It is just months until the next general election, and, given the speed of cuts pursued and promised by the coalition in 2010, pundits had predicted Labour would return to power in a landslide. Indeed, even before the 2010 election, there was hubris in believing that just because the state had shown its strength in bailing out the banks, and its effectiveness in limiting repossessions and job losses to nearly half the level of that seen in the 1990s, that people’s faith in government would be secure. Sadly, we are miles from restoring the electorate’s confidence in either government or party. The latest joint annual report from Deloitte and Reform, The State of the State, provides some insightful signposts as to the key dividing lines that could help us do so.
True, such reports are part-regurgitation of consolidated data, and part-consultant prospectus to sell services in ‘talent management, workplace design, and remote working’, none of which are likely to be the golden bullets to mitigate the cuts or for that matter improve citizen’s experience.
State of the State is part-scorecard for the fiscal strength of the nation, part-commentary on the choices parties are making, and how the sector has responded accordingly. What unfolds are three key things: a sobering analysis on the deficit; a report on how we need to re-evaluate what we deliver and how we do so; and, third, and most importantly, an unanswered challenge as to how we raise the United Kingdom’s productivity.
On the economy the report does a good job of banging the drum for the coalition, scooting over the fact it failed to meet its own targets on deficit reduction. Nonetheless, there is an economic reality we need to embrace, not least because the cost of debt repayment will crowd out expenditure on key services and remove the freedom we need to be able to bring about social change.
Where we need to diverge from its analysis is the argument it makes that it is the size of the state as a proportion of GDP that needs to be questioned regardless of whether GDP itself shrinks or grows. It makes meaningless comparisons with toxic economies such as Spain, Portugal, Ireland and Greece to do so – and in doing so seriously undermines the credibility of the report.
Using the deficit as a Trojan horse to argue that the state should be cut back to 30 per cent of GDP and beyond treats the public sector like a closed economy such as a business. The truth is the lines between public and private enterprise are less clear. This is true for both the delivery of public services, and for the stewardship of the economy.
The report commends the actions of managers and leaders, who in response to the cuts have re-evaluated whether a service needs to be delivered by the public sector, can be delivered better by others, or whether it even needs to be delivered at all. This is important because the relationship the electorate has with the state is in flux.
The report spells out that the government is spending on average approximately £10-11K for every individual, depending on where you live. Quantifying this expenditure in this way begs the question about how Labour can be the most passionate about demonstrating both the individual and collective value to voters. If we wish to maintain public trust in government, ignoring this challenge is simply not an option. Just ask people in local government.
To date the largest burden of the cuts have fallen on local authorities, and given pressures elsewhere this is a trend that is unlikely to change. That is why already there are countless examples of Labour councils making difficult but progressive decisions to ensure they are spending money on the right priorities and taking a zero-tolerance approach to underperforming services. It is also why it is right to pursue combined zero- and outcomes-based budgeting exercises such as those pursued by Haringey and Camden, and promised by Chris Leslie when we return to government. The starting point for such exercises has to be that no penny spent in a specific way is sacred.
Such exercises are forcing forward-looking leaders to reimagine the role of government. Government economically is always about being the risk-taker of last resort, but rather than simply defining that risk as being the ‘protectorate’ of the people, mainstream progressives are increasingly seeing this as being aggressively pro-growth, and leveraging powers and resources to improve productivity.
That is because we are witnessing a market failure that the report recognises the government is failing to deal with – namely a productivity gap that threatens our global competitiveness. The report limits itself to challenging public sector productivity, and probably as suggested above because the authors have a different agenda. Suggesting outsourcing to the private sector can always solve this is simply false dogma.
Instead of trying to create new rental streams for profiteers, the report would do well to reference some of the points in Mariana Mazzucato’s The Entrepreneurial State. In short this recognises that government are not just guarantors of the market, both on national and international levels, but that its direct actions provide the infrastructure for growth, and drive the kind of innovations that give our economies the injection of productivity they desperately need, but that create to much burden of risk for the markets to bare.
In this sense the report fundamentally exposes the right’s pessimism. For the mainstream centre and centre-left we need to show how the state can help bring back the productivity that will help reverse the decline in real wages affecting millions of Britains. It is here the new political centre can be won, and if we do so we can make the case for government anew.
Joe Goldberg is cabinet member for finance on Haringey council and tweets @joedgoldberg
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