21 June 2007

Jim Murphy MP

Minister of State for Employment and Welfare Reform

The Future of Public Service Reform

Thursday 21st June 2007

[Check against delivery]

When people – particularly politicians - talk of reform in the public sector, we must tread carefully. For too often, calls for change are taken to be criticism of all that the public sector delivers on a daily basis.

To an extent, we must take responsibility for this. At times, we have been amateurish in our engagement with public servants. In the early days of new Labour this was perhaps understandable, as we sought to prove that we weren’t captured by “producer interests” or trade unions and we would govern for the nation and not any one sectional interest. But in achieving this too many teachers, nurses and other public servants wrongly felt that we believed that they were part of the problem.

A decade later we need greater subtlety in our relationship and communications with public servants. Of course reform will continue to pick up pace but we need to take more people with us. Such an approach is crucial if we are to enter an era of more autonomy and less micro-management of national targets.

To do this, we must alter the perception of what it means to ‘reform’ public services.

People often talk of ‘reform fatigue’. But in the private sector reform is seen as innovation. The private sector changes to respond to, or better still, lead the market. If they don’t, they go out of business.

But just because the public sector cannot ‘go out of business’, it does not mean that the same ethos behind change shouldn’t exist. We have our market, just like business does. Our equivalent is losing the public’s consent to fund progressive public services in the future. 

We need a proper conversation about why we need change. Too often all that people hear is the “What” of the change and aren’t involved in a conversation about the “Why”.  The debate is about process and not purpose. If we are to move forward, we need to ensure that the ‘means’ don’t become confused with the ‘ends’; and undermine the argument for further reform.

So, at the outset, I’d like to set out three key reasons why I believe we do need to continue on our road of reform.

Firstly, we still have more to do to eradicate child poverty, promote equality of opportunity, and increase social mobility.

Even our staunchest critics cannot deny that a great deal of progress has been made over the last decade.

• two and a half million more people in work – with the biggest rise in employment rates for those who traditionally face the most disadvantage in the labour market;
• hospital waiting lists have halved;
• whilst 1400 failing schools have been turned around.

But we can make much more progress in the years ahead. Areas of deprivation still exist. A chain of disadvantage exists within too many families where each generation is a link in that chain - we have weakened the chains of disadvantage; but we are yet to break them.

Secondly, it is our duty to keep up with the public’s expectations of service delivery.

When the foundations of today’s welfare state were laid half a century ago, the service sector in Britain was embryonic. People’s experiences and expectations of services – especially the poorest – were formed by public services.

This hasn’t been the case now for some time. As society has become more prosperous and the service sector has boomed, expectations now are formed by private sector services. Public services no longer set the innovative norm.

And thirdly, to take account of the cultural changes – particularly the relationship between near limitless personal aspirations of many and the role of public services.

Aspiration has always been a driving force behind political change. Across history it has sparked revolutions, driven social progress, created trade unions and political parties and changed the destiny of continents. Both Tony Blair and Gordon Brown ensured that aspiration has been part of the essential architecture of new Labour.

As we consider the continued evolution of new Labour we should be mindful of the lessons of my Party’s history which are stark. When Gaitskill and others urged the Party to make a property owning democracy the social democratic objective they were wrongly pilloried by the Party. Labour politicians first discussed building council houses for sale, but allowed a vacuum to be filled by a different solution to that challenge. We anticipated aspiration, but we failed to act.

In the future, the real prize will not go to those who follow aspiration but to those who anticipate and shape it.

There is already a clear sense of direction in how the public want to see public services developing in the future. I’d like to focus on just one particular theme that was raised – that of personalisation.

In an era of global competitiveness, the array of services and products on offer is truly staggering. Almost every need is catered for; and if it isn’t, the gap in the market is filled overnight. The impact of globalisation also means that individuals and businesses are often competing not just with people in the same town or even country; but with people across the world.

In my own area of employment and welfare ten years of economic growth and stability and improved welfare services and there are record number of people in work. This means that often, those left behind are facing not one, but multiple barriers to work, making the journey back to the labour market that much more complex.

The combined effect is that we must tailor our services to individual needs if we are to be successful in the future. And in order to do this, Government does not “always know best”. People need to be empowered to make their own decisions. And they deserve choice - not choice for the sake of choice, but rather:

• choice to drive up performance;
• choice to meet the aspiration for greater control over their own lives;
• and choice to offer real and meaningful options for those who are most disenfranchised in our society.

It’s accepted that the greatest improvements in public services has been in the poorest areas. And yet in too many instances the poorest still have on occasion a lower quality public services. I want to see choice extended further. The alternative is that some families will have to wait for an ever improving universalism to deliver what others rightly take for granted.

A monolithic structure of top-down services delivered from the centre will not effectively achieve this. That’s why we have increased the use of the private and voluntary sectors and promoted local initiatives to focus on local solutions. But there is much more we can do to personalise services further, and allow people much more control over the services they use.

So how do we give effect to this? I believe one of the key concepts that we must build on in the future, is that of personal accounts, bringing together funding streams and enabling people to have control over the way money is spent. The best example of this at the moment is the Individual Budget pilots, for those in need of social care services. This budget co-ordinates resources from a variety of Government Departments – giving the individual the flexibility and choice to decide what they need.

And we should take this further.

In particular, I believe that we should devolve more power to the most important institution in our society – families.

Traditionally, British families have been 'generationally horizontal’ – with aunts, uncles and relatives across a generation providing support. But today with smaller families and longer life expectancy, our families are becoming more 'generationally vertical' across three or four generations.

To illustrate this briefly - in the first year of the Queen’s reign, she sent around 200 birthday cards to people who reached their 100th birthday. By last year, that number had increased more than twenty fold, with over 4,600 birthday cards issued and a further 500 sent to those who reached 105.

This has a huge effect on our society. In 1950, there were ten people working for every pensioner; today there just under four. In ten years time, on current trends this will reduce to three, and by 2050 there will be just two

So as families change so should our support to them. We could allow parents more flexibility. The Chancellor’s Child Trust Funds are groundbreaking in this area and we can go further.

We could test a new Family Account whereby various government family support could be owned and managed by parents. For example the government funded free fifteen hours of childcare for three and four year olds could be included. It could be used to allow a parent to stay at home longer; for both parents to reduce hours or allow parents to invest in a mix of formal and informal childcare perhaps some provided by grandparents.

But throughout all of our discussion on public service delivery in the years ahead; I believe that there is one aim which must remain central to everything we do - that of eradicating child poverty.

In March 1999, the Prime Minister and the Chancellor announced that we should aim to eradicate child poverty within a generation. This was and remains one of the most ambitious social aims of any government across the developed world.

We have reversed the trend we inherited and since this Government came to office and it has fallen faster hare than in any other major economy - whilst the poorest families are four thousand pounds better off now than in 1997. 

But to eradicate child poverty a combination of Government action, personal responsibility and getting more people into sustained work is essential. But as we look ahead, we could also do poverty differently within Government.

In my department, every new policy has to be child poverty proofed – examining what impact it will have on lifting children out of poverty. But policies across Government – health, education, community initiatives – all have an impact. That’s why I would argue, that in future every single policy across Government is child poverty proofed.  If we had this in the past we would not have cut lone parent benefit in our first year, we would have gone further in radical extension of choice and would have more quickly taken measures on children’s health inequalities.

So to do this, we need structural recognition that tackling poverty is a cross-government agenda. At the moment we rightly have a joined up approach to better regulation with a powerful cross Departmental Panel for Regulatory Accountability chaired by the Prime Minister. Every new Bill is forensically examined for its possible impact on public sector bureaucracy or new business burden. Additional burdens are compensated for by offsetting measures.

I believe we should consider a similar challenge function across Government on child poverty; every policy and new Bill could be examined for its impact on poverty. It is not too much to suggest that we should co-ordinate policy on child poverty as effectively as we do on unnecessary paperwork.

So, to conclude, as a consequence of public policy, societal pressures and cultural changes it is my belief that public services can never stand still. As Tony Crosland, a prominent thinker and Labour Minister under Wilson and Callaghan said back in 1975, “What one generation sees as a luxury, the next sees as a necessity.” My sense is that now that time line is no longer a generation, but at most a decade. In 1997, mobile phones were the preserve only of the prosperous; now, 96% of those in their early twenties have one.

Public services must keep up; if not, we risk losing the public mandate for investing in those services.

Most of our reforms over the past decade – though controversial at the time - are now part of the established orthodoxy: Bank of England Independence; protections against discrimination; the minimum wage; a flexible labour market.

So the public now rightly are more interested in our vision for the future rather than our retrospection about our previous achievements.

This is the challenge for us all.