Wednesday, 30 November 2011

Unending gloom

The Chancellor, George Osborne, today presented his Autumn Statement to the House of Commons at a time of increasing gloom over the prospects for the UK and global economy. In interpreting what Mr Osborne said, it is important to remember that while being Chancellor he is also the Conservative’s election strategist. Thus not only does he have to outline the economic policy of the Government but he also has to lay the ground for the next general election in 2015.

The Chancellor started by outlining the state of the UK economy and its public finance. This can only be described as very bad. On the economy, growth estimates have been sharply reduced with the consequence that unemployment (and youth employment) will continue to rise for several years to come. Economic growth is not now expected to return to pre-recession levels (at which time unemployment would be expected to fall) until 2013 which is quite some way in the future and very uncertain. On public finances the economic slowdown means that Government borrowing will be substantially higher than originally planned and the Chancellor conceded he would not be able to meet his aim of eliminating the structural deficit and to see national debt falling by 2014/15 (the time of the next election). This gives him a major political headache. However, the Chancellor did focus on the fact that the UK has much lower borrowing rates than other developed countries as a consequence of his deficit reduction policy.

The Chancellor strongly argued that the prospects for the UK economy have worsened because of external factors such as commodity inflation and the worsening economies of the Eurozone. While this is true it is probably not the full story. Many commentators including me (and perhaps the IMF) would argue that consumer and business confidence has been “shot to pieces” because of tax increases and the pace and scale of the public expenditure cuts and the way they have been implemented. People are now wary of purchasing new cars and foreign holidays (as evidence by the financial troubles of Thomas Cook).

The Chancellor announced many initiatives the key ones of which might be seen as:-

• A focus on infrastructure investment – he announced many investment projects concerning road, rail and telecommunications some which will benefit the East Midlands. Not only will such projects provide employment in the construction industry but will also benefit the business community. While this is to be welcomed the key question is whether it is too little too late. Many of us argued for a stronger focus on infrastructure last year at the time of the Spending Review.

• Support for businesses – schemes aimed at boosting growth, including a credit easing scheme to underwrite bank loans to small businesses. Many businesses will be sceptical about this because there have been similar schemes in the past which achieved little. We will have to see whether this one works.

The Chancellor has to find a way to pay for these things which he has done through savings on other Government budgets and lower than expected interest payments on Government debt. However, the most controversial item is probably the further tightening of public sector pay increases - the day before the national strike on changes to public sector pensions.
Finally, there is one huge huge caveat to all that has been said. It assumes that European politicians will find a solution to the travails of the Eurozone. If the Eurozone collapses (and there are many possible scenarios) then all bets are off and it is not pleasant to contemplate the consequences.

Tuesday, 22 November 2011

Mind your own affairs, minister

Local government in the UK usually gets a bad press. If these attacks follow internal failures, they are, of course, justified. But the problems are often more to do with the way central government treats councils.

Unlike other countries, the UK has no established constitutional position for local government – for the simple reason that the UK has no constitution. As a consequence, it sometimes seems that central government treats local government like a feudal master would treat his slaves.

Ministers arrogantly issue orders, create targets, reverse local priorities, interfere, inspect, criticise, insult and punish local government – ignoring the fact that councillors are also directly elected and have a local mandate.

The present secretary of state has proved no exception. Among other things, Eric Pickles has suggested that local government spending is as big a factor as the banks in causing the UK’s economic woes and attacked Nottingham City Council for refusing to disclose all items of expenditure over £500. This comes from a central government where revealing the brand of coffee drunk by ministers could be regarded as a breach of the Official Secrets Act.

This arrogance would not be so bad if it wasn’t also hypocritical. Central government itself is far from successful in developing and implementing public policies.

To give just a few examples:

Education – the UK is well down the rankings published by the Organisation for Economic Co-operation and Development and behind its main competitors in terms of reading, mathematics and science.

Defence – the seemingly continual chaos at the Ministry of Defence regarding budgets, equipment procurement and asset management.
Health – the cancellation of the NHS National Programme for IT after costs of £13bn had been incurred.

Transport – the failure to develop and implement a coherent and effective transport policy for the UK.

Taxation – errors and delays in relation to income tax payments as a consequence of what were said to be ‘computer errors’.

Data loss – losing 25 million child benefit records for reasons that remain obscure.

Furthermore, in 2010, the Institute for Government asked political science academics to identify the most successful public policies of the past 30 years. The results from the 150 respondents showed little consensus – the most successful public policy (the minimum wage) received only 24 first preference votes. The third, fifth and sixth most successful were seen as: privatisation, Sure Start and the Human Rights Act, policies that raise many eyebrows outside Whitehall. There were hardly any votes for policies in the key fields of education, defence and transport.

It seems that central government finds it difficult to do anything right. Despite this, governments of all colours are very fond of putting councils and other public bodies into ‘special measures’ when they are seen as failing.

Given Whitehall’s own record, isn’t it time it put itself into special measures? At the same time it might deal with the 2007 Lyons review’s call for local government to be given a level of constitutional protection and financial autonomy, as well as a reduction in central government intervention. The problem is that central government would then need to find someone else to blame.

Why are all the think tanks in London

I recently read a report in Prospect magazine about its annual “Think Tank of the Year” event held in London in the company of many of the good and great in our society. What struck me immediately is that all of the think tanks involved in this event were located in central London. I subsequently did a small amount of further research and soon discovered that, apart from those in Wales and Scotland, there doesn’t seem to be any policy think tank in the UK which is located outside of London, even though over 80% of the UK population lives outside the metropolis.

This seems yet a further example of the massive over-centralisation of the UK. In almost no other developed country does the largest city dominate to the extent that London does in the UK. Furthermore, in some countries, such as the US and the Netherlands, the capital is not the largest city and this provides a balancing effect between two centres. The over-centralised UK means that political power is concentrated in London and no doubt this explains the over-concentration of think tanks in London. London also dominates economically as well in that it has a disproportionate level of economic activity, compared to other parts of the UK, resulting in huge disparities in income and wealth.

The former UK foreign secretary, the late Robin Cook, once commented that the UK was the most centralised country in Europe and the Economist once suggested that the UK was the second most centralised country in the developed world after New Zealand which is about the size of Wales. This over-centralisation of power in the UK might not matter if the public policy development and implementation which emanated from it could be regarded as a success. Instead it is something of a disaster zone. Most of us can probably think of several disasters in public policy while we might struggle to think of anything which was an overwhelming success. In 2010, the Institute for Government asked political science academics to identify what they saw as the most successful public policies of the past 30 years. The results from the 150 respondents showed little consensus – the most successful public policy (the minimum wage) received only 24 first preference votes. The third, fifth and sixth most successful were seen as: privatisation, Sure Start and the Human Rights Act, policies that raise many eyebrows outside Whitehall. There were hardly any votes for policies in the key fields of education, defence and transport. Hardly a glowing testimony.

This constant policy failure, under all governments, must surely follow from the over-centralised and amateurish political and administrative systems we have in the UK. I remember being present, some years ago, at a presentation given by the (then) Prime Ministers Delivery Unit. This was a unit which reported directly to the Prime Minister and had responsibility for overseeing the implementation of the Government’s Public Service Agreements (PSAs) designed to enable the Government to achieve its policy objectives. At first I was amazed and them bewildered by the tone of the presentation which seemed to imagine and believe that instructions given from offices in Whitehall would eventually be translated into the right sorts of action by schools, hospitals, local authorities etc in Bradford, Birmingham, Bristol or Bolton. I recalled the words of former US President Harry Truman who was quoted as saying “people think I give orders from the White House and make things happen. Actually, I spend all day kissing backsides to make things happen”. The only inaccuracy here was that Truman used a cruder word than backsides.

The failure of this approach is clearly set out in a report by the National Audit Office which gave central government departments a score as to how far successful they had been in meeting their PSAs. The average across all of them was only 45% . Only two departments scored 100% and five departments scored less than 25%.

Prime Minister David Cameron is now talking about using the Eurozone crisis as an opportunity to reshape the European Union along different lines and more akin to what the UK government might wish to see. Is not the UK financial crisis also an opportunity to reshape the development of public policy and the management of government more in line with what is needed in a 21st century globalised world. Are there not rich benefactors somewhere out there who would finance the creation of a network of policy think tanks across the UK which could create public policy in a manner different to the stale and outmoded themes which emerge from London?