This is a good time to consider the reform of public services, for various reasons. The Office for Budget Responsibility predicts little growth in Total Managed Expenditure between now and 2015. However, increased public spending doesn’t always translate into improvement. David Cameron made an interesting point when he said, “Total public spending increased by 57% in real terms from 1997 to 2010, but on no measure can we claim that things have improved by more than 50%.”
The National Centre for Social Research recently reported that the numbers who support tax increases to fund public services dropped from 63% at its peak nine years ago to 31% in 2011. The worry is that money is not being spent as effectively as it could be. Combine this general fiscal anxiety with the challenges of an ageing population and unfunded pension schemes, and we find ourselves in a rather alarming position.
Reassessing the quality of public services
Theoretical questions about the role of the state are amplified by the economic crisis. With this in mind, we need to come together to reassess the role of commissioning, delivery and quality of public services. At Serco, we have built our reputation on improving services for the end user. Every day, our 100,000 people help governments, local authorities and businesses do more for citizens and consumers, more efficiently. It is this experience of exemplary service that puts us at the heart of this debate.
The Open Public Services White Paper sets out the government’s long-term vision for how public services can become more responsive to needs. The Paper was criticised by some for failing to provide short-term solutions, but if the government sticks to its long-term goals, it should be able to reduce the deficit and support growth. It may take ten years to see results, but sustained investment now could make all the difference later. There are a number of ways to approach this.
The 1997 World Bank Report on world development discussed, at length, the role of the state. It suggested that development needs effective states that play the facilitator’s role in complementing the activities of private businesses and individuals. This idea of the state as facilitator could be a plausible strategy for the UK. In the past, there has been something of a dichotomy around the delivery of public services: either the state provides the service, or it is privatised. One of the potential problems with this is that, in some areas, government might simply replace one monopoly with another. This lack of competition can create an environment where providers don’t have to worry about the consequences of sustained poor performance. But in the past decade, the contracting of services through competition has increased. At Serco, we believe that allowing competition not only drives down costs but encourages innovation.
To quote Cameron again, “It shouldn’t matter if providers are from the state, private or voluntary sector – as long as they offer a great service.” We believe that unleashing the entrepreneurial spirit of the private sector and incentivising companies to improve services will yield innovations that enable the state to spend more efficiently.
The role companies can play in driving service innovation is already clear in some of the emerging economies. In India, two healthcare organisations – Narayana Hrudayalaya, which provides affordable cardiac surgery (see page 38), and Aravind Eye Care System, whose mission is to eliminate needless blindness – run on sound business principles and provide affordable healthcare in a public system without being dependent on the state. Narayana Hrudayalaya is now offering to carry out cardiac operations for the NHS at a twelfth of the price it costs in Britain. This kind of entrepreneurialism is inspiring, and we should encourage it.
The Ministry of Justice is currently trialling 28 pilots in various areas, from prisons to probation. This evidence-gathering strategy will enable it to roll out a national model for payment by results in the criminal justice system by the end of this parliament. This performance-management style of contracting is well suited to a government adopting the facilitator’s role, as it can set objectives, then task others to deliver them. Outcome-based contracts have been running for a while. Some ‘Streetscene’ operations in local government (clusters of services from refuse collection to graffiti removal) have seen private companies sign contracts where payments received are dependent on the satisfaction levels of local residents – an example both of payment by results and Big Society in action.
Focusing on empowerment
There are some concerns about the ability of communities to take part in decision-making; one answer is to use managers to understand what people want from public services. The Serco Institute has done much to argue for the empowerment of managers – who are close enough to hear consumers, but distant enough to be accountable for managing services effectively. Under the Work Programme, Serco partners with charities and local organisations to help unemployed people into work. The incentivisation of managers and their subsequent motivation of their staff has enabled us to help 25,000 people back into work in our first year of operation.
This kind of empowerment is, after all, what Big Society is all about. David Cameron has said that he wants to replace top-down Whitehall programmes with community-led initiatives where services reflect usage and decision-making moves closer to the end user. If this ambition becomes reality, the nature of the state and how we interact with it really will change.
Improved public services will be a key factor in making people feel better about what they receive in return for their taxes. The current economic climate has given us fresh impetus to tackle reform, and we are beginning to see the introduction of intelligent, radical ideas that could make a real difference.
While there is a clamour for cost-cutting, the temptation for short-term fixes should be resisted in favour of realising the long-term aim of making services better for the end user. This is the prize that should focus our minds. If we get it right, we can change the nature of the state forever – from one that feels remote to one that truly works for us all.