Greg Clark MP: This government is decentralising the public sector for the first time in more than a century
Greg Clark is the Financial Secretary to the Treasury and MP for Tunbridge Wells. Most Tuesdays he will be writing this new 'Letter from a Treasury Minister' for ConservativeHome readers. Follow Greg on Twitter.
Whitehall has a long history of turf wars. Most vicious of all was the struggle between Tony Blair and Gordon Brown, but political memoirs are full of other tales of territorial conflict. The details differ from case to case, but the general pattern resembles a fight between Larry and Freya, the Downing Street cats.
Undaunted by the experience of previous governments, David Cameron took office determined that his administration should work along more cooperative lines. For instance, while I was still in my previous ministerial job – at the Department of Communities and Local Government – he asked me to prepare a personal report on the progress made by thirteen Government departments (the twelve domestic "spending departments" plus the Cabinet Office) towards the key Coalition goal of decentralising power. Given the criss-crossing of departmental boundaries that would be required, it was an unusual position for a non-Treasury minister to be in. Nevertheless the work was done and the report, published recently, can be read here.
Some departments have made more progress than others. None of them get full marks, but two get a four star rating ("well on the way") while the remainder get either two stars ("getting ready") or three stars ("in the pipeline").
That might seem a rather critical view of a Government that is committed to the principle of localism – but, in fact, it recognises a turning of the tide. For a century or more, successive governments have centralised power in Whitehall and Westminster. Margaret Thatcher, of course, rolled back the frontiers of the state in the great privatisations of the 1980s. However, in terms of the public sector as we think of it today, it is this Government that is undoing decades of centralisation – as documented in the progress report.
But why now? How does localism fit in with our number one priority, which is economic recovery?
To begin with, let’s remember that thirteen years of Labour not only wrecked our public finances, they were also marked by an especially obsessive attempt to micromanage the public sector. These two facts are not unrelated. The Blair and Brown administrations represented a final, desperate attempt to save the post-war model of bureaucratic government. Despite record public spending, they failed. Precious resources were wasted in pursuit of top-down targets instead of much-needed reforms that must now be pursued in the most challenging of financial circumstances.
As well as providing immediate savings, our determination to dismantle Labour’s bureaucratic legacy removes a key obstacle to long-overdue change.
Last week, I wrote that the Government is currently on track to haul back the State’s share of the economy from the ruinous 47.7 per cent of national income it reached under Labour to 39.5 per cent within five years. However, this much lower proportion still represents a substantial chunk of the economy. Therefore, the effectiveness with which these resources are used will have a major impact on our long-term prosperity.
For instance, spending on welfare can either provide a bridge to a productive role in the workforce, or it can trap people in worklessness. Spending on education can instill the knowledge, skills and discipline that the workers of the future need to succeed, or it can entrench low expectations. In short, the public sector can make its own contribution to economic growth, or it can hold it back.
And so the economic relevance of localism is this: A decentralised public sector is one that allows choice and innovation, and thus competition, improvement and better value for money. The ethos, incentives and ownership may be different from the private sector, but diversity, experimentation and responsiveness as just as important in making progress. The alternative to decentralisation is monopoly control, a suffocating blanket of conformity that is as damaging to today’s public sector as it was for the nationalised industries of the past.
For this reason it is vital that progress on localism continues. As I stated in the report, “decentralisation is not what the Government is doing this year, but what we are doing every year until the job is done.” Certainly, that’s why I’ve taken my responsibility for the City Deals programme with me into the Treasury – and I’ll have more to say about that in future letters.