As the Spending Review announcement on 25 November approaches, the Prime Minister has said that he wants to create a “smarter state”. Recently, an expert panel at the Institute for Government gave their verdict on what this might look like and what the Government can do to achieve it. Jonathan Pearson analyses the discussion.
The Prime Minister has laid out his aspiration to create a “smarter state”: one which delivers better services at better value for money for taxpayers. At the same time, the Government is aiming to create a budget surplus by 2020, primarily by reducing spending.
What this means for public services is unclear. The Prime Minister has outlined the areas where spending will be protected – the NHS, schools, defence and overseas development – and the three principles that will underpin the smarter state: reform, devolution and efficiency; however, he has spent less time detailing the “difficult decisions” that the Spending Review will have to make. So, what lies ahead as the Government sets out to build the smarter state?
The panel began by outlining their take on the Prime Minister’s three principles.
Paul Goodman, Executive Editor of Conservative Home and a former Conservative MP, considered the smarter state in the context of “political reality”: a Prime Minister who has begun what he has declared will be his final term of office, and is likely to expend most of his energy on steering the country through the EU referendum. The big question for Goodman therefore, was “what does the Chancellor think” about the PM’s three principles? It is clear that the Chancellor wants to reform the welfare system to find £12bn of savings – a task which the House of Lords made more difficult recently by opposing changes to tax credits – but he remains “shy” of reforms to social and family policy.
He is considerably less shy about matters of devolution, though the question hanging over this issue is whether the Chancellor’s plans will result in a true transfer of power and new opportunities to deliver services differently, or whether they are simply an opportunity to make savings. On efficiency, Goodman reflected on the Government’s digital agenda, cautioning that while digital certainly has potential to drive savings, it should not be seen as a “catch-all solution to the Spending Review”. Goodman ended on a broader note, wondering how many people in 2010 would have believed that the country would have reached 2015 without massive strikes, protests or collapsing services.
Peter Housden, former Permanent Secretary of the Scottish Government and the Department for Communities and Local Government, picked up on Goodman’s point about services, calling for “structural reforms” to services such a health and social care. These services need workforce reform to stem high turnover, and investment to build facilities and maintain delivery. Had he been contributing to the Prime Minister’s speech Housden would, he said, have given “much more emphasis to the role and significance of front-line staff, and the kind of organisations and leadership that makes their work possible.” Reflecting on devolution, he remarked that it was “quite counter-cultural” to Whitehall and that the country was in for a “long haul” before devolution could be successfully realised in practice. For Housden, making a success of devolution will require sustained political and official sponsorship at the most senior levels.
Daniel Thornton, Programme Director at the Institute for Government, noted that if the Government meets its target of achieving a surplus by 2020, the UK will have experienced a decade of sustained spending reductions. What’s more, the pattern of these reductions will continue to be uneven, with the most significant impact concentrated across a relatively small spending base of unprotected areas.
The result of this is likely to be that politicians will have to take hard decisions about what they can get rid of. These decisions are going to be much harder than under the Coalition, said Thornton, noting that in 2010 ministers had been able to stop programmes and projects that had been started by the previous government. This time there is a real risk that the Government will carry on trying to do too many things.
For Thornton, the keys to the smarter state are prioritisation, and acknowledging that some government targets are not achievable – such as the target to double exports by 2020. Like Goodman, Thornton felt that digital transformation could unlock significant savings, but emphasised that the Government needed to continue building capability in this area; this would enable it to capitalise on the momentum for reform and the improvements that users have already experienced, as well as managing the risks of transformation.
Questions from the audience ranged across the Prime Minister’s three principles. The panel considered the role of public sector markets in reforming the state; how the Government’s efforts could be better directed through the use of evidence and experimentation; what Whitehall could do to join up and build specialist capability, while at the same time shrinking and controlling pay; and how the Government could become more focused on its “customers” (those who engaged directly with its services).
The event ended with reflections from the panel on what Goodman called the “shadow of the long grass”: how much can the Government actually achieve and which reforms will be left behind? The credibility of the 2015 Spending Review will largely depend on how effectively the Government has planned to implement the reductions it wishes to make. The rhetoric of “difficult decisions” must shortly be converted into action. Whether this will be enough to achieve the smarter state the Prime Minister desires remains to be seen. The Institute will explore how the Government can deliver on its Spending Review objectives in a forthcoming report .
