15 June 2009

CBI Public Services Conference

The new approach to public service reform by Rt Hon Liam Byrne MP

1. As public spending growth slows, we will need a decade of public service reform and innovation

I hope this is not going to ruin my left-wing credentials with this audience, if I confess that I am possibly – probably - the only Labour MP who can claim to have helped found the CBI’s Public Service’s Group

It is good of you to invite me back.

It is a good time to come back and speak about reform of public services.

Not simply because the Prime Minister and the Chancellor have asked me to lead on public service reform policy from the Treasury.

But because this debate about how we improve our public services in new times, for new times, is now amongst the most important in public life.

This morning I want to set out a very simple argument:

If we make the right decisions about public finance, we can set a safe course back to balance

But the decade ahead will be very different to the decade that’s passed for three very simple reasons:

We can grow - not cut - day to day spending if we make some tough choices now – but we can’t grow at the same pace as the past;
The challenges we face in the years to come are new – but we can face them with confidence because of the foundations we’ve built;
The possibilities on offer to deliver services differently have multiplied beyond anything we saw or knew in the past – but we need to act – not sit back - to seize those chances.

For all these reasons – and more – we now know that the model, the methods, the modus operandi for change over the last 20 years has now almost run its course.

A fresh approach is needed, based on an ambitious give-away of power, and today I want to set out its rationale.

But let me start this debate about power, with some words about money.

We believe that if we take the right choices – hard choices – we can grow day to day spending and halve the deficit over the next 5 years.

This is quite simply, the safest pathway back to balance.

Globally, we face the roughest storm for some 80 years.

Output in the UK has fallen over the last three quarters by 4.1% - and by 3.3% in the US, 5.0% in Italy, 6.9% in Germany, and 9.1% in Japan.

That is why we have taken such dramatic action, praised by the IMF, to invest, not cut, our way out of recession.

The longer and harder the recession bites, the deeper the debts we must repay.

That’s the case for investing now.

But investing now, must come with candour about the pay-back.

That’s why Alistair Darling said in the Budget, that if we take tough choices now – on tax, on efficiency – we can grow day to spending until 2014, and halve the deficit.

If we make the right choices now, then Britain could have an extraordinary future ahead.

We can capture a good slice of the 1 billion skilled jobs that will be created worldwide.

And through better public services we can open those new jobs, those new opportunities, those new lives, to anyone from any background, with the talent and aptitude to work hard.

And if we get that right, we will have built not only a richer economy, but a fairer society and a stronger country.

2. The model of reform in the last two decades was right for its time, but has reached its limits

Now, the old ways of doing things are always more comfortable. There isn’t one of us here today who hasn’t one day thought, ‘why do we have to change this again?’ ‘Why can’t we leave it?’ or ‘go back to how we used to do it?’

Well, for the last 20 years we had a model of public service reform that for some in politics and public life is familiar and comfortable and well rehearsed.

It was based on transparency, choice and better public management.

Transparency to hold deliverers of public services to account, through the Audit Commission, for example;
Management to provide strategic direction and clear lines reporting;
And choice for citizens, e.g. through use of private and third sector providers.

This was the model we married with record investment to transform our public services from the sorry state we inherited to the steady state we have today:

Total spending on NHS has more than doubled in real terms to £89 billion;
Spending on education is 60% higher;
Transport spending up by over 70%;

And that money, allied to reform, bought some extraordinary results:

In 1997, more than 300,000 people waited over 6 months for NHS treatment. By 2007, it was less than 500;
Crime has reduced by 35% since 1995, bringing the chances of being a victim of crime to their lowest recorded level;
For the first time, over 64% of 15 year olds now achieve five or more good GCSEs or equivalent, up from 45% in 1997.

Many of you here today helped deliver those results and you should look on them with the most extraordinary pride

But like any thing of beauty there are flaws.

Sometimes, services were one-size-fits-all, not tailored closely enough to the individual and their ambitions.

Sometimes, we created “choices” without delivering real “control”. For example, people can choose the hospital but not how they receive treatment.

And sometimes I think it fair to say, we didn’t carry 100% of frontline staff with us, and we didn’t let flourish 100% of the innovation that lives on every frontline – as change was sometimes ordered, designed, imposed, monitored, tested and reported from the top down.

3. A new model of reform will be needed – one that meets the realities of the next decade

Put those old limits together with some new realities and you can’t help but conclude, we need a new model for change:

The demographics of this country are changing more rapidly than for a long time;
Identities are shifting – new family structures, new communities and a richer melting pot of cultural identities will require us to see differences as well as commonalities;
Demands are diverse as 21st century life lets each of us become more individual than ever before;
New technology connects us to communities that are doing more and more for themselves;
Together this means that each of us demands more – over half of MORI respondents strongly agree that public services should fit around their changing lives.

And this, just at the time when the pace of public spending growth begins to slow.

The conclusion?

Slower growth in funding demands bigger ambitions for change.

Not led by Whitehall, but led by the people we serve, and the people who serve them.

4. A vision of powerful people will be right at the heart of this reform

This must be the starting point for the decade ahead.

Powerful people; in charge of change; in their communities; in their care; in their self-development and the unlocking of their future.

On one level the case is philosophical.

Social justice means capability and power for everyone, not just those with the sharpest elbows or loudest voices.

As Amartya Sen puts it:

“Responsible adults must be in charge of their own well-being; it is for them to decide how to use their capabilities.

But the capabilities that a person does actually have (and not merely theoretically enjoys) depend on the nature of social arrangements, which can be crucial for individual freedoms.

And there the state and the society cannot escape responsibility”

But, for most, the case for powerful people is simply practical and good for public spending control.

It tackles public service pressures – not simply the grand projects.

It shifts us into prevention - not the costly business of clearing up after the event.

It fuses services together – not organising them apart.

We see it already:

In self-care and wellness management in health, for example in chronic conditions like diabetes;
We see it in family education;
We see it in self-directed online learning in tertiary education.

This is in effect a hand-over of power, a power shift.

Where once the motive force for change was Whitehall, with plans and targets and stock-takes.

In the future the motive force must be people:

With entitlement to quality, core services responsive to their needs;
clarity about what they can and cannot expect from services;
more direct control over their services, for example creating a system of personal budgets for health and care provision;
better information about their local services and how they are performing;
and easier and better ways to communicate with those delivering public services.

This transfer of power won’t be an overnight coup.

But in the months ahead, we have to debate how to stage the hand-over, and we will set out more in the days and weeks to come.

5. This is an approach which offers many rewards: but it will force us all to reconsider how we do business

Powerful people is a good in itself.

But in today’s environment, it is also a vital lever in stretching every pound-note of public spending as far as we possibly can.

Because when public servants are driven by citizen’s entitlements – not Whitehall’s targets – they are more free to innovate in the way they serve the public.

That is the innovation that I predict will be the hallmark of public service reform in the decade ahead.

Innovation to respond more flexibly to users needs.

Innovation to identify opportunities to redesign provision.

Innovation to join up to provide new mixes of services in different areas to different people.

We know already that it can work.

The best healthcare systems such as Kaiser in California delivering better outcomes and reducing cost through self-care in chronic conditions;
Early evaluation from individual budgets in social care showing high levels of satisfaction and good value for money;
Nurse-family partnerships in the US reducing crime rates by nearly 20%.

This is the kind of change, that once exceptional, now must become the mainstream.

So, as the new Chief Secretary, the Prime Minister and the Chancellor have asked me to bring together the public sector reform teams from the Cabinet Office and the Treasury to create a centre better equipped to drive faster change.

Yesterday, I asked every department to appoint their lead ministers for delivering value for money.

Their first step will be to draw up the contrasts between how efficiently their departments work compared to the best in class.

I remain determined to see the third sector boost its role in public services, so I will bring together ministers to review blockers to progress

And to ensure Whitehall sets the pace, we will now:

Signal the vitality of innovation by marking departments on it, in their capability reviews from the summer onwards;
Support civil servants in understanding new ways of doing business, with an overhaul of the SCS training and promotion;
Showcase the best innovation we find through our Innovators Council established to fast-track good ideas for change from the frontline straight to the top-table.

6. Conclusion

So, this is my starting point as the new Chief Secretary to the Treasury.

Eleven days into the job is not long, but I wanted you know immediately where I stood- how I see this debate.

Now is the time for us to set out together our vision for public services and how they can help Britain reach its potential.

It can be a richer and fairer place. And public services are the key to delivering that.

Crucially, it’s time to step up together to turn the plans we have in hand into concrete change.

Thank you.