Andrew Haldenby: Michael Gove and the teaching unions – allies in preserving ring-fencing, which should go

Andrew Haldenby is Director of the independent think tank Reform.  Its new research “Must do better” is available at www.reform.co.uk.  Follow Reform on Twitter.

A couple of days ago, Michael Gove took a teaching union to task for its opposition to reform.  In one respect, however, he and the NAHT are on the same side, which may give him pause to reflect.  Both are fighting hard to preserve the ring-fence around the schools budget in the spending review due to be published on 26 June.  In fact, there are several reasons why the schools ring-fence is a priority for removal.

The most important is the simple question of what Ministers can actually do to promote reform. Sir Ken Knight nailed it in his review of fire and rescue services, published last Friday: “I was struck in my conversations that the financial pressures of recent years seem to have been the driving force behind many of the changes and innovation I have seen.”  At the risk of labouring the point, Danny Alexander said it particularly well last month: “Of course these are really difficult decisions …. But you can use the process to drive some really good changes in the way the public sector works.”  One of the great lessons of this Parliament is that the police, other areas of criminal justice, defence and local government are innovating and rethinking because of their cuts.  Schools and the NHS are years behind.

I have no doubt that Michael Gove wants head teachers to think extremely hard about how to focus their resources on improving the quality of teaching.  In practice, that means reducing the priority of spending on teaching assistants and smaller class sizes (except for the youngest children).  Removing the ring-fence is one of the best ways that he has to achieve that.  It would accelerate his reform programme rather than hinder it.

The Department for Education has actually made this case itself.  In a document published in 2011, the Department told schools that, “what matters isn’t the amount of money spent per pupil, but how that money is spent. So we should all be focusing on improving value for money in schools’ spending”.  That is 100 per cent right but it has zero force in the context of a ring-fenced budget.

Andrew Haldenby: Yes, Ministers need to reform Whitehall. But they're going the wrong way about it.

Andrew Haldenby is Director of Reform.  Follow Reform on Twitter. “Whitehall reform: the view from the inside” is available at www.reform.co.uk

Whitehall reform was not on the agenda of the Conservative Party in Opposition.  When Francis Maude became Minister for the Cabinet Office in 2010, he actually said that he wanted to defend Whitehall, for example by banning the use of consultants who were taking the most interesting jobs away from officials.  At late as March last year, David Cameron mounted a firm defence of the status quo when he discussed the issue with the Liaison Committee of the House of Commons.

Now the mood has changed entirely.  Francis Maude has been transformed into an ardent advocate of change.  Ministers are putting a great deal pressure on Whitehall to update itself, under the banner of the Civil Service Reform Plan published last June.

45 research interviews published today by the think tank Reform shine some light on the reasons for the change of heart.  Ministers, Shadow Ministers, Special Advisers, officials and Non-Executive Directors of government departments all identify two basic causes for the inadequate performance of Whitehall departments.  The first is a style of employment and career planning which rotates people between roles too frequently. Here is a quote from a Coalition Minister:

“There is a difficulty in tying success and failure to individual responsibility within the organisation. This is quite unlike successful private sector organisations where people are given a project and unless they are clearly cocking up they’re allowed to see it through to the end and their future career doesn’t depend on this. I had examples of projects that were going quite badly wrong and needed to be put right and I’d get a team in and they’d say, ‘Oh Minister, I’ve only just taken over a month ago and the person who was responsible has moved on to do x,’ and that isn’t very satisfactory because it makes it difficult to objectively judge the capacity of the Civil Service to deliver.”

 

Andrew Haldenby: Grayling's prisons U-turn is biggest retreat so far on public service reform policy

Andrew Haldenby is the Director of the pro-market think tank Reform. Follow Reform on Twitter.

Earlier this year, the Ministry of Justice published data on prison performance for the first time.  It showed that private prisons were outperforming the public sector in regards to drug treatment of prisoners, numbers of suicides and staff sickness absence amongst other things.

In May 2012, two Cambridge academics revealed in the largest survey of its kind that public sector prison workers themselves recognised the benefits of competition with the private sector.  One senior manager said: “I think [privatisation has] been really helpful in raising our game, and it’s been a wake-up call in terms of suddenly realising that … this may not be a job for life, that we’ve actually got to deliver and if we don’t there’s people over there who will do it instead, and I think that’s been generally good.”

This superior performance fully justified the Ministry’s support for competition between prisons, continuing to allow private prisons to enter the market as has been the case for twenty years.  Only last month the Ministry told the Justice Select Committee that it is “committed to further competition in offender services to drive down the cost of prisons and other offender services and to maximise our ability to reduce re-offending.”  In 2011, in his competition framework for prisons and other offender services, Kenneth Clarke had given the clearest commitment of any Minister to competition in public services.

And this approach was of course consistent with the Government’s overall wish to open up public services.  In its key policy statement, the Open Public Services White Paper (July 2011), it said that it would “switch the default” for services like prisons “from one where the state provides the service itself to one where the state commissions the service from a range of diverse providers”.   This would bring a “host of benefits”.

Andrew Haldenby: A productive public sector poses a challenge to the unions - and the Government

Andrew Haldenby is the Director of the pro-market think tank Reform. Its report, "Reformers and wreckers" is available at www.reform.co.uk.

Today's TUC Congress is important because of the barrier that the organisation represents to the Government's public sector reform agenda. This week it will set out its opposition to free schools, academies, reforms to public sector pensions and any variation at all to a publicly-financed, publicly-provided NHS.

The TUC argues that any local management of the workforce means worse services (explaining the opposition to free schools), and that any cut in inputs (headcount, wages, pensions) means worse services. But in a report published on Friday, the Reform think tank published eight case studies of successful public service reform which show the opposite is the case.

It highlighted Denbigh High School in Luton at which a visionary headteacher transformed results by introducing her own development programme for the teachers there. It described the Merseyside Fire and Rescue Service which reduced fires in Merseyside by a half, while reducing the number of firefighters by 40 per cent, because real fire safety means fire prevention, which does not require traditional numbers of firefighters in traditional stations. It described hospitals in India, visited by Reform staff this summer, which have individually taken lessons from leading private sector companies, and which deliver safer care than the NHS as a result.

Andrew Haldenby: Cameron is in danger of letting the NHS go backwards

Andrew Haldenby is the director of Reform.

When David Cameron set out his five principles of reform this week, he forgot one: choice and competition. The Government thinks it is being clever about language - that they can still do choice and competition without talking about it. But it cannot do so while opposing them, and while putting into place policy levers that prevent them from happening.  As the Blairite former Minister Lord Warner stated at Reform's conference on global health innovation on Wednesday, “if we weaken on competition, all will be lost”.

First, the Government has, remarkably, decided to undermine the purchaser-provider split introduced by a Conservative Government in 1991.  The original Health and Social Care Bill preserved that split.  GP-led commissioners would purchase care from providers (typically hospitals) which were entirely separate.  On Tuesday, the Prime Minister changed that and said that each commissioner’s board would now include providers, in the form of at least one hospital doctor and nurse.  At a stroke, the bodies in charge of the NHS budget will become partly interested in defending existing provision rather than getting best value for the money.

Second, the Government has weakened competition by changing the role of Monitor (the key regulator of NHS provision).  The original Health and Social Care Bill gave Monitor the duty of “promoting competition” in order to improve health services.  This followed the example of other successful health systems based on competition.  In 2010, for example, Reform held a seminar with Wynand van de Ven, one of the foremost Dutch academics who was instrumental in designing that country's competitive health system. He said: "It is so exciting that you are going to have an economic regulator: that is the right way to manage a market to improve quality for patients and drive down costs". (The Netherlands has four regulators, each with clearly defined roles: a Competition Authority, a Quality Authority, a Solvency Authority and a Consumer Protection Authority.)

Andrew Haldenby: Building the Big Society

Andrew Haldenby is the Director of Reform

Yesterday Reform brought together 170 people to discuss "Building the Big Society" (twitter feed #reformbigsoc).  The event aimed to shed light on this powerful idea and to understand better how to achieve it in practice.  Oliver Letwin (Minister for Government Policy), Bernard Jenkin (Chair of the Public Administration Select Committee, which has just launched an inquiry into the Big Society), Jesse Norman (MP for Hereford and author of "The Big Society"), and Roberta Blackman-Wood (Shadow Minister for Civil Society) were the Parliamentary speakers.

What I felt we learnt was:

• Local Government is at the heart of the Government’s thinking.  Oliver Letwin described the Big Society in three examples: the shift in the Localism Bill to give councils much wider powers to act; the decentralisation of planning decisions to lower tiers of local government; and a village shop in his constituency manned by volunteers.

• The Government believes in liberalising public services and paying for results in order to achieve what Oliver Letwin called an “open texture”. But the Government has to decide whether the Big Society means a competition in public service delivery or a greater use of charitable providers.  What has happened by default is that the Big Society has become seen as a vehicle for greater use of charities, and as a result, every charity that loses any government funding for any reason is seen as a blow against the idea.  Both Patrick Butler (of the Guardian) and Matthew Taylor (CEO of the RSA) said that the phrase “Big Society” had become “toxic”, partly for this reason.  But if the Big Society means greater competition, as it should, then it will be judged on the outcomes of public services rather than the size of any particular sector.

• For-profit companies are already delivering the Big Society.  Clive Barton, Corporate Affairs Director of Serco, explained that the company delivers public services with a supply chain including charities and SMEs.  Andrew Wates (Director) said that Wates Group organises volunteering for all of their staff and has started to commission some services from social enterprises.  Ali Parsa (CEO) argued the advantages of employee-owned organisations such as his own, Circle, in terms of both ethics and efficiency. Clifford Chance, who hosted the conference at their offices in Canary Wharf, do a significant amount of pro bono legal work and also encourage staff to volunteer in local community projects.

• The Big Society needs finance. We heard about some exciting innovations – from Social Finance, Bridges Ventures and more – particularly in finding market solutions to social problems. The difficulty is that in relative terms the sums of money for financing social projects are dwarfed by those in mainstream financial services.  A programme for Big Society that brought in new entrants with credible business plans would draw the attention of billions, not millions, from the capital markets.

• The Big Society means a smarter government which commissions services effectively, termed a “Bold Government” by Rob Brown of PA Consulting. He said that government needs to work harder to create markets rather than providing services.

Andrew Haldenby: The number of people who work in the NHS is not a measure of quality

Andrew Haldenby is Director of the independent think tank Reform.

Today’s announcement by the new False Economy campaign should give heart to supporters of public service reform.  The campaign has found evidence of 50,000 NHS job losses over the next five years.  Reform’s previous research has shown that public sector job numbers must fall, by around a sixth, if the deficit in the public finances is to be eliminated.  That would mean a reduction in NHS staff numbers from 1.4 million to approaching 1.1 million.  If public workers accept lower wages, the necessary job losses will be reduced.
 
The underlying argument of the campaign is that there must be a certain level of public sector workforce, no matter the cost, and there must be the same working arrangements, no matter the need for improvement.  This makes the false assumption that the number of people that do a job is the measure of quality.  Instead NHS managers should focus on higher quality public services based on more productive ways of working.  For this reason the financial pressures make this the best chance in a generation to change NHS services.
 
This is clearly the argument that the Government should make.  It would be consistent with the brave call for reform that David Cameron made on Monday and indeed with the whole thrust of the Spending Review.  But the Government is paralysed by its completely unrealistic position that it can reduce public spending without affecting front line services.  In fact the great, great majority of the costs of police forces are in the officers, and the doctors in the NHS, and so on.  Of the 1.4 million people working in the NHS, only 236,000 are administrative support, and those people are on much, much lower salaries than doctors.

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.

Andrew Haldenby: Reforming quangos will strengthen the role of Parliament and help to restore MPs' credibility

Andrew Haldenby is Director of the independent think tank Reform.

There must be a general election coming.  Every time a politician mentions a good idea, their opponents leap onto exactly the same square of territory.  Invitations for today’s speech by David Cameron for Reform were sent out last Thursday.  On Friday, Liam Byrne, the reforming Labour Minister, briefed the Times that quangos were in his sights – indeed, he had sent letters to his colleagues “demanding an urgent review of all quangos to assess which can be abolished, merged with other bodies or taken back directly into their ministries”.

Quangos might seem an unusual choice of target.  After all they spend only 5% of the whole government budget (£35 billion out of £675 billion according to the Cabinet Office definition, which is itself arguable).   Given the fiscal crisis, why not target the big ticket items instead – benefits (over £150 billion), the NHS (£110 billion), education (approaching £100 billion)?

But the thing about quangos is that they show the problems in UK government in their purest form.  Taking on quangos means setting out the principles that will underpin the wider agenda of reform of government.

The most important principle is accountability, highlighted by David Cameron in a speech last week.  Reform described the lack of accountability of the civil service earlier this year (and advocated giving Ministers powers to appoint senior civil servants, making them democratically accountable).  Quangos are even less accountable than Whitehall. 

Andrew Haldenby: Market forces will make us a healthier nation

Andrew Haldenby is director of the think-tank Reform and co-author of Fit for Recovery, a report it is publishing today which concludes that since a healthy society will be an essential component of a swift economic recovery, both Government and the private sector must tackle public health issues. You can download the report here.

The task of improving the nation’s health has almost been forgotten in the last six months, submerged under the daily headlines of economic and financial woe.  But a new Reform report argues that better health is already part of the story of economic recovery, and has lessons both for the NHS and for the wider effort to improve the health of the nation.

Quietly, businesses are driving what amounts to a revolution in UK healthcare.  Both large and small employers are helping their employees exercise more, eat better and stay mentally fit.  They are providing services that are still years away from standard NHS practice, such as free health checks on demand and immediate treatment at the first signs of poor mental health.

They are doing so for many reasons but not least for their bottom lines.  Better health means greater productivity via increased revenues, reduced costs and lower absence.  Without fanfare, market forces are driving a major part of society towards better health.

There are a number of positive ideas here.  The first is immediate – better health will help the recovery because greater output from experienced staff could be the difference between a firm’s success and failure.  The second is longer term – that efforts by business will open up a new flank in the nation’s health effort, complementary to efforts by individuals and government, and without any drain on the public finances.

Andrew Haldenby: Civil service reform should be a first term issue

Andrew Haldenby is director of the think-tank Reform and co-author of Fit for Purpose, its new report on civil service reform, which is being published today.

Here are two visions of 2012 which I hope will provoke you to read the report and decide just how important Whitehall reform is for the next Government – Conservative, renewed Labour, or indeed coalition.

The measures in the “2010 Civil Service Reform Act” described below are exactly those put forward in the Reform report today.  This is not to say that Whitehall alone can solve the UK’s social and economic problems (far from it).  But it is to say that any successful reforming Government will need to tackle Whitehall reform head-on and first up.

****

It is 2012.  The Conservative Party has won the 2010 election with a majority of 16.  As promised, education reform is the priority and the great hope of the new government.  ConservativeHome readers are pinning their hopes on the creation of a wave of new schools and measures to reintroduce rigour and independence to qualifications.

But over the last six months it has become clear that reform is running into the sand.  The reason is the obstruction of the newly renamed Department for Education and Standards.  In meeting after meeting, senior officials have presented policy solutions that reinforce the status quo rather than offer radical change.

Andrew Haldenby: Fiscal stimulus will prolong the recession

Andrew Haldenby is director of the think-tank Reform, which today publishes a report, The hole we are in and how to get out of it, presenting new evidence that a fiscal stimulus – whether tax reductions or spending increases – will prolong the recession. This, he says, is worrying since the Government is expected to announce just such a package in the Pre-Budget Report next week.

The Chancellor wants to introduce a stimulus to give the electorate the confidence to increase consumption.  But the overwhelming academic evidence is that what actually restores confidence is a sense that governments have regained control of their finances.  This is why many economies – including the UK in the early 1980s – had the paradoxical experience of a return to growth after tax increases.

This is also why fiscal stimuli in the form of crisis tax cuts don’t work.  Either the electorate will discount them because they know the money has to be paid back in higher taxes.  Or – this is the view of the academic authority, Stephen Ceccheti – governments will avoid the higher taxes and the public finances will get even further out of balance.

Reform’s Consultant Director, Nick Bosanquet, points out that the Government has misread Keynes.  Keynes actually focused on confidence; a true Keynesian position would be about measures to raise confidence and demand in the private sector.  Instead we have what he calls “Toxic Keynesianism” – the view that what we need is big government spending programmes which will beat unemployment and further increase the role of the state.

Our report is also about honesty.  The Prime Minister and the Chancellor have said that the public finances can withstand a burst of extra borrowing.  In fact the UK has the fourth highest structural budget deficit in the OECD.  Including the Government’s long term spending commitments on pensions and education, the deficit stands at 6.6 per cent of GDP.  Without changes in spending, that means eventual tax rises of £100 billion, or £4,000 per household, which would wipe out over a quarter of families’ disposable income.

Please don’t believe the Treasury’s estimates on borrowing in Monday’s report.  In the last five years, it has underestimated the true level of borrowing by a total of £121 billion.

A Government worth having: Health policy

In the latest of our 'A Government Worth Having' series we look at health policy.  Top-up payments, patients being able to choose their healthcare commissioner and strong Matron-like figures are just three of the ideas suggested below. We've previously looked at new directions on economic and foreign policy as part of this series.

Simon Chapman: "The next Conservative government will have to face up to the overwhelming pressures that the NHS faces: demographics, dementia, obesity, technological and treatment advances, and rising expectations. These are already upon us and will only increase.  We will spend over £100 million on the NHS next year. That is highly political. At the moment there is no direct democratic accountability. An unelected NHS Board won’t make that better.  Tax funds are already insufficient to meet demand, although there is undoubtedly room for more effective spending. Decisions about priorities and rationing should be brought as close as possible to the people affected by them. Personal budgets (vouchers) and locally elected health boards are the levers. Co-payments are also inevitable.  Health reform must become a first term priority. The public are ready for honesty and candour – certainly more eager than the current Westminster consensus is prepared to allow.  We need to close the gap between health and social care. Joint commissioning and pooling budgets is one way forward. Bringing both under the strategic responsibility of one department is another: how about changing Andrew Lansley’s job title to Shadow Secretary of State for Health and Social Care? Before anyone shouts, I know that Local Authorities are responsible for social care, but they could be made accountable to a different Secretary of State.  Finally, if we want to improve confidence in the NHS, we need to make end of life care more of a priority. Over half of all deaths occur in NHS hospitals, and over half of all complaints about NHS hospitals concern dying and bereavement care. Hospices are often superb, but they cannot provide a complete answer."

Nadine Dorries MP: "I trained in an NHS which was run with consideration and discipline. The first concern of any nurse was to reassure her patient. To be aware that a hospital was a scary place, that we knew most things weren’t going to hurt and would probably be ok, but that the patient didn’t.  As a night nurse I spent many an hour sat on the edge of the bed of a sleepless worried patient, with tea and toast, listening to the dark worries keeping my patient awake. How long will I be off work? Will this affect my life?  I worked on wards which had dedicated ward cleaners and Auxiliary nurses who took pride in their wards and were in silent competition with the cleaner on every other ward in the hospital.  Nurses never wore their uniform outside of the hospital. A plastic apron was donned every time you treated a patient. Hand washing was automatic, cleanliness imbued throughout every aspect of the ward day. Visitors limited in order that a ward could be properly cleaned. There was no MRSA and poorly patients got the rest they needed.  Matron ruled, Doctors trembled, no nurse failed to give anything but her best. Everyone was accountable via a very clear line of command. Everyone knew who was responsible for what and when.  The NHS of today is driven by targets and process, not patients. Sometimes it feels as though patients are an inconvenience, lying in the way of clipboards and men in suits.  We need to make healthcare delivery totally patient focused. By remembering patients are there because they are vulnerable and ill and by giving patients respect and putting them at the top of the NHS agenda, by removing business suits and replacing with caring  uniforms, we may just begin to see a shift of priorities."

Andrew Haldenby, Director of Reform: "The issue of top-up payments for NHS care is waiting to be grasped by Government or Opposition.  This year a series of cases have proved that the existing rules are a classic example of how bureaucratic inflexibility can become cruelty.  Currently Norman Lamb is the only frontbencher spokesman who has argued for change bravely and positively rather than reluctantly.  A majority of patients and doctors are in favour.  Allowing patients to top up would be directly in line with the modern Conservative ideas of social responsibility and the post-bureaucratic age."

Dr Rachel Joyce, our PPC for Harrow West and a former PCT Director: "The NHS internal market failed because the “commissioner” is a poor proxy for the patient. Bureaucratic rules and targets make meaningful clinical and patient involvement in commissioning impossible, leaving managers to make decisions on what services are provided for patients.   “Successful commissioning” in the NHS is judged by performance against targets and rules. Success, in contrast, as judged by a patient is on good clinical outcomes and convenience.  Therefore much of the increase in health spending has been wasted on the administration of targets, resulting in high comparative costs but poor outcomes.  Patients should be able to choose who commissions their care. If GPs could choose their commissioning organisation, then patients could choose their GP practice (and therefore their commissioner) on the basis of outcomes. An independent NHS Board could be responsible for monitoring outcomes and quality via agreed indicators.  Patient choice of commissioner would drive down unnecessary bureaucracy and inefficient care, and would enable the NHS to provide comprehensive care that is not only efficient, but has world-class outcomes. "

Andrew Haldenby and Lucy Parsons: Higher spending does not equal better services

Andrew Haldenby is Reform’s Director and Lucy Parsons is Reform’s Economics Research Officer.

What should we make of Gordon Brown’s call this morning for a new “stage” in the Government’s policy on public services reform?  Writing in the Financial Times, the Prime Minister identifies two new goals: “no tolerance of under-performance” and “empowering the users of services themselves”.  He ends by repeating the call for “investment and reform” that has underpinned the Government’s policy since the first Comprehensive Spending Review in 1998.

We should first be pleased that the Government is committed to reform.  The message from today’s Reform report – A lost decade: Counting the opportunity cost of public spending 1999-2008 – is that such a commitment is essential.  So many social trends point towards public services with more individual and less government input: greater consumerism, prosperity, educational attainment, connectivity, for example.  At the same time greater globalisation will make it much harder for governments to solve problems with higher taxes.  As Sir Gus O’Donnell, the Cabinet Secretary, said recently:

“We are going to have real problems.  Because of the competitive nature of globalisation, it is going to be hard to put tax rates up.  The increasing demand for spending more ... means that we are going to have to do more with less.” 

Second, we could ask the Prime Minister to look again at the progress so far.  In his article he says that the Government is about to launch “the third stage” of the reform programme.  Stage one was extra spending, to repair under-investment.  Stage two was on a “greater diversity of providers and more choice”.

Today’s Reform report suggests that there is still much to do if those stages are to be completed (let alone left behind).  Spending has certainly been increased but as a flash flood rather than a planned irrigation.  Its greatest impact has been to increase the costs of existing programmes rather than transform them.  Where it has happened, reform has been marginal and uncertain. 

Andrew Haldenby and Helen Rainbow: Reform is the only way to unlock value in the NHS budget

Andrew Haldenby is Director of Reform and Helen Rainbow is Reform’s Senior Research Officer.  The report “NHS reform: national mantra, not local reality” is available at www.reform.co.uk.

To say that the health service is big and complex is an understatement – it has the biggest budget in government (£90 billion in England alone and counting), a staff of 1.35 million (5 per cent of the entire workforce) and more political issues than any Secretary of State for Health can cope with.  But today’s annual NHS report by the think tank Reform suggests that the challenge of health policy reduces down to something manageable: redesign and improve services within a ceiling of 9-10 per cent of GDP.

There is a massive need for services to improve.  The quality of the NHS and the outcomes that it delivers remain behind other peer group countries.  We identify a “cradle-to-grave gap” – from infant mortality, to maternity services, to chronic care, to life expectancy.

This means a need for new investment in many areas – within a restricted level of funding.  Taxpayer funding is (and should be) limited for the next five years given the immediate pressures of a slowing economy and longer term concerns over economic competitiveness.  Greater productivity is the answer to this strategic challenge.