23 September 2015

David Cameron recently set out the policy context for the public spending review under the theme of the ‘smarter state’. Prime Ministers invariably trot out such all-embracing phrases: remember the Big Society? Yet aside from the slogan, Peter Riddell asks, how does his argument stand up?

Getting the spending review right – delivering in the PM’s words ‘better value for taxpayers but better services too’– is central to the success of the Government’s programme between now and 2020. The Institute for Government shares Cameron’s aspirations for more effective government and agrees that the spending review will only work if there are changes to the way the state operates.

But there are inevitably gaps in his argument, as well as between his rhetoric and the realities of departments negotiating with the Treasury. This is aside from what a ‘smarter state’ means on the ground, with a multitude of agencies involved in tackling the most difficult social problems.

Discussion of the importance of civil service leadership and skills was notably absent from the speech. Perhaps it is seen as a matter for Sir Jeremy Heywood and his team, but political commitment and backing for improvement are crucial.

We have already been doing a lot of work at the Institute on the three areas Cameron identified – reform, devolution and efficiency.

Reform

Cameron highlighted how public service markets are central, ‘bringing in new providers or allowing new ways of doing things’, that ‘those providers should be paid by the results they achieve’ and that ‘opening up contracts to small businesses can drive innovation’. The record so far is patchy, as shown by the problems over prison tagging and the accountability of academies.

Transparency is good for efficiency, but the PM also needs to convince people that improvements are real. Adopting the Institute’s proposals on transparency would therefore be a good idea. Our work on public service markets shows that to achieve this, the civil service needs to develop the right skills and capacity to ensure that such markets are designed, managed and monitored to high standards.

The Prime Minister argued that ‘for those who are hardest to reach there should be a whole-government approach, rather than a series of piecemeal and inconsistent interventions’. A fine aspiration, but harder to achieve. Our work on public service delivery will look at how to help those with complex needs to know where to go for help, and at how local services can work together effectively.

Devolution

Cameron highlighted the series of devolution deals in England, via the Local Growth Fund, and City and Growth Deals, now being expanded into a much larger transfer of powers under the Northern Powerhouse umbrella—with 38 submissions so far made. Despite all the talk and initiatives, serious decentralisation has not been achieved, not least because it has not been in the interests of big spending departments. As we have argued, only a sustained drive from the PM and the Chancellor to give local authorities a seat at the spending review table could overcome this. With local areas now bidding direct to the Treasury this could be addressed, at least in part. Central government needs to be more transparent about the process and the criteria for how bids will be assessed. Lessons need to be learned from devolution to Scotland, Wales and Northern Ireland about the problems of operating in a more fragmented landscape.

Efficiency

The Prime Minister highlighted the savings already made through reducing the size of the civil service, better use of government property, and making government more digital. There is, as he said, considerable scope for local services to work more closely together. He talked enthusiastically about the creation of the Government Digital Service (GDS) as ‘one of the great unsung triumphs of the last parliament’. Digital is not quite the unsung success story he suggests. Cameron is right that government needs to go much further in making services digital. Yet recent changes in the leadership of the GDS do raise questions about the balance between the centre and agencies in making changes.

The PM talked mainly at a headline level about the spending review, noting that the government needs clarity on its priorities in view of limited resources. We agree. The record since 2010 is only partially reassuring. Too often, institutions have been abolished but their functions redistributed rather than looking first at functions and then at institutions, as was shown by the abolition of the Audit Commission.

Too often projects are delayed rather than stopped. The Major Projects Authority (MPA), another welcome innovation since 2010, oversees almost half a trillion pounds worth of projects, many of which are judged by the MPA as being highly uncertain of success. It is questionable whether the government has enough capacity to manage the large number of projects it is undertaking. It will be fascinating to see if the PM follows the advice of many business people who have come into government and reduces the number of projects, in order to concentrate scarce resources and people on the government’s big priorities. Despite improvements, too often policies and projects are announced without proper thought being given to implementation.

The Prime Minister’s ‘smarter state’ speech deserves to be considered seriously, not because of any particular novelty but because it lays out the central themes of the spending review and what government says it will be trying to do for the rest of the parliament. Over the next two months we will explore his argument in detail.

Comments

I think the Prime Minister's advisers have been imbibing too many American websites along with the dubious field of behavioural economics (which is only a subset of Chicago neoclassical economics). Hence the reference to the American use of 'Smarter' rather than the British 'Clever'.
I am afraid I don't find Smart very Clever.