How Labour can redefine the public sector debate

Reform will get nowhere if it starts and ends with confrontation with the workforce.

The public sector now looks set for months of bitter confrontation between the government and the unions. The doctors have announced a day of industrial action  -  their first in more than 40 years. Meanwhile teachers are set to strike in the autumn over changes to pensions.  Earlier in May tens of thousands of public sector workers including police and prison officers, lecturers and civil servants took part in a day of action and union leaders have warned of more to come.  It is clear that the mood among public sector workers is one of anger – and in their fight against the coalition’s programme of cuts and reforms the unions are looking to Labour for strong, unequivocal backing. 

How should the Labour leadership respond?  According to the former cabinet minister, Charles Clarke in a new article for IPPR’s journal Juncture, by adopting its own radical reform strategy for  public services. Clarke's prospectus is bold and much of it controversial: he calls for tight control over pay and spending, greater hypothecation of tax and an extension of user charging and competition.  He acknowledges that many of these reforms are unlikely to win the support of the industrial wing of the labour movement but argues that Labour shouldn’t allow "vested interests, even including some of its own members and supporters" to stand in the way of change. He does however offer new forms of institutional dialogue with unions and professional bodies to get agreement over areas such skills development, pensions and working arrangements.

Clarke is right that a future Labour government would have to make tough decisions. This is underlined in a new briefing published by IPPR today in conjunction with the CBI. The report highlights the fact that long-term trends, especially an ageing population, will increase demand on public services, while reducing future tax revenues.  The analysis is based on projections from the Office for Budget Responsibility showing how Britain’s budget balance is likely to move from a surplus of 1.3 per cent of GDP in 2015-16 to a deficit of 0.6 per cent of GDP in 2030-31 and then to 3.2 per cent of GDP in 2060-61: a deterioration of 4.5 per cent of GDP or £66 billion in today’s terms. 

These pressures are not unmanageable, still less an excuse for cutting back on providing high quality universal services. But they mean that any future government will have to make very difficult choices. The way forward is to create a broader, more sustainable tax base, take big strategic decisions about which services we as a country should prioritise and get serious about raising public sector productivity over the long term.

In terms of prioritisation we should be investing in universal affordable childcare: the success of the Nordic countries shows that this has massive long term pay offs in terms of reducing educational inequalities, as well as helping to expand the tax base by raising the female employment rate. In short, investment in early years is a massive win/win. But if we put our eggs in that basket it means that other services will face a tighter funding settlement over the long term.

That brings us to productivity. The electoral success of New Labour was built on the idea that social justice and economic efficiency could go hand in hand. It is my contention that the success of a future Labour government would depend on making public service productivity and the values of social justice, association and democratic empowerment go hand in hand.  

Lets be clear: being serious about productivity means being hard headed about reducing costs. In particular that means looking at where new technology can deliver services in a less labour intensive way. For example, new technologies in health mean that people will be able to monitor their own conditions much more actively without the need to consult a doctor. In another example, increasingly universities in the United States are opening up their degrees to the public by allowing online access to teaching material.  This could radically transform the nature of a university education by allowing wider access at lower cost. 

But delivering better value also requires the engagement and enthusiasm of those who deliver our public services day to day.  An agenda that seeks to marry the values of cooperation and employee participation to the need to improve efficiency has the potential to secure the buy-in of public service professionals. 

For example, could staff be rewarded by collective bonuses when a service improves? Or for example could we create new forms of not for profit service delivery organisation in which staff and users are jointly in control? The prospect that social care users could mutualise their personal budgets to create community led care providers is an enticing one. 

Of course user and producer interests will still clash and it is for that reason that we need robust forms of accountability in public services. We should also be realistic: it will be impossible to achieve agreement on every reform. And Clarke is right that before working out how it can better engage staff in the process Labour will need to be much clearer than it has been about its overall strategic approach to reform and the kind of changes that are necessary.  But it is important to remember that reform will get nowhere if it starts and ends with confrontation with the workforce.

Rick Muir is IPPR's associate director for public service reform

A future Labour government would have to make tough decisions on funding. Photograph: Getty Images.

Rick Muir is director of the Police Foundation

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What type of Brexit did we vote for? 150,000 Conservative members will decide

As Michael Gove launches his leadership bid, what Leave looks like will be decided by Conservative activists.

Why did 17 million people vote to the leave the European Union, and what did they want? That’s the question that will shape the direction of British politics and economics for the next half-century, perhaps longer.

Vote Leave triumphed in part because they fought a campaign that combined ruthless precision about what the European Union would do – the illusory £350m a week that could be clawed back with a Brexit vote, the imagined 75 million Turks who would rock up to Britain in the days after a Remain vote – with calculated ambiguity about what exit would look like.

Now that ambiguity will be clarified – by just 150,000 people.

 That’s part of why the initial Brexit losses on the stock market have been clawed back – there is still some expectation that we may end up with a more diluted version of a Leave vote than the version offered by Vote Leave. Within the Treasury, the expectation is that the initial “Brexit shock” has been pushed back until the last quarter of the year, when the election of a new Conservative leader will give markets an idea of what to expect.  

Michael Gove, who kicked off his surprise bid today, is running as the “full-fat” version offered by Vote Leave: exit from not just the European Union but from the single market, a cash bounty for Britain’s public services, more investment in science and education. Make Britain great again!

Although my reading of the Conservative parliamentary party is that Gove’s chances of getting to the top two are receding, with Andrea Leadsom the likely beneficiary. She, too, will offer something close to the unadulterated version of exit that Gove is running on. That is the version that is making officials in Whitehall and the Bank of England most nervous, as they expect it means exit on World Trade Organisation terms, followed by lengthy and severe recession.

Elsewhere, both Stephen Crabb and Theresa May, who supported a Remain vote, have kicked off their campaigns with a promise that “Brexit means Brexit” in the words of May, while Crabb has conceded that, in his view, the Leave vote means that Britain will have to take more control of its borders as part of any exit deal. May has made retaining Britain’s single market access a priority, Crabb has not.

On the Labour side, John McDonnell has set out his red lines in a Brexit negotiation, and again remaining in the single market is a red line, alongside access to the European Investment Bank, and the maintenance of “social Europe”. But he, too, has stated that Brexit means the “end of free movement”.

My reading – and indeed the reading within McDonnell’s circle – is that it is the loyalists who are likely to emerge victorious in Labour’s power struggle, although it could yet be under a different leader. (Serious figures in that camp are thinking about whether Clive Lewis might be the solution to the party’s woes.) Even if they don’t, the rebels’ alternate is likely either to be drawn from the party’s Brownite tendency or to have that faction acting as its guarantors, making an end to free movement a near-certainty on the Labour side.

Why does that matter? Well, the emerging consensus on Whitehall is that, provided you were willing to sacrifice the bulk of Britain’s financial services to Frankfurt and Paris, there is a deal to be struck in which Britain remains subject to only three of the four freedoms – free movement of goods, services, capital and people – but retains access to the single market. 

That means that what Brexit actually looks like remains a matter of conjecture, a subject of considerable consternation for British officials. For staff at the Bank of England,  who have to make a judgement call in their August inflation report as to what the impact of an out vote will be. The Office of Budget Responsibility expects that it will be heavily led by the Bank. Britain's short-term economic future will be driven not by elected politicians but by polls of the Conservative membership. A tense few months await. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.