Labour's next big idea: the "relational state"

Recognising the importance of human relationships could revolutionise public services.

Sparked by the financial crisis and subsequent recession, the Labour Party has been engaged in a serious debate about the core tenets of its economic policy. And there is little doubt that Ed Miliband has started to carve out a distinctive position on "responsible capitalism". However, there has so far been much less discussion about Labour’s approach to public services. If the party wins the next general election it will assume responsibility for a state both substantially reformed from the one it left in 2010 and under unprecedented financial pressure.

There is much of which Labour can be proud from its recent period in office: NHS waiting times, crime rates and school failure all tumbled. However, there was collateral damage from achieving these results, requiring a re-assessment of the party's dominant approach to running the state. The desire to demonstrate "delivery" led to a vast increase in command and control management techniques, which, while sometimes necessary to deal with appalling performance, tend to alienate the workforce and crowd out space for responsiveness and experimentation.

The correct instinct to give citizens power over public services narrowed to a choice between providers, neglecting the many ways in which people might shape the services they use. And the case for institutional pluralism and diversity beyond the public sector was often reduced to a fight about competition. Elsewhere, the drive for high standards of "customer service" was inattentive to the role of public services in enabling people to forge relationships with each other and a sense of common life. And finally, the fear that any variation or contingency in service provision would produce unacceptable inequalities drove a bias towards centralisation and standardisation that sapped professional creativity and local mobilisation.

These lessons don’t mean abandoning everything Labour did in government, less still failing to defend the real strengths of its record. But they should prompt hard thinking about how Labour would govern in the future, not least because major challenges – from chronic health conditions, to anti-social behaviour and educational excellence – cannot be addressed by the state delivering solutions onto an unsuspecting public.

In an IPPR publication out today, we argue that combining the best instincts of "New Labour" and "Blue Labour" offers the outlines of a fresh approach to improving public services and governing the state. Like New Labour this should be firmly anchored on the side of the citizen, in favour of non-state provision where appropriate, and intolerant of poor standards. And like Blue Labour it should care about institution building, guard against bureaucracy, and focus on how services are run, not just what they achieve.

So what might that mean in practice?

Given the major fiscal pressures it would face, the first task for an incoming Labour government would be to set strategic priorities. We would put childcare and social care high on that list, but the party should find ways to involve the public honestly and directly in the trade-offs and choices facing the country. It might convene a delib­erative citizen’s convention to provide advice and input to politicians ahead of the next Spending Review.

Beyond this, Labour should set a small number of core goals and citizen entitlements in the main public services, leaving more space to innovate. In education, for example, the focus could be on a national attainment "floor target" for schools and an entitlement to catch-up support for pupils at risk of falling behind. In health, it could be waiting times and a right to GP access. But there can’t be a hundred "priorities".

In the end, public services are only as good as the people working in them. In the past, Labour used extra spending to oil the wheels of reform. With less cash around, a grand bargain is needed that frees professionals from a excessive compliance culture, draws them into shaping and governing services and challenges them to stand up to bad practice.

Rather than a tired debate of public versus private, the focus should be on a supply-side revolution led by a new wave of autonomous providers. Self-governing institutions, bounded from the over-reach of both bureaucracy and profit, are most likely to foster strong relationships and service innovation. For instance, while the focus is on the funding challenge, social care services are crying out for greater humanity and innovation, with new forms of mutual and cooperative provision in the lead.

A more relational state also requires the mobilisation of local leadership and initiative. So Labour should decide on those things which must be done nationally and decentralise power elsewhere – starting with our major cities. They could be put in charge of Housing Benefit and housing capital expenditure, with a remit to use those resources to make housing more affordable in their area.

Decentralisation needn’t stop at the town hall though. Citizens should be given meaningful power over services. This can be focused on both individuals (such as those with long term health conditions managing budgets and care planning) and groups (such as parents associations having a say on the governance and priorities of children’s centres).

Finally, the drive for strategic priorities, institutional independence, professional autonomy and local control must be matched by strong forms of accountability, which extend beyond just targets and markets. In education, this could mean all schools having academy-style freedoms to innovate, balanced by democratically accountable local school commissioners. Similarly, it could mean reducing the amount of statutory guidance for teachers, matched by longer and tougher probation periods so that poor performers are removed.

The political viability of pivoting towards a more relational state rests on the basic question of whether voters want a government that tries to solve their problems for them, or one which gives them power over their lives. Does the public want outcomes delivered for them or space to foster the relationships that matter?

In the past, politicians have tended to go into election campaigns promising better schools or more nurses. That might not work anymore, especially when the money to pay for such promises has dried up. But if such pledges are abandoned, what comes in their place?

These electoral dilemmas are not the place to start thinking about how the next Labour government might run the state, but they are among the places where this debate will have to end up.

Graeme Cooke and Rick Muir work for the IPPR but write here in a personal capacity.

Labour Party leader Ed Miliband addresses workers at Islington Town Hall on 5 November in London. Photograph: Getty Images.

Graeme Cooke is research director at IPPR

Rick Muir is associate director at IPPR

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Stability is essential to solve the pension problem

The new chancellor must ensure we have a period of stability for pension policymaking in order for everyone to acclimatise to a new era of personal responsibility in retirement, says 

There was a time when retirement seemed to take care of itself. It was normal to work, retire and then receive the state pension plus a company final salary pension, often a fairly generous figure, which also paid out to a spouse or partner on death.

That normality simply doesn’t exist for most people in 2016. There is much less certainty on what retirement looks like. The genesis of these experiences also starts much earlier. As final salary schemes fall out of favour, the UK is reaching a tipping point where savings in ‘defined contribution’ pension schemes become the most prevalent form of traditional retirement saving.

Saving for a ‘pension’ can mean a multitude of different things and the way your savings are organised can make a big difference to whether or not you are able to do what you planned in your later life – and also how your money is treated once you die.

George Osborne established a place for himself in the canon of personal savings policy through the introduction of ‘freedom and choice’ in pensions in 2015. This changed the rules dramatically, and gave pension income a level of public interest it had never seen before. Effectively the policymakers changed the rules, left the ring and took the ropes with them as we entered a new era of personal responsibility in retirement.

But what difference has that made? Have people changed their plans as a result, and what does 'normal' for retirement income look like now?

Old Mutual Wealth has just released. with YouGov, its third detailed survey of how people in the UK are planning their income needs in retirement. What is becoming clear is that 'normal' looks nothing like it did before. People have adjusted and are operating according to a new normal.

In the new normal, people are reliant on multiple sources of income in retirement, including actively using their home, as more people anticipate downsizing to provide some income. 24 per cent of future retirees have said they would consider releasing value from their home in one way or another.

In the new normal, working beyond your state pension age is no longer seen as drudgery. With increasing longevity, the appeal of keeping busy with work has grown. Almost one-third of future retirees are expecting work to provide some of their income in retirement, with just under half suggesting one of the reasons for doing so would be to maintain social interaction.

The new normal means less binary decision-making. Each choice an individual makes along the way becomes critical, and the answers themselves are less obvious. How do you best invest your savings? Where is the best place for a rainy day fund? How do you want to take income in the future and what happens to your assets when you die?

 An abundance of choices to provide answers to the above questions is good, but too much choice can paralyse decision-making. The new normal requires a plan earlier in life.

All the while, policymakers have continued to give people plenty of things to think about. In the past 12 months alone, the previous chancellor deliberated over whether – and how – to cut pension tax relief for higher earners. The ‘pensions-ISA’ system was mooted as the culmination of a project to hand savers complete control over their retirement savings, while also providing a welcome boost to Treasury coffers in the short term.

During her time as pensions minister, Baroness Altmann voiced her support for the current system of taxing pension income, rather than contributions, indicating a split between the DWP and HM Treasury on the matter. Baroness Altmann’s replacement at the DWP is Richard Harrington. It remains to be seen how much influence he will have and on what side of the camp he sits regarding taxing pensions.

Meanwhile, Philip Hammond has entered the Treasury while our new Prime Minister calls for greater unity. Following a tumultuous time for pensions, a change in tone towards greater unity and cross-department collaboration would be very welcome.

In order for everyone to acclimatise properly to the new normal, the new chancellor should commit to a return to a longer-term, strategic approach to pensions policymaking, enabling all parties, from regulators and providers to customers, to make decisions with confidence that the landscape will not continue to shift as fundamentally as it has in recent times.

Steven Levin is CEO of investment platforms at Old Mutual Wealth.

To view all of Old Mutual Wealth’s retirement reports, visit: products-and-investments/ pensions/pensions2015/