The prime minister’s article in the Daily Telegraph on Monday this week, about bringing a bigger private sector role into public services, is a classic example of two-plus-two making whatever anyone wants it to be, six, 12 or 23.
The right of centre immediately welcomed David Cameron’s comments as a code for backing wholesale privatisation, while unions and the left vowed to fight to the death this apparent commitment to returning to the days of Thatcherite compulsory competitive tendering.
The reality is more prosaic. The prime minister did not announce a dramatic new policy outside reforms already announced, other than to suggest a ‘presumption’ in favour of making public services ‘open to a range of providers,’ a comment which, by Tuesday, Number 10 was downplaying. Downing Street also confirmed that earlier plans for quotas of public services to be delivered by the private or voluntary sectors would be dropped in the forthcoming Open public services White Paper, out in the next fortnight, to which Mr Cameron had alluded.
Local government already has a plurality of service providers. If it did not, then it would have escaped the odium of making cuts to voluntary sector contracts. In education, free schools and academies are already up and running. Health is still largely a single provider but is, anyway, haring off in a different direction with the health reforms handing powers to GPs.
Councils will continue to operate as at present, namely, at different speeds. Neither the voluntary nor private sectors will be remotely interested if there is no or little money attached to their provision of services. Small firms and local groups will lack the economies of scale to make the necessary upfront investment required to make structural long-term savings. The private sector itself will always cherry-pick the big contracts. Councils will retain accountability for lack of anyone else to fill the gap and, as a result, the buck will continue to stop with them.
There will be changes, although not as much as the right and left have assumed from Mr Cameron’s comments.
Wednesday, 23 February 2011
Wednesday, 16 February 2011
The silo mentality remains an issue
In hindsight, the last 10 days’ uproar over council cuts to the voluntary sector and the threat to Big Society may be seen as the time when Number 10 fell out of love with localism.
It will have dawned on the prime minister and his advisers in the past fortnight that once you start ring-fencing specific major services from cuts, such as schools and health, then you must either ring-fence all the remaining services or expect them to disappear as councils struggle to reduce budgets by one-quarter in two years.
One can imagine David Cameron charging about Number 10 wanting to know why Sure Start centres face the chop or community projects are axed, and why their funds were not also ring-fenced and how come no-one warned him?
The frustration was evident in his Big Society comeback speech on Monday. During questions, Mr Cameron, whose knowledge of local government appears to be based on his constituency district of West Oxfordshire – which he praised for not cutting grants to the local Citizens’ Advice Bureau – remarked: ‘Not all local authorities are behaving in the same way.
‘This is a democracy, not a dictatorship. I cannot order every local authority what to do with their budget.’
He could, of course, as other governments have done, but he will not, because the problem is less lack of ring-fencing than lack of funding per se.
Instead, he would be better advised to look at the other end of the telescope, namely Whitehall. As the Total Place pilots found, and as their successors, the 16 community budget pilots will find, there is still too much waste and duplication caused by the silo mentality of Whitehall departments and their reluctance to share budgets locally.
The Government has been curiously reluctant to grasp this nettle, although decentralisation minister, Greg Clark, is certainly rattling cages.
Rather than being frustrated at the impact of council cuts, the prime minister should call Mr Clark in to Number 10, add ‘community budgets minister’ to his brief, and order him to make the pooling of all public sector budgets at local level the coalition’s number one priority.
It will have dawned on the prime minister and his advisers in the past fortnight that once you start ring-fencing specific major services from cuts, such as schools and health, then you must either ring-fence all the remaining services or expect them to disappear as councils struggle to reduce budgets by one-quarter in two years.
One can imagine David Cameron charging about Number 10 wanting to know why Sure Start centres face the chop or community projects are axed, and why their funds were not also ring-fenced and how come no-one warned him?
The frustration was evident in his Big Society comeback speech on Monday. During questions, Mr Cameron, whose knowledge of local government appears to be based on his constituency district of West Oxfordshire – which he praised for not cutting grants to the local Citizens’ Advice Bureau – remarked: ‘Not all local authorities are behaving in the same way.
‘This is a democracy, not a dictatorship. I cannot order every local authority what to do with their budget.’
He could, of course, as other governments have done, but he will not, because the problem is less lack of ring-fencing than lack of funding per se.
Instead, he would be better advised to look at the other end of the telescope, namely Whitehall. As the Total Place pilots found, and as their successors, the 16 community budget pilots will find, there is still too much waste and duplication caused by the silo mentality of Whitehall departments and their reluctance to share budgets locally.
The Government has been curiously reluctant to grasp this nettle, although decentralisation minister, Greg Clark, is certainly rattling cages.
Rather than being frustrated at the impact of council cuts, the prime minister should call Mr Clark in to Number 10, add ‘community budgets minister’ to his brief, and order him to make the pooling of all public sector budgets at local level the coalition’s number one priority.
Wednesday, 9 February 2011
Pressure mounts from the cuts
As night follows day, it was inevitable that however prepared chief executives maintained they were for the spending cuts, and however much planning they had put in, the end result would be last-minute slash and burn, dramatic job cuts, and salami-slicing of services. After all, the CSR was only in October, the settlement in December, the front-loading much harsher than anticipated, and the new financial year less than two months away.
So, is it a surprise that councils have opted to cut whatever delivers immediate savings, irrespective of their impact, whether community grants, third sector funding, lollipop ladies, streetlighting or branch libraries?
Depressingly, no. And should the Government be taken aback that its much-vaunted Big Society idea has also been cut off at the knees, along with council funding? Of course not. And should communities secretary, Eric Pickles, as has been suggested in some quarters, take the rap from the PM for not doing more to stop council cuts to the voluntary sector? Again, no. He is supposed to be a localist.
If I may be allowed to name drop, at a magazine editors’ reception at Number 10 last week, I managed to grab a few seconds with the prime minister, and observed that the council cuts were ‘not very strategic’, to which he replied: ‘That’s down to councils.’
The cuts are indeed down to councils, although the reason for making them is very much government macro-economic policy, and the PM can hardly wash his hands of them. (Incidentally, David Cameron’s response to my suggestion that if Whitehall and public sector budgets were more joined up, then big savings could still be made was to say, ‘Eric Pickles is doing a fine job’).
However, the PM is right in that the localist agenda – such as the removal of ring-fencing - means councils taking responsibility for making unpalatable decisions. Having handed them a brutal settlement in one hand, and pledges on localism in the other, the Government has no alternative but to tough it out.
If it truly believes in localism, then it must leave councils to make the decision on cuts, however un-strategic and salami-slicing they may be.
So, is it a surprise that councils have opted to cut whatever delivers immediate savings, irrespective of their impact, whether community grants, third sector funding, lollipop ladies, streetlighting or branch libraries?
Depressingly, no. And should the Government be taken aback that its much-vaunted Big Society idea has also been cut off at the knees, along with council funding? Of course not. And should communities secretary, Eric Pickles, as has been suggested in some quarters, take the rap from the PM for not doing more to stop council cuts to the voluntary sector? Again, no. He is supposed to be a localist.
If I may be allowed to name drop, at a magazine editors’ reception at Number 10 last week, I managed to grab a few seconds with the prime minister, and observed that the council cuts were ‘not very strategic’, to which he replied: ‘That’s down to councils.’
The cuts are indeed down to councils, although the reason for making them is very much government macro-economic policy, and the PM can hardly wash his hands of them. (Incidentally, David Cameron’s response to my suggestion that if Whitehall and public sector budgets were more joined up, then big savings could still be made was to say, ‘Eric Pickles is doing a fine job’).
However, the PM is right in that the localist agenda – such as the removal of ring-fencing - means councils taking responsibility for making unpalatable decisions. Having handed them a brutal settlement in one hand, and pledges on localism in the other, the Government has no alternative but to tough it out.
If it truly believes in localism, then it must leave councils to make the decision on cuts, however un-strategic and salami-slicing they may be.
Wednesday, 2 February 2011
A rethink on pension costs
It is true that public sector pensions are generous because they are based on final salaries at a time when such private sector schemes are disappearing down the plughole.
But it is also true the average payment is about £4,000, reflecting the high number of lower-paid staff in the sector. And it is true that pushing local government employee contribution rates up to 11% on salaries of between £31,501 to £42,000 – just the middle income bracket most squeezed by inflation and tax hikes – is an unnecessary and provocative act by the Government which has now had second thoughts.
The decision to raise contributions by 3.2% over three years from 2012 – to raise £900m from the local government scheme alone from 6.6% average contributions to 9.6% – was made in the Spending Review last October, and was clearly driven by the deficit-reduction agenda and by media headlines over ‘fat cat pensions’, rather than by any long-term strategy to reduce the cost of such pensions to the taxpayer.
It is unnecessary because Lord Hutton’s inquiry, due to report in March, will almost certainly recommend sweeping changes to public sector pensions. This will include pensions based on career average rather than final salary, which will hit high-earners but make little difference to low and middle earners. It may well include proposals for increases in contributions.
The decision to raise contributions is provocative because the increases fail to take into account how much public sector staff are bearing the brunt of deficit reduction.
Apart from inflation and tax rises, public sector employees are also on pay freezes set to last at least another year. Furthermore, the planned rises will take contributions to the point where many younger employees – however unwisely – will choose to drop out of the scheme rather than pay 10% of their salaries, thereby worsening the funding situation.
The low-key decision to postpone an announcement from March to June about just how the details of the rises would be worked out suggests a sensible rethink at the Cabinet Office.
Don’t be surprised if the rises are quietly shelved altogether, allowing the Hutton review to make the running in future.
But it is also true the average payment is about £4,000, reflecting the high number of lower-paid staff in the sector. And it is true that pushing local government employee contribution rates up to 11% on salaries of between £31,501 to £42,000 – just the middle income bracket most squeezed by inflation and tax hikes – is an unnecessary and provocative act by the Government which has now had second thoughts.
The decision to raise contributions by 3.2% over three years from 2012 – to raise £900m from the local government scheme alone from 6.6% average contributions to 9.6% – was made in the Spending Review last October, and was clearly driven by the deficit-reduction agenda and by media headlines over ‘fat cat pensions’, rather than by any long-term strategy to reduce the cost of such pensions to the taxpayer.
It is unnecessary because Lord Hutton’s inquiry, due to report in March, will almost certainly recommend sweeping changes to public sector pensions. This will include pensions based on career average rather than final salary, which will hit high-earners but make little difference to low and middle earners. It may well include proposals for increases in contributions.
The decision to raise contributions is provocative because the increases fail to take into account how much public sector staff are bearing the brunt of deficit reduction.
Apart from inflation and tax rises, public sector employees are also on pay freezes set to last at least another year. Furthermore, the planned rises will take contributions to the point where many younger employees – however unwisely – will choose to drop out of the scheme rather than pay 10% of their salaries, thereby worsening the funding situation.
The low-key decision to postpone an announcement from March to June about just how the details of the rises would be worked out suggests a sensible rethink at the Cabinet Office.
Don’t be surprised if the rises are quietly shelved altogether, allowing the Hutton review to make the running in future.
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