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The future challenges facing public services: building on international experience

  • Date(s)
    5 July 2007
  • Time
  • Location
    Policy Network, London

China’s current rate of economic growth is unsustainable, and is underpinned by the build up of massive foreign currency reserves in the region that threaten the long-term stability of the world trade system, said Will Hutton, author of The Writing on the Wall: Why We Must Embrace China, at a Policy Network seminar on Tuesday 19 June.

Speaking at the launch of a new Policy Network working group on globalisation and social justice, the chief executive of the Work Foundation said that social democrats needed to resist the argument put forward by the opponents of globalisation that the emergence of China as a global economic power posed a significant threat to jobs and living standards in the west. Instead, the real threat to the world economy posed by China and other emergent economies such as India lay elsewhere, in the build up of foreign currency reserves in the Asian region.

‘We have to recognise that China is in a dysfunctional position in the way it is acquiring foreign exchange,’ he said.

In his speech, entitled hyperglobalisation v protectionism, is there a new social democratic paradigm?, Hutton went on to attack the misrepresentation of the economic threat posed by China in the west. ‘There needs to be a change in the language we use when talking about China,’ he said. ‘Most Chinese companies are state owned, and in real terms, China’s productivity is no higher than it was under Mao.’

He also challenged the current political mood of protectionism taking hold in countries such as the US. ‘At the moment there are twenty anti-China bills in the US Congress,’ he said. ‘The purpose of these bills in to introduce tariffs on Chinese imports. This can pose as a threat to the world trade order and act as a catalyst for a possible economic war and disabling the global economy.’
New Labour should heed the lessons of the Australia as it considers the future direction of public service reform under Gordon Brown, said the former director of Demos, Tom Bentley, at a Policy Network seminar in London on Thursday 4 July.

The Executive Director for Policy and Cabinet in the Premier’s Department of Victoria, Australia, said the reforms introduced by New Labour in the past 10 years – of encouraging choice and contestability in the provision of public service in the context of increased overall levels of investment - were originally pioneered by the modernizing centre-left governments of Paul Keating in Australia and David Lange in New Zealand, more than a decade earlier.

How these reforms have played out in Australia were likely to provide important lessons for the new Labour administration, as it reflects on the successes and failures of the past decade in government.

Bentley began by comparing and contrasting the debate on public service reform in Australia and the UK. Since the defeat of the Labour Prime Minister Paul Keating and the election of John Howard in 1996, Australia had seen the emergence of ‘two systems’ of public provision, he said. At the national level, the Liberals had sort to pursue a narrow definition of consumer ‘choice’, with policies such as pupil subsidy for independent sector, penalty tax on those not taking out private insurance, incentivising private home ownership, and creating new training markets.

By contrast, at the state level, the predominantly Labour-led administrations had pursued a strategy of attempting to rescue ‘core’ public services from the privatising instincts of the Liberals. As a consequence, while the reform strategies of the Labour states superficially resembled those of Britain’s New Labour, in reality, they were primarily dedicated to restoring existing public services and seeing off the Liberal threat, not to meeting the new demands and capabilities of the future.

As a result of this ‘two system’ approach, divided along political lines at the state and federal level, Australia had witnessed a decline in the public take up of state services, exacerbating existing social inequalities in the country. In the past decade, for instance, the number the number of pupils at state schools had fallen by 10 per cent. This was in contrast to the UK, where there had been an attempt by New Labour to blend core investment with greater choice in one system. Unlike in Australia, therefore, in Britain, the Blairite reforms of the past decade had, to a certain extent, managed to successfully combine goals of both increasing diversity of provision and maintaining social cohesion.

Despite the different trajectories the ‘choice’ agenda had taken in the two countries, Bentley went on to suggest that it represented a reaction to similar contemporary challenges - not withstanding the unique problems in Australia associated with coordinating delivery and maintaining oversight in a devolved federal system of government; the difficulties of coordinating services and maintaining equity of provision across a large territorial area; and the unique social and economic problems associated with Australia’s Aboriginal population.

The joint challenges shared between the two countries included the coordinating services within a mixed economy of provision; growing social diversity and inequality associated with the distributive effects of the global economy; higher public expectations, but uncertain legitimacy of state intervention; complex, fragmented agency and government responsibilities; a constrained fiscal environment; and the growing cost and demand pressures on public services.

Bentley also suggested that the public reform agenda in both countries had encountered similar barriers to its successful implementation. These included a growing expectations gap; fiscal constraints; increasing workforce alienation; increased fragmentation, reorganisation and complexity; and weak voice and transparency in its accountability structures.

The core issue in both countries, therefore, was how to marry ‘system coherence and clarity of objective with diversity of provision and responsiveness’. With this in mind, Bentley went on to develop a four-fold typology of public service reform, based round the two axis of: 1. Clarity of objective, coherence of delivery chain (the Barber index); and 2. Diversity of provision (The Legrand scale).

These axis give way to the following four-fold typology of public service reform:
· Stasis (survival mode) – characterised by low clarity of objective and diversity.
· Command and control (temporary override mode) – characterised by high clarity of objective but low diversity.
· Segregation (market share mode) – characterised by high diversity but low clarity of objective.
· Alignment (self sustaining mode?) – characterised by high clarity and diversity of provision.

Reflecting on the state of public services in Australia and the UK in relation to this four-fold typology, Bentley suggested that reform in Australia had been overwhelming characterised by the third type – the Segregation (market share mode) - where diversity of provision had been won at the cost of clarity of objective, with knock on effects on the coordination of services and social equity.

By contrast, in the UK, while New Labour’s public service reforms had attempted to realise the fourth type – Alignment (self-sustaining mode) – it had failed to do enough to create the capabilities necessary to generate institutional autonomy. As a result, the consequences of its reforms more often resembled the second type – Command and control (temporary override mode) – with only limited and temporary effects on the long-term performance of the system.

Finally, responding to the question of how to bring together the twin goals of coherence and diversity and achieve ‘alignment’, Bentley suggested that governments needed to concentrate on the following four areas: combining experience and outcome in definition of service quality; behaviour change through co-production and shared responsibility; promoting coherence in pluralised local systems; and serious innovation strategies.

Respondents included Sir Michael Barber, former head of The Prime Minister’s Delivery Unit and author of Instruction to Deliver, as well as Julian Le Grand, Richard Titmuss Professor of Social Policy at the London School of Economics. The meeting was chaired by David Albury, an independent organisational and policy consultant and former principle adviser in the Prime Minister's Strategy Unit.

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