Andrew Haldenby: One million public sector jobs need to go

Andrew Haldenby is Director of the independent think tank Reform and is co-author of its new report, The Front Line, which is published today.

Both Gordon Brown and David Cameron have taken the position that public spending must be cut but that “front line services” must be protected.  The title of the Government’s efficiency paper yesterday made it clear: “Putting the frontline first.”  David Cameron has been equally clear, saying to The Sun (for example) in July:

“I am looking Sun readers in the eye – and we have to cut public spending. I will do it in a fair way. I will protect front line services. I will do the right thing.”

Today’s Reform report, The front line, finds that both main parties are wrong to take this position.  The bulk of the costs of public services are in the front line – and more importantly, so are the bulk of the reasons for their inefficiency and poor and patchy performance.  Reducing the deficit and reforming the public sector means tackling the front line above all.

Politicians tend to talk about public services as if all the costs are in the back office, administration and “management”.  In fact, it is the actual business of public services – the doctors, teachers, police officers, and so on – that are the major costs.  Of the 1.4 million people working in the NHS in England, for example, only 220,000 provide administrative support.  60 per cent of the costs of the police service are uniformed officers.  Since 1999 the Whitehall civil service has grown by 5 per cent compared to a 30 per cent increase in the NHS workforce and the police service.

Our report measures the cost of the public sector workforce at around a third of everything that government spends (taking into account that nearly half of public spending are benefit payments).  It is not credible to say that the deficit can be tackled without including this part of the budget.  We find that if the cost of the public sector workforce is to play its fair part in reducing the deficit, it should fall by around £30 billion, equivalent to around one million of the six million public sector jobs.  Services which have seen the greatest employment growth and the worst productivity falls, such as the NHS, should see the greatest reductions in costs and headcount.

Andrew Haldenby is Director of the independent think tank Reform and is co-author of its new report, The Front Line, which is published today.

Both Gordon Brown and David Cameron have taken the position that public spending must be cut but that “front line services” must be protected.  The title of the Government’s efficiency paper yesterday made it clear: “Putting the frontline first.”  David Cameron has been equally clear, saying to The Sun (for example) in July:

“I am looking Sun readers in the eye – and we have to cut public spending. I will do it in a fair way. I will protect front line services. I will do the right thing.”

Today’s Reform report, The front line, finds that both main parties are wrong to take this position.  The bulk of the costs of public services are in the front line – and more importantly, so are the bulk of the reasons for their inefficiency and poor and patchy performance.  Reducing the deficit and reforming the public sector means tackling the front line above all.

Politicians tend to talk about public services as if all the costs are in the back office, administration and “management”.  In fact, it is the actual business of public services – the doctors, teachers, police officers, and so on – that are the major costs.  Of the 1.4 million people working in the NHS in England, for example, only 220,000 provide administrative support.  60 per cent of the costs of the police service are uniformed officers.  Since 1999 the Whitehall civil service has grown by 5 per cent compared to a 30 per cent increase in the NHS workforce and the police service.

Our report measures the cost of the public sector workforce at around a third of everything that government spends (taking into account that nearly half of public spending are benefit payments).  It is not credible to say that the deficit can be tackled without including this part of the budget.  We find that if the cost of the public sector workforce is to play its fair part in reducing the deficit, it should fall by around £30 billion, equivalent to around one million of the six million public sector jobs.  Services which have seen the greatest employment growth and the worst productivity falls, such as the NHS, should see the greatest reductions in costs and headcount.

If tackling the front line helps to reduce the deficit, it will also help to improve public services themselves.  Measures such as sickness absence and staff morale show that the public sector workforce performs significantly worse than the private sector. It is not too much of an exaggeration to say that the public sector is barely managed.  Public sector “performance management” has meant answering to central targets rather than the real management task of achieving an outcome within a budget.  Financial management is extremely weak. The root cause is a lack of accountability, whether to the users of services, to local electorates or (for senior civil servants) to Ministers. Tackling the deficit means changing the public sector fundamentally, from unmanaged, bureaucratic, monopolistic and secretive, to managed, accountable, competitive (where possible) and transparent.  Again, it is the working practices of the front line workers that have to change most of all.

Both main parties have set out the right rhetoric – to reform public services radically by making them accountable to their users.   In his key policy document of the summer, the Prime Minister called by for “a radical dispersal of power”, so that “in the future, patients and parents must drive the system”.  The Conservatives have repeatedly called for radical reform and, two weeks ago, said that such reform could save £60 billion a year by making the public sector as productive as the private sector.  This is the right way to achieve savings in the public sector; to change the structures of the system that cause inefficiencies, rather than making some temporary “efficiency savings” that leave the reasons for inefficiency unchallenged.

But with the exception of policing, both have fought shy of the actual policies that would deliver it. Both have pledged to hedge around reform of education and in particular health with limits and constraints. Opposition to change in the health service is especially misguided since it is the biggest budget of all and the service most in need of change.

For schools, reform means giving parents real choice of profit-making schools with an arrangement that if schools get costs down, parents will receive some of the benefit.  That would give schools the incentives to open and expand.  But the Government is equivocal on the principle of choice and the Conservatives, while committed to the principle, are nervous about introducing the profit motive that will allow provision to open up.

For health, it means giving patients free choice of the bodies that will buy care on their behalf (in the current system, primary care trusts), with the same kind of arrangement on costs.  That would allow the leaders of primary care trusts to take the tough decisions on getting value for money locally, in particular shifting care out of hospitals and into more local, more convenient settings.  But both parties are becoming ever more strongly opposed to health reform in practice.  Andy Burnham has pledged that the NHS should be the preferred provider of healthcare.  The Conservatives would stop all closures of services, which would put reform into deep freeze (it will be almost impossible to start new services without freeing up resources from within the service).  Their pledge to increase NHS spending no matter what is already undermining those NHS managers who want to explain to their staff that this is a new world where cost savings are non-negotiable.

Francis Maude’s proposals show that the Conservatives have grasped the principle of accountability for the civil service.  Above all, this means giving Ministers power of appointment over permanent secretaries and an end to the job for life culture through the introduction of fixed term, transparent contracts tied to performance.  The same principle of accountability needs to apply throughout the public sector.

In our research we found that good managers within the public sector are ready for reform.  They take for granted that costs can be reduced by at least 20 per cent without reducing the quality of service.  But they need a new kind of political leadership that explains to the electorate that services are going to change, budgets shrink and headcounts fall.  Ministers and their Shadows are not yet making that case. 

If politicians will the ends, they have to will the means.  Shrinking the deficit and reforming the public sector means real change without any political constraints.  Radical change will not happen if politicians see their role as the defenders of the status quo.