Public sector

Oliver Letwin is often mocked for putting things in over-complicated language, for talking about ‘a shift in the theory of the State from a provision-based paradigm to a framework-based paradigm’. But in his interview with the Wall Street Journal Europe, Letwin sums up the Cameron vision for public services with admirable clarity: 'Hospitals compete for patients, schools compete for pupils, welfare providers compete for results in getting people out of welfare and into work. So we get to the point where it [the public sector] is efficient because it is answering to the people it is serving and not to bureaucracy.

This government’s love of quangos reached new heights in today’s Budget when Darling announced the creation of a ‘credit adjudicator service’. This will allow companies who feel they have been unfairly denied credit by their bank to appeal the decision to the credit adjudicator service which will have the legal power to order the bank to lend the money.    The Treasury is quick to stress that businesses will have to have claims referred to the credit adjudicator service by their regional business body. But this quango, which will cost five million pounds a year to run, strikes me as a quite absurd attempt to second guess commercial lending decisions. It is also unaccountable.

The credibility of the Chancellor’s Budget tomorrow depends on the policy changes that he announces for the public sector.  It won’t be enough for him just to announce a series of public spending totals that decline gracefully in the years to come.  Within some broad limits, anyone can do that.  What counts is whether he backs it up with practical ideas to target the big government costs, which lie in two places - benefits and the public sector workforce. In retrospect, the general election has fallen at the wrong time for the UK public finances.  Since early last year, the prospect of an early election has allowed the Government to put off the date of publication of its full plan to address the deficit.

James Purnell envisages a society of ‘empowered’ voters left to make decisions for themselves. It is an attractive concept – individual responsibility displacing state directives will save money and, providing those running the institutions are competent, improve public services. Writing in the Times, Purnell acknowledges that these concepts can become lost in the abstract terms in which they are expressed. What a pity he didn’t take his own advice - his article is an extended abstract noun. Not that it’s all bad. What power is there for parents who can’t afford to move close to a good school, he asks.

Great article from my former boss, Andrew Haldenby of Reform, in today's Telegraph.  He makes the general case that spending less on public services needn't mean worse public service – far from it, in fact – and is scathing about the political class's inability to soak up this lesson.  But it's this passage which jumped out at me: "Another path to reform is to get more out of the workforce. Simple changes have tremendous results. If public-sector workers took the same amount of sick leave as those in the private sector, that would save 3 per cent of their wage bill, which adds up to £6 billion per year. If they worked the same number of hours per week as in the private sector, that would save a further 10 per cent, or £20 billion per year.

How things change.  A few months ago, Alistair Darling would only go so far as to not rule out a public sector pay freeze.  By the time of the Pre-Budget Report, that became a 1 percent cap on pay rises.  And now, in an interview with the Sunday Times, he's talking explicitly about public sector pay cuts.  He cites the example of the private sector, where workers have accepted cuts to hang onto their jobs. It certainly makes sense.  Wages make up such a hefty proportion of public spending, that any serious plan to cut the deficit will have to take them into account.

Over at the FT's Westminster blog, Jim Pickard picks up on an important comment from Stephen Timms, the Treasury minister, speaking at a committee meeting this morning.  Timms suggests that Treasury hasn't ruled out a public sector pay freeze, as recommended by the Audit Commission's Steve Bundred.  Here are the minister's words:   “It’s certain the case that our pay policy needs to reflect the wider economic circumstances ... we will be deciding on pay policy over the next few weeks, the policy has got to be fair to people who work in the public sector just as we have to be fair to everybody else. The suggestion by Steve Bundred has made is certainly one we will reflect on but the details on that will be made over the next few weeks.