By Neil O'Brien
The little groups of forlorn-looking smokers you normally see outside Government buildings have been replaced over the last few days by gangs of official pickets in fluorescent jackets. The PCS union has been striking in protest at government plans to reform the generous redundancy payouts regime which currently applies in the civil service. As a result, court hearings have been postponed, job centres have been operating a skeleton service and 2,000 driving tests were cancelled. People have found it difficult to get their passports or benefits.
This is just a little taster of things to come.
Whoever wins the election faces a really tough slog, and many battles with the public sector unions. Labour have set out plans for tax rises and spending cuts worth £77 billion. Oddly enough, they still don’t want to say where the axe will fall.
Even so, the Treasury grimly forecasts that our debts will rise to £1.5 trillion - more than twice the upper ceiling level for debt which Gordon Brown promised to remain below. And in reality a bigger tightening is needed to stop our debt from soaring ever upwards, because the Treasury forecasts assume that we will immediately bounce back into a wonderful economic boom. But, as the Institute for Fiscal Studies has pointed out, there are good reasons to think growth will be weak for years - unless something big changes.
As we point out today in a new book - The Renewal of Government - getting spending back under control will not be enough to solve our problems. The next government must unashamedly go for growth if we are going to get out of this mess.
On the supply side, we must staunch the flow of business regulation, make it easier and cheaper to build, and reduce the huge cost of energy and climate policies. Government must encourage house building and business development. We need to ensure that local authorities directly benefit from development, so that they have a powerful incentive to grant planning permission. We should consider innovative answers to the problem of housing in the South East, including docklands style development zones in areas people want to live. Government must also facilitate investment in our creaking energy and transport infrastructure, services that are the life blood of any healthy economy.
Welfare reform could make a big contribution to our economic recovery. The benefits bill is a huge part of Government spending: over 100 billion, even excluding pensions. But the real cost is in allowing nearly six million people of working age to rot on benefits.
And the public sector has an important part to play too. A fifth of all jobs are in the public sector, but their productive abilities are currently smothered by layer after layer of choking restrictions. If we unshackle them, public sector performance could soar. But if we want that to happen, there are seven big things we need to do:
We need to phase out national pay bargaining, as Sweden already has. It means the public sector pays too little in expensive areas and too much in cheaper ones. This wastes resources and leads to staff shortages in expensive areas.
We should end automatic annual promotion up national salary scales. Instead pay and promotion should be tied to performance and should be at the discretion of local managers and should reward effort.
We must make it possible to remove under-performing workers and teams that are no longer needed in the public sector. According to the Cabinet Office, “There were fewer than 100 compulsory redundancies between 2005 and 2008”. That comes to 25 redundancies a year out of a total of 525,000 civil servants. That’s no surprise given the rigid HR rules that apply and the high cost of paying people to leave (up to £180,000 per person at the Foreign Office).
We should stop loading secondary objectives onto public services. We should strip back flawed public sector practices like “equal pay audits” which are arbitrary and have cost public services billions, leading to services being cut and assets sold.
As the strikes show, we need to improve industrial relations in the public services. We should review how national strike action is triggered, and abolish the Code of Practice on workforce matters in public sector service contracts, which buttresses the monopoly position of the public sector unions by limiting competition from the private sector.
We need to reform public sector pensions so that they do not create perverse incentives to remain in the public sector, or an obstacle to competition from alternative providers. As a first step, the Government should be prohibited from running up vast unfunded pension liabilities.
Lastly but not leastly, we should review the growth of management positions in the public sector. The National Audit Office commissioned a poll of 300 former civil servants, asking why they had opted to leave their jobs. “Bureaucracy and paperwork” – was cited by four out of five as the main reason for leaving. And having top heavy management generates more bureaucracy. For example the number of managers and senior managers in the NHS increased by 76% between 1998 and 2008, compared with a 46% rise in total doctors and just 26% in total qualified nursing staff.
The TUC have already a go at the book, arguing that “public services are fundamentally different from private sector activities.” But why should employment conditions be so radically different between the public and private sectors? We should remember that public services exist to serve the public - not their employees.
The reforms we outline will allow the public sector to do more for less money, protect services, and contribute to our economic recovery. While bloated government got us into the fiscal crisis, the renewal of government could help us get out.