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PublicFinance

The business monthly of the public sector

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Issue 05 May 2014

MAY 2014

Election fatigue

Super annuation

Does Silk cut it?

Tony Travers predicts the end of politics as we know it

Pensions minister Steve Webb on savings and sports cars

Finance minister Jane Hutt tells PF what works for Wales

Iain Macwhirter on the fallout for the UK from Scotland’s referendum

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16/04/2014 16:31


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PublicFinance

CONTENTS

May 2014

Features 24 COVER STORY Taking it to the max? Narrowing polls in Scotland’s referendum race are putting ‘devolution max’ back on the agenda as an alternative to independence, writes Iain Macwhirter

30 Rainy day man Pensions minister and Corsa driver Steve Webb tells Judy Hirst why he trusts retirees not to blow their annuity savings on a Lamborghini

34 The Silk road Finance Minister Jane Hutt talks to Vivienne Russell about the accelerating transfer of fiscal powers to Wales following the Silk Commission review

38 PF interview: Nigel Edwards The new chief executive of the Nuffield Trust tells Mike Thatcher about ‘magical thinking’ and an over-reliance on integration to ease NHS woes

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24 ‘UNIONISTS ARE UNDER PRESSURE TO PROMISE A FORM OF DEVOLUTION THAT REALLY WILL HAPPEN. VAGUE PROMISES OF MORE POWERS WILL NOT SUFFICE’

30

Regulars 4

Leader The growing consensus for devolution

5

Second thoughts Tony Travers on an election season with little love lost for the main parties

6 News Cities need fiscal freedom to boost growth, says Jim O’Neill; Whitehall’s ‘inexplicable’ pay differences; and advice to councils on making the reform case 8 News Analysis The debate over Europe and Ukip’s surge in the polls make the local elections impossible to predict

Need to Know 42

10 Opinion Lord Bichard on systems failure; Duncan Selbie on public health’s homecoming; Lord Bew on ethics; and Graham Allen on localism

On Account CIPFA on the ‘get tough’ policy with charities that file their accounts late

43 Smart Thinking? The Internet of Things is the next big idea online. But what’s it all about?

16

Voice of the Nations Infrastructure investment in Scotland has been given a £1bn boost

44

Management Development How to build your personal brand

46 48

Numbers Game Cipfa Events

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CONTACTS

Leader Devolution revolution?

W

hatever the result of Scotland’s independence referendum, greater devolution would seem to be inevitable across the UK. As Iain Macwhirter points out in this month’s cover feature (pages 24-29), a No vote on September 18 will trigger a number of compromise measures extending Holyrood’s powers. A Yes vote would obviously take us into a whole new world. Meanwhile, the Wales Bill should get Royal Assent later this year, allowing the Welsh government to borrow money and control some taxes (pages 34-37). And in Northern Ireland, elections take place in May to 11 super councils with additional powers. But it’s not just the UK’s nations that are seeking to take control from the centre. Cities across the four countries are eager to capture the powers that have made London such a vibrant and productive capital. Some progress has been made with the coalition’s embrace of City Deals and ministers’ acceptance – in principle if not hard cash – of Lord Heseltine’s No stone unturned review into stimulating economic growth. More recently, Ed Miliband committed a Labour government to the ‘biggest economic devolution of power’ in 100 years, outlining plans to transfer £20bn from Whitehall budgets to city regions. The direction of travel is clear, but there has to be doubt as to whether the journey will be a swift one. Labour, like the Conservatives and LibDems when they were in opposition, talks a good talk on devolution and localism. But election tends to adjust priorities. Labour in power was reluctant to cede control and took away many of local government’s responsibilities. Under the coalition, the current communities secretary has adopted a policy of ‘muscular localism’ – dictating both a council tax freeze and the frequency of bin collections. What is needed is a culture change that sets local control as the default option. As Graham Allen, chair of the Committee on Political and Constitutional Reform, suggests in our Opinion section (page 15), the relationship should be one of peer-to-peer rather than father-to-son. The Treasury ’s well-rehearsed argument – that growth in cities is a zero-sum game with gains in one area offset by lower activity elsewhere – needs to be challenged. Perhaps Jim O’Neill, economist and former Goldman Sachs Asset Management chair, could be the person to do this. Now heading the City Growth Commission, O’Neill tells PF that increased fiscal devolution to cities is a ‘necessity’ and should be ‘top of the agenda’ (page 6). His is a powerful voice to add to the growing devolution consensus.

■ Mike Thatcher EDITOR letterstoeditor@publicfinance.co.uk

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Second thoughts pfOpinion

■ Tony Travers

Nobody likes us … There is little love lost for the major parties ahead of local and European elections. The future is unclear and, as a result, policymaking has an air of desperation Election season is upon us. This month there will be a UK-wide vote for the European parliament alongside mainly city-based local polls. The 11 new councils in Northern Ireland will also be elected, in shadow form. In Scotland, on 18 September, the most important UK vote in modern times will occur. The electorate will have its last opportunity before next year’s general election to send signals to the political parties. Many of these signals are unlikely to be ones most national politicians want to hear. The recent revival of the MPs’ expenses scandal, thanks to Maria Miller, yet again reminded Britain’s political class how disliked they are. Another case, involving Patrick Mercer, has further rekindled the story. A growing lack of trust in MPs (collectively, if not individually) runs in parallel with other indicators that are deeply worrying for all political parties – with the possible

exception of Ukip. On top of this, Scotland could vote either way. The total ‘Conservative plus Labour’ vote in UK general elections has declined from over 97% in the 1950s to barely 65% in 2010. Party memberships are tiny compared to the 1960s and 1970s, leading to an unhealthy and unpopular dependence on rich individuals and trade unions. Opinion polling about the credibility of what politicians promise makes gloomy reading. Failure to notice the conditions that led to the 2008 financial crisis only reinforced the idea that the people who govern the country are not up to the job. A measure of the problem is that when comedian Russell Brand pops up in the media with a ‘why vote?’ message, he is taken seriously on BBC news analysis programmes. But it is the popularity of Ukip, above all else, that signals to the Conservatives, Labour and the Liberal Democrats that the times are a-changing. The LibDems have suffered terribly for joining the coalition. Their role as a party of protest has evaporated, leaving them with, it would appear, broadly 7 to 11% of the

THE REVIVAL OF THE EXPENSES SCANDAL, THANKS TO MARIA MILLER, REMINDED BRITAIN’S POLITICAL CLASS HOW DISLIKED THEY ARE Photo: Reuters

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popular vote. Labour, and in particular Ed Miliband, have found it impossible to generate a big poll lead. The gap between Labour and the Tories shrunk throughout the early part of 2014. The Conservatives, even as the economy has started to grow, have seen part of their activist base eaten alive by Ukip. These trends will affect the preparation of manifestos both for this year’s polls and for the 2015 general election. None of the political parties has the faintest idea of what the future holds for them. Against this backdrop, policymaking for public services will be tinged with desperation. The parties need to offer voters a package of services, either directly or through regulated private companies. However, because the political class has seen its authority decline, on many issues parties and governments now lack the selfconfidence to lead opinion. In an attempt to bolster trust, the government has considered offering constituencies a power to ‘recall’ their MPs: that is, it would be possible to trigger a byelection where voters felt their MP was guilty of wrongdoing. It is hard to see that such a step would be sufficient to reverse the long-term trends in British politics. Ukip will do well in the Euro elections and will gain some council seats. Whether they have any MPs after the 2015 election will be a signal about the party’s durability. Nigel Farage may never become prime minister, but he is shaping politics in a way that suggests the 2014 elections will be the first of many where insurgency affects policy-making. British public policy will from now on be shaped in an environment very different from the broadly settled political conditions that prevailed for many years after 1945. Tony Travers is director of the Greater London Group at the London School of Economics MAY 2014

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News Local powers

Cities guru calls for more fiscal freedom BY RICHARD JOHNSTONE

Increased fiscal devolution to cities is a ‘necessity’ to boost the growth rate of the UK, a leading economist examining plans to increase the powers of municipalities has told Public Finance. Jim O’Neill, the chair of the City Growth Commission established to develop a devolution blueprint for urban areas, said that granting city authorities fiscal powers must be ‘top of the agenda’. The commission, which was established by the Royal Society of Arts, is set to publish its report this autumn, in time for its recommendations to feed into party manifestos ahead of the general election. Since being formed last October, it has completed a call for evidence and held five evidence sessions

to examine the role of ‘metro areas’ in the UK economy. O’Neill – who when chief economist at Goldman Sachs coined the term Bric to describe the shared growth prospects of Brazil, Russia, India and China – said cities would be key to future economic expansion. ‘My premise is that we can think of a few interventions for the 15 metro areas as we define them that can boost the national economy’s growth trends,’ he added. Speaking to PF at the halfway point of the project, O’Neill said he wanted to challenge what he described as the Treasury’s view that growth in cities was a zero-sum game, with gains in one area likely to be offset by lower activity elsewhere. ‘It’s challenging the central

Metro money: Economist Jim O’Neill looks forward to cities taking more control of their own financing

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premise of how, from what I can see, much of central government has approached this – that if you help one region it’s got to be paid for at somebody else’s expense – which I think is the wrong approach.’ Critical to resetting this balance will be increasing the fiscal powers available to cities, he said. ‘Some sort of fiscal devolution to at least some of those areas that are well organised seems to be a necessity, but not necessarily sufficient, for the core premise – that if you undertake interventions in various important national regions, the national growth trend of the UK will be raised.’ This was likely to take the form of a recommendation to give cites greater ability to retain or influence their own tax take. ‘At the core of it is cities having some basic ability to raise and retain income themselves,’ he said. Although the commission had yet to decide what taxes or income streams might be considered for localisation, the issue was of ‘fundamental importance’, he said. ‘I’m very aware, not least of having lived in New York, about how you can have cities in one country having a very different practice with respect to their own local taxes. I think it’s something we’re going to consider.’ Recommendations for increased financial freedoms were likely to include an examination of how extra sources of capital funding could be made available to municipalities. ‘The whole idea of cities doing their own bond financing for projects – why would that not be something that should be given more serious consideration?’ he asked. ‘It would seem to be definitely part of the possible more open-minded, exciting future.’ Other elements likely to feature in the commission’s final report include reforms to the powers of city authorities and universities to get more graduates to stay in the cities where they studied. Infrastructure will also feature prominently, as O’Neill said it was ‘central to the thesis’ that large agglomerations were likely to generate more economic growth, so

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publicfinance.co.uk/news

PublicServices ■ Richard Johnstone

Treasury guidance to help councils make reform case infrastructure was needed to ensure cities were connected to each other. He told PF that the controversial High Speed 2 rail network should be built from the north first to create high-speed and high-frequency services between northern and Midland cities. O’Neill admitted that he initially thought the rationale for the line was ‘iffy’, but now believed the chance to cut journey times between cities across England could be ‘truly incredible’ if construction began from the north. He hoped to meet Sir David Higgins, the chair of the government-backed company undertaking the project, to make the case that the first phase of the line should prioritise improved journey times between more cities. ‘If you can dramatically reduce the time for a train between Liverpool, Manchester, Leeds, Birmingham, Sheffield, Nottingham – to take six – that would strike me as effectively creating a broad urban conglomeration which is easily another London,’ he said. World Class Performance Symposium

Spending chief signals ‘squeeze’ on Whitehall pay BY RICHARD JOHNSTONE

There are ‘inexplicable’ differences in pay across the civil service that need to be examined as part of the government’s deficit reduction programme, a senior Treasury figure has said. Speaking at CIPFA’s World Class Performance Symposium on April 3, Julian Kelly, the Treasury’s director of public spending, said the country faced a 20-year period to repair the public finances and debt levels after the 2008 financial crisis. Departmental current spending would continue to be under pressure as a share of national income for the duration of the next parliament. ‘The broad message is whichever party gets into government we’re going to continue to see a squeeze,’ he told the event, held in conjunction with the Photo: Rex/Shutterstock

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A new government tool to improve the cost-benefit analysis of public service reforms could help councils make the case for local changes that improve provision and cut costs, according to a senior figure involved in its development. The government published Cost benefit analysis guidance for local partnerships on April 2, under its public service reform programme. Developed as part of the Greater Manchester ‘whole place’ Community Budget pilot, it was the first Treasuryapproved assessment of the costs and benefits of joining-up and reforming public services in local areas. The framework was developed by New Economy, the economic strategy unit of the Greater Manchester Combined Authority. John Holden, acting director of economic strategy at the agency, led the team that devised the methodology. He told Public Finance it would allow authorities to take public service reform plans such as Community Budgets to Whitehall with a clear understanding of where savings could be made. ‘This model provides a framework to start thinking about more holistic projects that deliver long-term outcomes but also produce short-term cashability [savings],’ he said. The guidance sets out a standard process to determine the benefit of reforms, based on the unit cost of services, their

Whitehall approved: The Treasury is backing a tool developed in Manchester impact and the savings that result. For example, the analysis found that better coordination of employment and skills support to tackle unemployment could save £9,234 for the Department for Work and Pensions per person per year, but would also provide £566 of annual benefit per head to the NHS. In another example, the benefits of lower anti-social behaviour were estimated to be split between the police (40%), local authorities (30%) and housing providers (30%), while reducing crime saved an average of £609 an incident, split across at least six public sector agencies. Holden said Treasury backing for this analysis – it has been included in Whitehall’s Green Book for policy appraisal and evaluation – was crucial to implementing reforms. It had also been added to the

Government Finance Profession and the Treasury. There was a need to get better at what Kelly called the ‘basics’ of spending control across government, such as pay. ‘We have recently done some analysis across government of what we pay people,’ he said. ‘You take the whole of the civil service and control for age, skills and the grade mix within a particular department and you say what’s the average cost of employing someone? ‘And what you discover is huge variation that, at the moment, is

government’s assessment process for the latest £320m round of the Transformation Challenge Award, which provides funding to town halls to implement reforms. ‘It’s massive in terms of credibility with Treasury and across government. The methodology is generally respected and its robustness is acknowledged,’ he said. ‘You can see that in the Transformation Challenge Award, which was announced on the same day the guidance was published. The Department for Communities and Local Government took the decision to include it, and said to local authorities that if they want to make a robust case they should look to use this model. ‘That shows it’s already getting traction in central government in determining how they spend their money.’

inexplicable. At the top end we have an agency that’s paying people about 50% more on average than everyone else. ‘That’s the kind of analysis we have to do across government to really employ intelligent decisions,’ he added. ‘This is about basic disciplines, and we as finance leaders have got to take responsibility for how we’re managing the basics of what we do.’ Kelly concluded that the soon-to-beappointed director general for spending and finance would lead on this process as part of the government’s financial management review. MAY 2014

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News

Analysis Local elections

Counting down to polling day The impact of the European elections on May’s council votes is the great unknown as people head to the polls to determine control of local authorities across the country. Richard Johnstone reports This year’s local elections are, alongside the vote for the European Parliament, the parties’ last big political test before next year’s general election. Votes taking place on May 22, including all-out polls in 32 London boroughs, will also gauge popular reaction to economic recovery and government spending cuts – contests are being held in most English council seats for the first time since the coalition came to power. A high-profile European campaign will draw the national focus, with the insurgent UK Independence Party favourite to win the largest share of the vote amid the increasingly loud debate over Britain’s future in the economic bloc. Going into the election, Ukip (with 10 MEPs) is only the fourth biggest party, behind the Conservatives (27), Labour (13) and the Liberal Democrats (12). However, party leader Nigel Farage has said he is confident the party can cause ‘an earthquake’ by winning the largest national vote share. Ukip’s surge makes predicting the outcome of elections in the 167 unitaries, metropolitan boroughs, districts and mayoralties being held on the same day difficult, say Chris Game, visiting lecturer at the University of Birmingham’s Institute of Local Government Studies. In last year’s county elections, Ukip won 147 seats across 23 authorities 8

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despite very few incumbents, which Game calls a tremendous achievement. Similarly to 12 months ago, there is no way to tell whether Ukip support is ‘welling up’, he tells Public Finance. ‘In one sense, they are the great unknown.’ According to Farage, Ukip will field its largest ever slate of candidates – more than 2,500. The party is ‘doing very well in local government’ and could make hundreds of gains, he has claimed. Local government leaders of the three main parties all agree that Ukip will be the key factor in the campaign. David Sparks, Labour’s leader in local government, tells PF he is confident the party will gain seats in the fifth local elections in a row. However, the results are unpredictable due to both the Euro election and the differing impact of expenditure cuts across authorities. ‘I am confident, but not complacent, that we will make further gains, but there are too many uncertainties to forecast with any precision,’ he says. ‘Genuinely, the big question is going to be Ukip. I would have preferred the local elections not to be on the same day as the European elections, but with it being on the same day and with Farage on a bit of a roll, it’s very difficult to predict. ‘Some seats will be gained that would not normally be gained and some will be lost that would not normally be lost,

because we can’t say what the impact that third party is going to have.’ The Liberal Democrats’ local government leader, Gerald VernonJackson, says the fact these wards have not been fought since 2010 means losses are likely for the coalition parties. ‘The question in the European election is will Ukip come top, and how the other parties will fare. The question in the locals is, given that these people were elected on the same day as the general elections four years ago, what’s happened to the parties in that time?’ Local elections since the formation of the coalition in Westminster have seen the LibDems lose large numbers of councillors – from more than 700 in 2011 to about 124 last year. Although the starting point for the party is not as high in this year’s round of mainly urban authorities, VernonJackson warns they still face a tough time, with control of his own authority of Portsmouth among those they are defending. ‘The people who are expecting to make big gains are Ukip and Labour, Photo: Alamy

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publicfinance.co.uk/news

theStats State of the parties ahead of the May 22 vote 35

Minority

Number of MEPs/councils/mayors

30 25 Minority

20 15

Minority

10

Minority Minority

5 0 MEPs Conservatives

London boroughs Labour

Unitaries

Liberal Democrats

Metro boroughs Ukip

No overall control

Mayors Independents

Source: PF research

‘WHERE UKIP IS IN CONTENTION, THEY WILL TAKE VOTES FROM THE MAIN PARTY, WHOEVER THE MAIN PARTY IS’ GARY PORTER, CONSERVATIVE LOCAL GOVERNMENT LEADER

and you’ve got to make gains off somebody, so for both the Tories and us it will be a more difficult evening,’ he says. Conservative local government leader Gary Porter says Ukip will add ‘a different flavour’ to the campaign. ‘Where Ukip is in contention, they will take votes from the main party, whoever the main party is,’ he predicts. But he also hopes councils will be judged on their performance in dealing with government spending cuts. ‘The public now accepts that services haven’t been impacted as badly as everybody thought they would be with the reductions. Is that going to mean voters think we’ve got a good council, [and say] “I don’t care what colour they are, I’m going to be voting for them because they’ve managed to get through this round of austerity without a major impact”?’ Although hoping voters ‘look for the positives’, Porter tells PF that the Conservatives – who have overall or minority control of 21 unitary and metropolitan councils being contested – are likely to end the night with losses. Coupled with the votes taking place in 74 districts, change in the overall control of the Local Government Association is likely to follow. ‘I think Labour taking the chair is almost a certainty, and I’m sad as that won’t be the fault of our members, that will be for factors outside of their control,’ says Porter. The most high-profile contests will be in the Southeast, where in addition to all-out boroughs in the capital, two unitaries – Milton Keynes and Slough – and two districts – Hart in Hampshire and Three Rivers in Hertfordshire – will

elect wholly-new chambers after boundary changes. Labour’s shadow minister for London Sadiq Khan has targeted six London councils to turn red – Croydon, Redbridge, Barnet, Harrow, Merton and Tower Hamlets. Chris Game says three represent ‘low-hanging fruit’ – Redbridge, Harrow and Merton. A high-profile mayoral contest also takes place in Tower Hamlets, one of five being held across London and in Watford. The other two are more difficult targets for the party, he says, with Barnet, where the Tory administration controversially outsourced a host of services, the toughest. ‘It may be that Labour want to pick on Barnet as an example of some of the awful things that can happen under a Conservative administration.’ Tories have overall control of two mets going to the polls, and Game suggests that Trafford could be more vulnerable to Labour than Solihull. Of West Yorkshire’s three hung authorities, Bradford is likeliest to go to Labour’s overall control. All projections are made without knowing where Ukip will pick up votes or seats, Game stresses. Although they are most likely to have a base in districts where they had county councillors elected last year, the number of all-out elections and some small wards increases volatility. Of the contests to watch, Ukip could make inroads in Milton Keynes, he says, where a full council election is being held following a boundary review. ‘I don’t think even they’ve got any idea how they’re going to do,’ Game concludes. ‘Nobody is putting any money on it because we genuinely don’t know.’ MAY 2014

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■ Bad service? Blame the system, by Lord Bichard ■ Putting the public into health, by Duncan Selbie

Opinion ■ Lord Bichard

Bad service? Blame the system When things go wrong in public services, we blame individuals and rush for structural reorganisation. It’s better to focus on systemic change at a local level The way in which we deliver our public services means that the most vulnerable and those with complex problems inevitably get a raw deal. And yet we seem incapable of changing. For a start, when services are deemed to be unsatisfactory we still see structural, rather than systemic, reform as the only response. That is what Andrew Lansley’s reforms of the health service were about, as well as Michael Gove’s education reforms. Much the same criticism could be made of most of Tony Blair’s public service reform agenda. None of this is surprising, because structural reorganisations give both officials and politicians the impression of having done something and shortterm action is attractive to those who are building careers or reputations. The problem is that reorganisations hardly ever deliver better services to clients, citizens, users or patients. This is because they rarely address the systemic reasons why they have been receiving poor services. Often, too, reorganisation is accompanied by yet more intense regulation and performance management, as those responsible for delivery become ever more desperate to demonstrate that things are improving. In fact, all that the attention achieves is to identify failure more efficiently. If you think this is an exaggeration, then look at the 10

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way in which we have responded to the death or serious abuse of children and vulnerable adults over the past 30 years, with the systemic failures exposed by serious case reviews rarely being effectively addressed. Contrast that to the way in which, for example, the aviation industry responds to accidents or near misses. While that industry seeks methodically to identify and rectify system failures, we in public services are obsessed with blaming the pilot. As a result, the aviation industry improves training, ensures that pilots are better prepared to react to problems as they arise, and ensures that systems and equipment are redesigned to minimise future risk. Whereas in public services we continue to blame individuals and then respond with surprise as the same systemic failures recur again and again. None of this is to suggest you never need to reorganise public services or indeed manage performance or hold people to account. It is to suggest that structural reorganisation is not the place to start. The place to start is with the Wrong prescription? Andrew Lansley’s reforms scrapped primary care trusts in favour of GP consortiums to manage NHS budgets

clients or users and, in particular, the clients with the most complex problems. In spite of two decades of rhetoric, we still have services that are, more often than not, designed for the convenience of providers rather than to meet the needs of clients and users. Sadly, when public service reform is discussed it fails to engage the public or the most senior policymakers because it seems to be about dry theories of bureaucratic administration. But the consequences of the way in which we have mismanaged public services are waste and personal suffering. Recently, I heard of an elderly lady who was in hospital when told she was reaching the end of her life. Like most people she wanted to die at home and the hospital staff wanted to help her fulfil that simple wish. It took the involvement of 25 different teams, 23 separate assessments and the convening of two funding panels before she was able to leave hospital three months later, only to die at home within a fortnight. That is but one example of the human cost of fragmented governance, an obsession with structures and a lack of service design capacity. Five years ago, I was tasked to look at how our public services could best respond to the expected period of austerity. One of my recommendations was to develop the Total Place programme to encourage agencies to work together at a local level, to rethink the way they meet local needs and to deliver better services at lower cost. Total Place was an attempt to improve services without further reorganisations and proved immensely popular. However, Photos: Shutterstock

15/04/2014 12:33


publicfinance.co.uk/opinion ■ A failure of culture? by Lord Bew ■ Wanted: local vision, by Graham Allen

Services are, more often than not, designed for the convenience of providers rather than to meet the needs of clients and users. The consequences of mismanagement are waste and personal suffering because it was associated with the then Labour government it did not survive the 2010 election, although it did provide the inspiration for community budgets, the Troubled Families programme and City Deals. Total Place, for me, demonstrated several other important points relevant to this discussion. First, it showed that the more effective integration of services around clients requires genuine devolution of power. Second, Total Place demonstrated that Whitehall’s determination to work in silos and centralise has often stood in the way of developing effective local collaboration. And, third, it showed the importance of civil society in improving the quality of people’s lives. Very often, government

– local and central – has thought solely in terms of delivering services, whereas the primary aim should be to help citizens lead better lives – and that is not the sole preserve of the public sector. Many of our problems derive from a, doubtless well-intentioned, belief that the public sector can alone solve the problems faced by the most disadvantaged members of society. As a result, many people feel disempowered and sometimes at the mercy of insensitive bureaucracies. Although we have long spoken about the importance of consultation and participation, there has been much less said, let alone done, about co-production or co-design. These, of course, require a shift of power from professionals and policymakers to citizens and therein may

lie the reasons why they have so rarely been achieved. They do, however, offer the chance of policies and services that make sense to clients. They might also result in clients feeling able to use their own resources and initiative to better effect to improve the quality of their lives. That kind of approach is a long way from relying on bureaucratic reorganisations and inspections but it might just stand a better chance of improving the quality of living for the most disadvantaged and vulnerable. Lord (Michael) Bichard has been a cross-bench peer since 2010. A former permanent secretary, he was a chief executive in both central and local government, and the first director of the Institute for Government. A version of this article appeared in a Fabian Society pamphlet on multiple service needs MAY 2014

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Opinion ■ Duncan Selbie

Water feature: At Hinksey lido, a municipal heated outdoor pool close to Oxford city centre, there is free swimming for children aged 16 and under

Putting the public into health Public health funding is back where it belongs, with local authorities. And one year on from the transfer, councils’ efforts are beginning to show results It has been one year since the transfer of public health responsibilities from the NHS back to where it belongs in local government. This change represents the greatest opportunity to improve the public’s health in 40 years. Councils are best placed to decide what’s important for the people who live in their communities and, working with key partners, determine how best to direct all available resources to achieve maximum impact in improving the public’s health. This is an important and exciting change to the public health system. Supporting local authorities in this task, has involved the transfer of about £2.7bn of funding from the NHS, 3% of the health budget, in the form of a 12

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ring-fenced public health grant. Good health and wellbeing is not solely the absence of illness. Employment, decent homes, friends, the environment we live in and our own individual choices all play their part. Councils are perfectly placed to use all available resources to engage on all these fronts because they have the ability to leverage public health benefits from the whole of their spending power and not just the ring-fenced grant. In fact, many local authorities are putting additional investment into public health services. During the past 12 months I have visited local authorities all over the country and have seen at first hand the enthusiasm and hunger to take on the challenge of improving the public’s health. Local authorities are passionately and genuinely committed to the health of their communities. There is no ‘one-size-fits-all’ approach and I am energised by the diverse

evidence-based approaches being taken to improve health – from creating thousands of jobs from Hartlepool in the north to Medway in the south, to free access to swimming and to exercise in places like Blackburn with Darwen. Although their population profiles and needs are necessarily varied, what these councils all share is a profound understanding that their new duty is to improve the public’s health rather than per se provide a public health service, as important as that is. During my meetings with local teams I see extraordinarily able local leadership from officers and politicians, and a focus on assets and possibilities rather than problems and deficits. We are acutely aware of the huge challenges that local authorities are currently facing. Local authorities are operating in an unprecedented financial environment and all have tough decisions to make. Public Health Photo: Alamy/Shutterstock

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A DIGEST FROM THE WEB

Good health and wellbeing is not solely the absence of illness. Employment, decent homes, friends, the environment we live in and our own individual choices all play their part England maintains an ongoing dialogue with councils and where there are fine judgments to be made we will work closely with them and offer advice. Recently, fears have been expressed that public health budgets are being routinely diverted away from public health interventions. We do not believe this to be the case. Local authorities are free to spend these budgets to improve the health of their local population in ways that they see fit. Councils don’t have to ask permission as to how they spend their public health grant, but will, ultimately, be judged on their outcomes against the measures in the Public Health Outcomes Framework. That said, I expect directors of public health in each local authority to ensure their public health grant is being utilised appropriately. In addition, as the accountable officer for this spending, I have written to every

‘I hope there will be a “race to the top” around cities policy and devolution. All the evidence shows that cities and surrounding areas will be critical to the health of the UK economy. All politicians need to make the most of the urban opportunity’ Alexandra Jones, chief executive, Centre for Cities

‘At the same time as government has successfully borne down on overall council tax levels, it has shown little concern about increases in council tax for the very poorest households in England. It is clear that they will suffer some of the biggest increases.’ Peter Kenway, director, New Policy Institute

‘The government has admitted that 45% of debts under the new student loan system are unlikely to be repaid, close to the level where the Exchequer would find itself worse off than before the fees increase. It has got its sums badly wrong.’ Conor Ryan, director of research, the Sutton Trust

‘The problem of the banks that are deemed tooimportant-to-fail is political. Quite simply, their lobbying power is enormous, and until the political will to take on these banks is found, we will each continue to subsidise bank bonuses.’ Simon Wren-Lewis, professor of economics, Oxford University

local authority in England explaining what I need by way of assurance that councils are using the ring-fenced grant in line with the conditions. It is natural that local authorities will have different priorities and spending plans from the pattern that they

On your marks… Park runs organised by recreation departments take place across the UK

inherited and we are pleased to see the ring-fence beginning to be combined with other funding streams and focused on the wider determinants of health. Public Health England’s role is clear. Our job is to support local government in every way we can, including occasionally holding up a mirror and connecting authorities to others facing similar challenges. This has been a fast moving and productive first year and good foundations have been set. While there is still much to do, I am very happy with the progress made and I have been deeply impressed by councils, each in their own way getting on with and taking their public health responsibilities extremely seriously. The public’s health is most definitely in safe hands and we are well on the journey from transition to transformation. Duncan Selbie is chief executive of Public Health England MAY 2014

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Opinion ■ Lord Bew

Wheel of misfortune: Plebgate, which cost Andrew Mitchell his job as Conservative chief whip, shows that paying lip service to ethical standards is not an option

A failure of culture? Very recent events suggest there is work to be done if Lord Nolan’s Seven Principles of Public Life are not to be taken for granted. But how do you go beyond tick-boxes? Next year it will be 20 years since Lord Nolan first set down the Seven Principles of Public Life – honesty, openness, integrity, objectivity, selflessness, accountability and leadership. His original text stands the test of time. Nolan’s principles, now widely known across public life, are almost taken for granted; they have become a shorthand for ticking the organisational ethics box. There was, for a while, a view that Nolan’s task had been completed. Even the continuing need for a Committee on Standards in Public Life itself was questioned. However, very recent events – not just in parliament but in banking, the police and the health service – make it abundantly clear that the job is not done. The common theme in these crises – once investigations are complete and reports published – is that despite codes and rules, there has somehow been a failure of ‘culture’. In 2005 the committee said in its 14

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Tenth Report: ‘However intangible the issue of culture appears… it is critical to delivering high standards of propriety in public life in a proportionate and effective manner. Learning from good practice must play a central role.’ The committee identified training and development as one of the key areas for improvement in order to build that culture. Now, more than ever, we need public office holders and the organisations they work for to internalise and embed the Seven Principles into their individual and organisational psyches. How best to build high ethical standards into the culture of organisations is something with which the current committee is wrestling. We hope to recommend effective, practical and proportionate ways to build these principles into organisational processes. The private sector and the professions have been looking at these issues recently. For instance, Sir Richard Lambert’s Banking Standards Review recognises that training is needed for conduct as well as competence and that it needs to go beyond a tick-box online offer. Similarly, the Legal Education and Training Review recommends a greater emphasis on legal ethics and values.

The reflections of the lay members of the House of Commons’ Standards Committee published in the wake of recent events suggest that induction programmes for all new MPs and refresher training for all MPs might be one way of embedding high ethical standards in Parliament. We’d like to hear from organisations with examples to share of how they embed ethical principles through education and training, to build an ethical culture. What works and what does not? Are there any differences in results when you outsource training, or keep it in-house? What role does leadership play in this process? Stretched budgets and resources across the public sector are a fact of life, but the exponential costs of failure – both financially and reputationally – are plain to see. The costs of another Stafford or Plebgate mean that paying lip service to ethical codes and standards is simply not an option. That was what Nolan was trying to tell us. Lord (Paul) Bew is chair of the Committee on Standards in Public Life. To contribute examples of ethical development, email the Secretary to the Committee at public@standards.gsi.gov.uk Photo: PA/Shutterstock

15/04/2014 12:37


publicfinance.co.uk/opinion

■ Graham Allen

Wanted: local vision The Labour leader has made a start with proposals for enterprise and extra ministers for the regions, but a permanent shift of power out of Whitehall is needed Ed Miliband’s announcement on boosting local enterprise partnerships and appointing Whitehall ministers for the regions is a start but more should be expected. Labour’s adaptation of Lord Heseltine’s Growth Review shows an ability to think outside the box, which should continue – not least because the Conservatives will soon match this with their own proposals. However, corporatism alone is not enough. Labour’s USP is the much wider democratic context that it must bring to the table. Enormous political events, the Scottish referendum, local austerity, the European elections and fixed-term governments should all impact on our thinking and ambition. In the absence of ideas about how a democratic future will look in our localities, politicians will look depoliticised, frightened of trusting the people and anxious to keep central control – rather than pitching a bold, liberating vision for the country’s future. Without the bigger democratic picture the patronage of nine extra ministers in Whitehall will be seen as the centre finding a new way of controlling the regions and localities, not the other way around. The relationship must change from father to child to peer-to-peer, one not about conditional gifts but new rights for the localities. Not largesse from Whitehall but a permanent shift of power backed up by democratic checks and political accountability. Business should be encouraged to bring its talent to the table but not to be Whitehall’s cat’s-paw in the localities. As drafted, Labour’s proposals would give business a veto. If they don’t approve of bids, they can prevent a locality from even entering the LEP bidding competition against other areas. Their involvement must be on the basis

of partnership and empowered by local government, with both institutions free to inspire creativity and entrepreneurship – not as surrogates for the bland aspirations of the Man in Whitehall. The proposals also need to be big enough to measure up to the task of English devolution. It is right for Scotland and Wales to have clear governance, income tax assignment and defined powers. Yet in England there is as yet no proposal or even an ambition for structural devolution. What message does this send ahead of a referendum in Scotland (on separation) and possibly in Wales (on tax powers)? While we await clarity from all the parties on English devolution, the message remains that devolution is an expedient, not a principle – something to placate the noisy and annoyed, rather than because we believe in it. Alongside a welcome economic stimulus to the regions and localities, it is essential to base our democracy on principles, not botches. To be believable, these principles must apply to England

as well as to Scotland, Wales and Northern Ireland. Just creating extra ministers in Whitehall and a boost to LEPs does not do it. Giving English local government the powers, finance and independence from Whitehall that the nations of Scotland and Wales have has to be the next step. This settlement is commonplace in most western democracies and must be entrenched – as in the Scotland and Wales Acts – beyond easy repeal. The last government’s regional development provisions were repealed in days by an incoming government and could be again unless the localities feel ownership and the powers are rooted in our places, our democracy and our hearts and minds. Without this vision, Ed Miliband’s ‘biggest change in a hundred years’ to the regions will be little more just a highly conditional stimulus to LEPs. It really depends on what comes next. Graham Allen MP chairs the Commons Select Committee on Political and Constitutional Reform

The message remains that devolution is an expedient, not a principle – something to placate the noisy and annoyed

Democratic deficit: Westminster politicians appear anxious to keep central control

MAY 2014

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15/04/2014 12:37


Voice of the

Nations Scotland

Race to invest given £1bn boost NEWS FROM THE DEVOLVED ADMINISTRATIONS Scotland S Scotland cotland BY KEITH AITKEN IN EDINBURGH

International investors look to be taking Scotland’s increasingly fractious independence debate in their stride, according to the Scottish Futures Trust. The trust, set up to develop alternatives to the Private Finance Initiative model, is non-partisan, but finance director Peter Reekie told Public Finance that interest in Scottish infrastructure investment was sky-high among Scottish, UK and international institutions. His comments came as Finance Secretary John Swinney announced a £1bn expansion in the Scottish Government’s infrastructure programme. This takes the pot of money to be invested through the Non-Profit Distributing (NPD) model pioneered by the trust to £3.58bn. The trust will now work up business cases with public bodies for a steady stream of capital projects through to 2019/20. Swinney said the extra funding capacity would provide the construction

sector with the long-term certainty of a continuing pipeline of projects. ‘Every additional £100m of construction activity is estimated to support more than 1,300 jobs,’ he added. Reekie pointed to recent commitments from German, Spanish and Australian institutions and from the European Investment Bank, which has committed £600m to the Scottish NPD programme. ‘That’s a big share of the total EIB allocation that’s coming to Scotland, because we have a pipeline of projects,’ he said. ‘These programmes are a fantastic example of the big international players being very, very interested in the well-constructed projects that are in the pipeline and in the deals that are being done.’ He highlighted the trust’s breadth of activity, noting that it had become a centre of expertise in public sector infrastructure working. ‘Having the knowledge to show that we can do different things effectively is key, and we

Model development The new hospital for sick children in Edinburgh is being built through the NPD finance model of the Scottish Futures Trust

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have taken on a whole batch of new things – even though we’re only five years old as an organisation,’ he said. In contrast to the PFI route, NPD allows the Scottish Government to borrow cash from private sector institutions for long-term repayment at capped levels of return, without dividend-bearing equity and with an enhanced stakeholder role in managing projects. It has been used increasingly to fund Scottish infrastructure projects, such as the £228.5m hospital for sick children in Edinburgh. ‘We have very competitive bids from funders for financing these projects,’ Reekie said, noting that it had taken less than two years to get the children’s hospital from proposal to construction. Alongside NDP, the trust leads a Scotland-wide community investment initiative called the Hub. Through five regional HubCos it brings public sector consortiums together with private sector development partners, bundling smaller projects to cut costs and reach sufficient scale to attract institutional investors. The pipeline of work through the Hub is now worth some £2bn, and Reekie said that 77% of the project value was going to smaller, often local, contractors. The trust is piloting a project bank account approach to ensure faster payment to sub-contractors. It was an example, he said, of the SFT’s ability to innovate, and to release innovation in partners, by managing risk better and by working closely with individuals within partner organisations. ‘Institutional slowness to react can mean that it’s hard for people to change things where they are,’ Reekie said. ‘What we do is to create change and enable people to do things differently.’

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