capture only the very early impact of that legislation and exclude primary care. Overall, around a third of spending on public services is now delivered by other providers. 

Outsourcing problems gave force to the argument that common ethical standards should be expected of all providers of public services, with inclusion of transparency clauses in contracts now at least becoming accepted in principle in the interests of public accountability. But there is a strong case for a more fundamental change in commissioning ethos, shifting emphasis to longer-term strategic partnerships with the private and independent sectors. Such a cultural transformation seems unlikely any time soon, given the continuing squeeze on public service budgets. 

Reconfiguring the state – last gasp initiatives 

Austerity and outsourcing entail reconfiguration of a kind. Yet the Coalition hardly lived up to its initial ‘localist’ mantra. Initiatives such as City Deals – complemented by the Local Growth Fund and Local Enterprise Partnerships (LEPs) – enabling local councils to become ‘place-shapers’ were modest in scale. Offsetting this was increasing financial stringency faced by local authorities because of their high exposure to the austerity agenda. For the most part reconfiguration was indeed more about the scale than structure of the state. 

The September 2014 Scottish referendum, however, created renewed constitutional ferment, heralding further devolution (including new fiscal freedoms) in Scotland, as well as (in their own distinctive forms) to Northern Ireland, Wales and the London Mayor. 

Influential advocates of local devolution and a more decentralised political economy for provincial England made their voices heard too. This applied to the centre-left think tank the Institute for Public Policy Research (IPPR) and to the Royal Society of the Arts (RSA) City Growth Commission. Those reports were reinforced by a vigorous campaign on the part of the Core Cities Group, led by elected leaders of 11 city authorities (not only in England but also Cardiff, Edinburgh and Glasgow). The RSA, contemplating devolved powers to metropolitan areas, indeed coined the term ‘devo met’ matching ‘devo max’ for Scotland. 

The Local Government Association (LGA) was also understandably keen for sub-national dispersal of power to become part of any constitutional convention. The case fundamentally revolved around joined-up approaches to public services and resource allocation, therefore the economic and social value that could be added at this territorial level. 

The first substantive step was unveiled by George Osborne in November 2014, the impetus fascinatingly coming from the Treasury rather than from the Department for Communities and Local Government. Greater Manchester (GM), in close proximity to the chancellor’s constituency base, was to be the beneficiary of devolved spending agreed with 10 local civic leaders on the Combined Authority. The agreement stopped short of additional revenue-raising powers, apart from concessions on local business rates (a pilot extended to Cambridge and adjoining councils). A metro-wide mayor is to be elected by 2017, whose responsibilities will include those wielded by the newly installed police and crime commissioner. 

In February 2015 an outline memorandum of understanding meant that GM was also to be entrusted with its own health budget. A new strategic health and social care partnership board for that region will create fresh opportunities for integrated service commissioning. It was the antithesis of the ‘prefectoral administralism’ overseen by Whitehall that became the hallmark of the Coalition’s education policies. Devolution deals were then agreed with Greater Sheffield – containing the marginal parliamentary seat of Nick Clegg – and West Yorkshire Combined Authorities, though less far-reaching in scope, leaving open future changes to local governance. Such bespoke solutions are fine up to a point; nonetheless piecemeal approaches add to the current incoherence of English governance structures. 

And it still leaves the fundamental question: to whom should control be transferred? With debate concentrated on metropolitan areas and city regions, the Report of the Labour party’s Local Government Innovation Taskforce, unveiled before the Scottish referendum, alighted on more systemic reconfiguration around place. A ‘New English Deal’ for existing ‘top tier’ (metropolitan/unitary/county) authorities was proposed, though the pace would be faster and extent of devolved powers greater where warranted by local governance capacity. 

The risk, as the pendulum swings, is of exchanging one set of problems for another. The Labour party report located a devolved settlement within a strategic national framework of desired outcomes, entitlements, standards and funding, as well as making it conditional on stronger local accountability and performance reporting. The attendant danger is of a back-door route to the discredited top-down performance management associated with New Labour in its heyday. Nonetheless, important issues of balance arise in multi-layered government; otherwise any notion of shared citizenship is undermined, instead unleashing an unstable political dynamic.

Conclusion – all our yesterdays 

Decentralisation may help navigate the continuing financial challenges ahead. Michael Burton notes how returns have not been commensurate with the scale of past public service investment. Yet the extent of cuts being imposed on local government poses existential threats unless local authorities are given more fiscal room for manoeuvre, despite the resilience so far displayed. Indeed, if the current lop-sided fiscal consolidation strategy continues, public services generally will have to wait until the end of the decade for any significant budgetary relief. We are also only at the early stages of what needs to be done if outsourced markets are to exhibit principles of sound governance. 

In the mid-20th century the American economist John Kenneth Galbraith coined the phrase ‘private wealth and public squalor’. There is a grave risk of coming full circle. Indeed, the Cambridge academic Andrew Gamble contends in Crisis Without End (2014) that ongoing fall-out from the 2008 financial crash reflects a deeper systemic crisis, requiring a fundamental rethink of some long-standing neo-liberal policy paradigms. 

With revenue streams depleted, the issue is whether there is sufficient critical mass in a hollowed-out public domain to effectively discharge such basic functions as tax enforcement, border control and defence of the realm, let alone achieve more complex social policy objectives. This is at a time when trust and confidence in government is already fragile, notwithstanding recurring rhetoric about ‘transformative change’ in public services.

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