Modern government for a divided country

Good evening. A very warm welcome to the Institute for Government: all the more for these excessively interesting times in which we live. I’ve been Director of the Institute for four months, and people keep saying rather grimly, “You couldn’t have joined at a more interesting time.” That’s true, but let me say at the start what a privilege and what great fun in any case it is to have joined the Institute and its exceptionally talented and dedicated team.

It seemed worth putting together a talk like this in order to do two things. The first is to comment on a year of extraordinary upheaval which had Westminster bloggers protesting about “too much news” and triggered deep questions about the future of democracy and the West. I wanted to say something about that wider context in which we do our work and about what that means for modern government. The second is to say what we’re doing at the Institute, why we’re doing it and why it matters.

Valerie Amos (Baroness Amos), former Secretary of State and now Director of SOAS (at the University of London), who’s on the Board of the Institute, said to me recently that governing a divided country is the hardest task for modern politics. As John Kerr, the peer and former diplomat put it on this platform a few months ago: how do you build a majority for the policies you want, not find your policies dictated by the majority?

I’m going to talk about four things:

• Why it’s a hard time to run a country
• The challenge to democratic institutions  
• What modern government might do in response
• What we’re doing at the Institute.

Why it’s a hard time to run a country

Of course, it’s not uniquely hard. This year marks the centenary of the battle of Passchendaele, famous not just for more than half a million casualties but also for the mud. A battle of which Lloyd George said, “[It] was indeed one of the greatest disasters of the war... No soldier of any intelligence now defends this senseless campaign.” Or again, is government now harder than in the 1970s, when government ran big chunks of the economy and almost 100 companies that are now in private hands?

All the same, there are aspects that do make government now unusually difficult.

• Financial crisis and austerity. We’re still working our way through the effects of the 2008 financial crisis – and the widespread anger at that crisis. We’re still grappling with austerity, even if that word is dropping out of fashion; the departments for Communities and Local Government and for Transport have faced cuts of more than 50 per cent in their day-to-day spending in the last five years.

• Debt, deficits, demography. But budget pressures – not just in the UK but many Western democracies – have deeper roots than the 2008 crisis. It’s not new to have deficits and public debt but it is new to try to rectify them with an ageing population, as well as trying to preserve the deep sedimentary layers of promises governments have made to people, particularly on health and pensions.

• “Bonfire of the promises.” That leads to what I’ve called before the “bonfire of the promises”. Governments are having to say to people, that “contract” that you thought you had with us, all those expectations about what the state would give you – all that is being rewritten, and not in your favour. And now – please vote for us again.

We’ll work through this too, in my view, as people become accustomed to a longer working life – the only realistic answer to some of these pressures, and indeed, as we find a cure for dementia, one of the blights on the vision of how wonderful the 100-year life will be. But at the moment these pressures on their own make it a hard time to be in democratic politics.

• Globalisation, trade and immigration. On top of that, we have the revolutions wrought by globalisation, trade and immigration. Andy Haldane, chief economist of the Bank of England, made the point here in our first event of the year, that during years of strong growth in the national economy, not all groups have benefited equally. Some regions have done better than others, older generations have done better than younger ones, and (his central point) some people have a legitimate retort when told that the country overall is doing well – that they’re not.

Globalisation has also made it harder for governments to collect tax, if companies – or individuals – barely recognize national borders. Moises Naim, the Venezuelan economist, in his 2013 bestselling book The End of Power – why being in charge isn’t what it used to be captured this point, arguing that governments’ power had dissipated to companies, to individuals, to the media.

• Media and social media. That brings us to the media cycle and social media, which as one minister put it to me “devour the announcements that we have planned for the day and want more an hour later,” while confronting politicians constantly with stories that need response (and now, brand new planks of national security policy from the president-elect of the United States).   

The result of all these factors together is the anger and mistrust that we saw last year and that hangs over this year’s elections in Europe – in Germany, France, the Netherlands, and maybe Italy. There’s a kind of black comedy this year to the proceedings of the World Economic Forum which kicked off yesterday in Davos; even though stock markets are booming, the global economy doing better, and the risks of a sharp China slowdown arguably less, world leaders are grappling with a mood that they call unprecedented. It is nationalism, arguing that we should shut out the problem. It is populism, offering appealing solutions that may embrace all kinds of apparently contradictory positions. It is also the evolution of partisan worlds, built on selective truth.

Barack Obama made this a target of his final speech in Chicago on Tuesday last week, warning that American democracy was under threat from a basic lack of solidarity among its citizens. Even though he had averted an even deeper recession, rescued the car industry and created jobs, he noted “the rise of naked partisanship, increasing economic and regional stratification, the splintering of our media into a channel for every taste.” “Increasingly,” he said, “we become so secure in our bubbles that we accept only information, whether true or not, that fits our opinions, instead of basing our opinions on the evidence that’s out there.”

I’ve been talking mainly about the shudders passing through economics and politics, but let me say something briefly about why Iraq still resonates so much in this context. It’s not just a story about US military might confounded. And for the UK, it’s not the worst recent decision of that kind; in my view, Britain’s shockingly casual decision to send military forces into Afghanistan’s Helmand province in 2006 – and to take on responsibility for combatting the country’s drug trade – was a stupider mistake. More was known – even if not properly considered – about the risks and about the forces that might be needed.

But Iraq has rightly been more damaging to western democracy and its global reputation. It told us that our political system was less appealing than we thought, and could not easily be exported. It told us more than we wanted to know about its frailty – that you need institutions with deep roots, and a shared willingness to protect the losing side, if you are not to create a brutal ‘winner takes all’ contest. I had dinner with Vladimir Putin at his residence in 2007, as Iraq was indisputably unravelling. What was most of interest – beyond his determination to win every verbal point – was his view that Iraq would be the moment when the US retreated to become a regional, not a global power.

Challenge to institutions

This brings me to my second overall point: the challenge to the institutions of democracy themselves.

The Supreme Court ruling on Brexit expected this month goes to the heart of this, pronouncing on whether the government must consult Parliament before triggering Article 50. We’ve had, notoriously, the spectacle of the Daily Mail telling the world that High Court judges were “enemies of the people” for saying that Parliament should have a role.

We’ve also had Jeremy Wright, the Attorney General, telling the court that despite all appearances, the use of the Royal Prerogative for executive actions is not an ancient relic of outdated laws but a crucial part of the modern state’s powers. By committing herself to putting a final Brexit deal before both houses of Parliament, Theresa May yesterday effectively shut down one flank of the controversy but the status of the referendum in a parliamentary system remains unclear.

The question is not so much whether the courts can pronounce on these wrinkles in our unwritten Constitution – clearly they can – but whether people will accept the verdict. One civil servant with a front row seat on this said to me: “We talk about rule of law as a fundamental British value, but what about when it comes up against other ideologies? Is it really as fundamental as we think?”

The new mood is intolerant of representative democracy – which is partly why we had a referendum in the first place. The now routine description of MPs as part of a “political elite” is, I think, disturbing; they are elected representatives.

But these are simply aspects of the wider challenge to institutions we have taken for granted. Mainstream political parties are disintegrating, their concerns not matching those of voters. The standing of traditional media is under attack from public and politicians as well as rivals in social media.

In the US, the principle that both parties at least tried in Congress to keep government going has been a casualty of the last decade. Now we have the president-elect’s war of choice with the intelligence agencies, and an outright challenge from a distinguished congressman that Trump is an illegitimate president if Russia put him there.

This is something of a bitter result after a quarter century of peace and a fair amount of prosperity, at what was thought to be the “end of history”, liberal capitalism supposedly having won the Cold War.

It raises the question of whether democracies can still solve their own problems. The answer is that they can – but only if politicians can overcome divisions to command a majority for changes they want to make. They can’t if one side rejects the legitimacy of the other, and of the institutions of democracy themselves.

And that does mean being able to argue for a direction of travel and to persuade people to go along. If we are instead in an “Age of Unreason,” to quote the working title of the book George Osborne is writing, then anyone attempting to lead a country through this thicket of problems can’t win by argument. We are then in an era of mythology, of romantic claims not facts.

What should be done?

So what should be done? On a more positive note, people are beginning to suggest ways to “do government differently” to protect a country’s governability. Many of these suggestions are exploratory, playing with ideas; others take a new, hard look at old problems. In discussing them I’m not saying that I or the Institute embrace all of them. But you can hear the start of a more upbeat, if experimental, discussion about how government can improve – and also strengthen the case for its own legitimacy.

Let’s come back to that notion of John Kerr’s: how to forge a majority for a policy, not policies to satisfy the majority. How do you bridge these divisions? Theresa May’s “shared society” is a potentially interesting notion – likely to have been even more so if she hadn’t had Brexit to navigate.

What might a government need to do? There are new techniques it might deploy – and then there are ways in which it might change the approach to making policy, to arrive at something more fitting for a 21^st century society.

• Acknowledge the problem. Government needs to acknowledge when people have lost out or been left behind. It does nothing to foster faith in government to deny flatly that some people or regions may have been hard hit by change. Equally, government needs to get better at having what is sometimes blithely called “a public conversation” when it wants people to face up to inconvenient truths – such as the cost of the NHS. The Brexit debate was not a good advertisement for skill in getting a message across.

• Demonstrate competence. It’s the bare minimum that voters feel entitled to expect. Mistakes are deeply damaging to public trust, not just on the grand scale like Iraq, or the black comedy of the £286m airport on the island of St Helena too windy to receive flights. As Matthew Parris wrote in The Times in December: “stratospheric blunders cost us billions, while at street level useless officials or low-calibre service sap output and demoralise the people who try harder.” 
   
• Develop digital government. It dangles the hope of making government cheaper; more interestingly, it is enabling people to deal with government in different ways, such as seemingly trivial things like getting passports and driving licenses online, or getting medical advice that way. One MP told me he was crowdsourcing his manifesto from email conversations with constituents.
   
• Develop skill in forming coalitions. We don’t have a coalition now in Westminster – although they are commonplace in local government – but we might well again, as political allegiances continue to shift. Many issues will need cross-party support in Parliament and select committees, increasingly sure footed and effective, are fostering this.
   
• Explore the potential of cities and regions: They are emerging as testing grounds for new ideas and ways of governing. There have been fitful but increasingly serious commitments to their development.

Those are techniques of government which might change – and then there are sizeable areas where the way in which policy is made may need to change. One the government has picked for itself is industrial strategy. We still don’t really know what Theresa May means by this and it’s a phrase that governments love to utter. But we should welcome any serious attempt to sort out the tangle of thinking on infrastructure, financing, risk and rates of return, foreign ownership, energy, skills and executive pay.

Another is our tax system which is complex and heavy-handed, and the drama and secrecy (or these days, mock secrecy) around Budget days means that it gets none of the scrutiny that other areas do. There is a growing chorus arguing that partly because of this, the tax code is failing to keep pace with social changes: the rise of the self-employed, or people working later in life – as they will need to.  

What the Institute is doing

I’ve talked about the context in which we are working: new difficulties and new thinking on how that changes political leadership and government.

The Institute’s mission is to make government more effective – to make it work better. We focus on the machinery of government, on how it is done – but that covers a lot. Much of this is technical, but we do it in awareness of that wider context and of the need that brings sometimes for cultural change.

There is a view, which you find sometimes in well-sheltered pockets of British government, that government is a machine to be perfected, and politics the nuisance that crashes in to disrupt it.

That attitude reminds me of my favourite piece of promotional material – sent by the Saudi government to the Financial Times when I was working there – boasting that the Kingdom had achieved decades of what it called “progress without change”. You can’t make that joke any more about Saudi Arabia – there’s plenty of change now, which may or may not amount to progress. But you can, unfortunately, about parts of British government. Yet it is not an attitude that can afford to survive. It matters that the relationships between different parts of government work well, and lend themselves to accountability and to change.

How ministers work with the civil service, how both work with Parliament, how departments manage public bodies, how all of these build public support – these are part of running a modern government. And these have been at the core of the Institute’s work since its beginning nine years ago.

We do this by research and comment, by large public events and by high-level private discussions.

We’ve got a broad and rich programme of work, too big to recount here, but let me pick out three things that are priorities for this year.  

Whitehall

Accountability, the theme that has run through all our work about the relationships between different parts of government. Whitehall Monitor, our almanac compiled by Gavin Freeguard and his team, published later this month, and Performance Tracker, a new study led by Julian McCrae and to be published at the end of February, are the way that we judge that performance in numbers.

Professionalisation of the civil service. This is a longstanding IfG theme, clearly worth pursuing. The aim is to get away from culture of the bright generalist and make sure that on finance, commercial, digital, and policy-making for a start, people have the necessary knowledge and expertise.

Policy-making

We’re looking at what goes wrong both in the process and in the thinking. When I took this job, John Kay, the economist, said to me “so many of these decisions are a catastrophe of process.” We were talking about the Hinkley power station, Heathrow and HS2 at the time, but the point applies to many areas.

On Monday we published a report on making tax policy better – led by Jill Rutter – and are delighted that the Chancellor has already accepted an early recommendation: to have only one ‘Budget event’ a year, not two.

In three weeks, we’ll bring out a report led by Emma Norris called All Change, about the calamitous tendency for constantly reinventing the same policies. This churn is particularly marked in three areas central to productivity and to bridging the country’s divisions: further education, industrial policy, and regional policy. In further education alone, since the 1980s there have been 28 Acts and 48 Secretaries of State covering some part of it, while no organisation has lasted more than a decade.

Brexit

This is the biggest challenge; it brings all these points together, and is now a substantial programme of work for us in itself, at first led by Dr Hannah White and now by Jill Rutter. It’s technically difficult, and politically formidable – trying to sell a single version of Brexit to a country that had only a narrow majority for the principle overall. The IfG starts from the question “How can you make this work better?” and then takes a hard look at the state of preparedness and how to pursue negotiations.

The state of preparedness is better than you might think from many reports, we have found – the task of describing the impact and the opportunities well underway. Less so on planning for the negotiation, perhaps – and it will be a negotiation. The central point that Ivan Rogers made before he stepped down as the UK’s permanent representative to the EU was that it is a curiously British view – rational and transactional – to think that the other 27 countries will gravitate to a win-win outcome. There are just too many interests in play for that. I thought the Prime Minister’s speech yesterday guilty of wishful thinking on that point.

On the other hand, she has a point, it seems to me – more than often credited – in saying that she will keep the negotiating position to herself to the end. But there are then consequences of this stance. Take the example of the borders and how people cross them 731 days after Article 50 is triggered.

Civil servants say to us with some force that if they’re going to apply the same scrutiny to Europeans as they do currently to Americans, they’ll need three times the resources they have now because that’s the number of extra arrivals they’ll have to monitor. If they’re going to digitise it all, to do it more cheaply, they should start now. If they’re not going to know what to do until negotiations are concluded, then the inescapable implication is that they will need more time – a way of continuing the status quo beyond those first two years.

Occasionally, I think that Brexit is the epitome of tediousness: 10 years’ work – and that estimate is plausible – for people who had plenty of other worthwhile plans for that time. But more often, I think it is a revolution that will change us in ways we can barely judge at this point. As one civil servant put it to me last week: “In 42 years, we have absorbed Europe deep, deep into our Constitution and we are struggling even to describe the reach of EU law in our own law.”

Conclusion

I’ll make a few quick points in conclusion. One of the greatest tasks of modern government is to command support for its chosen policies despite the current mood of challenge, scepticism, contempt and disbelief.

And so, first, at the very least government needs to be more professional, more accountable, smarter and more competent – and demonstrate to people that it is so. Beyond that, it needs to bridge the divisions in the country with its policies but also with its techniques for speaking to people in order to build coalitions for a majority.

Above all, it needs to make again the case for the benefits of progress, for economic growth, for government itself and for its legitimacy – not for “big government” or “small government” but for government’s right and responsibility to address the country’s problems and to attempt to lead it forwards.

There is an urgency about this. After the last six months, it might be tempting to treat 2016 as a watershed. It’s always tempting to pronounce the time we’re living in as a turning point but that’s often a fallacy; what we have seen may be just the beginning. We have yet to face, for example, the significant erosion of middle class jobs by technology, but it will come and change our politics again; we’ve yet to face successful challenge to the union of the UK, but that may come.

Government has achieved a lot – even in just this quarter of a century since the Berlin Wall fell. We are more open, more prosperous; we have embraced a digital revolution. But we’re also more divided, and that makes the task of modern democratic leadership much harder.

Successive governments have been too casual about those divisions provided that they could demonstrate national economic growth. I would be reluctant for them now to try to bridge these divisions in a way that was casual about economic growth – as is the danger of some versions of Brexit. But what is clear is that they now need to answer them in a way that makes – once again, even though we thought the argument won a long time ago – the case for the legitimacy of government itself.  

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