The Chancellor’s ambitious ‘Budget for growth’ needs to be coupled with an equally ambitious programme of public sector reform.
Any plan for growth will only succeed if it also involves the transformation of our public services. Efficient and well-directed public sector spending can help to support and boost the private economy, not just by supporting it through a strong infrastructure and a well-educated workforce, but also by making Britain an attractive place to live and do business.
In a time of unprecedented cuts and a strong commitment on achieving challenging targets for spending reductions many public bodies may be tempted to reduce the frontline provision of services by cutting community health facilities, nurseries, services to older and vulnerable people, arts and cultural events, or programmes to increase labour participation. In order to stop public bodies taking the easy route to cuts and thereby harm the long-term competitiveness of the UK economy, the government should not shy away from radical structural reform.
Over the last decade UK public bodies have fallen well behind private companies in productivity. According to the Office for National Statistic productivity in the public sector declined by more than three percent between 1997 and 2007, while among service providers in the private sector, it improved by more than 20 percent during that period. This has placed a huge and unnecessary strain on the whole UK economy. Reducing public spending alone will not increase efficiency – a radical reform must accompany the cuts.
Allowing the private and voluntary sector to participate in this process is critical. The chancellor rightly points out that the UK has one of the most innovative and creative business services sectors. It also has charities and voluntary organisations that are recognised world leaders in their respective fields. The government has the opportunity to benefit from this latent knowledge and enthusiasm by engaging these organisations in reform by stating the problems and allowing all providers - in-house, private or voluntary – to come up with new, innovative solutions rather than just contracting with them for ‘doing the job’. Steps to improve procurement and to encourage small groups of public sector workers to establish employee-led mutuals are to be applauded, but they do not begin to address the more fundamental challenge.
Reform needs to cut across government departments – star chambers to police wayward overspenders or non-cutters will not solve the problem. Instead, commitment and leadership from No. 10 and the Treasury in particular are needed to set out a more ambitious and sustainable path to driving public sector reform.
