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Smarter Government

Volume 502: debated on Monday 7 December 2009

With permission, Mr. Speaker, I would like to make a statement on “Putting the Frontline First: smarter government”, a Command Paper that I am presenting to Parliament today.

This Government are very proud of Britain’s public services and Britain’s public servants: our doctors and nurses, who treat 1 million people every 36 hours; our police teams, who have brought down crime by a third; the teachers and support staff in our schools, who have helped record numbers of young people get record exam results this year; our job centre staff, who have helped 2 million people move off unemployment since last November; and, of course, our armed forces, serving with such distinction in Afghanistan and around the world.

We always knew that with the right backing, Britain’s public servants could transform the quality and standards of public service in this country, and over the last decade they have—not by some happy accident, but by the work of careful design and determined investment. NHS investment has doubled, education investment is up by 60 per cent. and investment in public order and safety is up by 50 per cent. All that was achieved while over-delivering by 20 per cent. on our Gershon review savings of £26.5 billion in the three years to 2008.

Thanks to that effort, we have reached a point at which the investment gap that we inherited in 1997 has been fixed. We have not only reached but exceeded international averages for spending on education and health. We are at a turning point. In the decade ahead we can capitalise on the great strengths that we have created, and set out a new way of driving standards in public services up, while we drive the deficit down.

I am laying before the House today a Command Paper showing how the Government will set about that task in the years to come. It draws together more than 12 months’ work from literally thousands of people across public life, the private sector, charities and voluntary groups. I particularly thank Sir Michael Bichard, Sir Tim Berners-Lee and Nigel Shadbolt, Martha Lane-Fox, our efficiency advisers Gerry Grimstone, Lord Carter of Coles, Martin Read and Martin Jay, and those from across the third sector who have advanced the relationship between Government and civic society.

Today’s Command Paper summarises what we have learned from that work, but our starting point is a relentless focus on standards. We are ambitious for Britain’s future: we know that we can do well in the years to come. However, we know that if Britain’s families are to do well in the future, they will need first-class public services to support them. We will make first-class standards in public services not a privilege for the few but the right of all, by setting out—in health, education, policing and, in time, social care—new entitlements to high-quality public services, backed where appropriate by the force of law.

To help citizens to hold local services to account, we will revolutionise the free availability of comparative information on police efficiency, hospital costs, and Government and local authority spending. We will ensure that services, where they can, fit in with the demands of modern life by putting more services online, and we will redouble our efforts to persuade more people to use the internet. Today I can announce the provision of a further £30 million with the aim of getting 1 million more people online by 2012. We will free public data created using taxpayers’ money, including Ordnance Survey mapping and boundary information. We will make it easier for civic society to contribute to public life by pressing ahead with a new social investment bank, and by testing social impact bonds.

Our second principle will be to free up the front line to innovate and collaborate by cutting back on ring-fenced budgets and national targets. I am therefore setting out today 10 steps that I, with the Secretary of State for Communities and Local Government, have drawn up to provide local councils with a range of trading, joint-venture and regulatory flexibilities. I believe that if we set in place strong rights to high standards and free up the front line to innovate, we can cut overhead costs at the centre.

We are already on track to deliver £30 billion of savings between 2008 and 2011, but today I am setting out steps to save £12 billion more, and in the pre-Budget report we will set out further difficult choices that will have to be made if we are to halve our deficit over four years.

First, we will reduce the costs of the senior civil service. I am announcing today that we will reduce senior civil service costs by 20 per cent. by 2012-13, and seek to move 10 per cent. of civil service posts that are currently in London and the south-east to other parts of the country in the medium term.

Secondly, Bill Cockburn, chair of the Senior Salaries Pay Review Body, will review senior pay across the whole of the public sector, reporting to Government in time for next year’s Budget. In the meantime, I will personally review all proposals for salary offers above £150,000 set by Government.

Thirdly, we are publishing today plans drawn up by all Secretaries of State to increase the administrative efficiency for which they are accountable in human resources, IT, collaborative procurement and asset management. I am also publishing benchmarking information for all central Government Departments and major agencies, showing exactly where we will focus to deliver £9 billion of efficiency savings over the next few years. I am also today setting a goal of saving £1.3 billion by putting services online, halving the consultancy bill and reducing our marketing spend by a quarter.

Fourthly, I am announcing today the first results of a comprehensive review of arm’s-length bodies, which will report by the time of the 2010 Budget. We will save £500 million a year from changes introduced by the review, and as an interim step we will abolish or rationalise 123 arm’s-length bodies, subject to the necessary consultation and legislation.

Finally, I believe that, as part of this new future, the Government must either sell or transfer to different owners the things they no longer need to own. I am therefore publishing today an asset portfolio listing the state-owned assets that Government can commercialise over the medium term. It includes options for the future sale of the Tote, the student loan book, the Dartford crossing and the high-speed rail link, and potential alternative forms of ownership of British Waterways agreed by myself and the Secretary of State for Environment, Food and Rural Affairs. Our policy will also include a new approach for testing where publicly owned assets should be transferred for use by the third sector.

The Government believe this country is both richer and fairer for the strength of our public services. We will never compromise on high standards, but neither will we ever compromise in our search for value for money. Today’s Command Paper sets a new path for the future that draws on the strengths created through a decade’s work, and I commend it to the House.

I am grateful to the Chief Secretary for letting me have a copy of his statement in advance—not that it, or the Prime Minister’s speech this morning, tells us anything much that we have not heard before. The paper is a series of reheated announcements that underline Labour’s failure over 12 years to get to grips with public service reform and to cut the waste and inefficiency that have been allowed to multiply.

We were told that all services would be available online, but Tony Blair pledged in 2000 that all services would be available online by 2005, and they were not. The Government tell us they will roll out a “tell us once” service for births and deaths, but they have already told us about “tell us once” three times. There is also the reannouncement of the sale of the Tote: that is a 1997 manifesto commitment that has been reannounced several times since, most recently about six weeks ago at that Dispatch Box. The story is the same for crime mapping, ring-fencing, NHS tariffs, e-auctions, and so on and so on. In addition to the reheated announcements, there is the usual sprinkling of stolen policies: the quango cull that the Leader of the Opposition announced in July this year, and the high-level sign-off for top public sector salaries.

There are also the pledges to undo some of the damage the Government themselves have done during their 12 years in office. The Prime Minister said in this morning’s speech that the Government will cut marketing and communications spend by 25 per cent.—after more than quadrupling it since 1997. Since 2000, they have poured billions of pounds of taxpayers’ money into unreformed public services, borrowing and spending like it was Monopoly money, and talking about efficiency but never delivering it.

That has happened not because the Government do not understand—the Prime Minister said in a speech to the Institute of Directors in 2001:

“The efficiency we seek in the private sector we demand in the public sector…Government at every level—national, regional and local—must raise its game.”

It is also not because they did not have good advice—tens of thousands of man-hours spent on reviews and report writing have identified tens of billions of pounds-worth of potential efficiencies. But the Government have not been able to translate that into real cashable savings. Gershon identified £21.5 billion-worth of savings, and while the Chief Secretary has just claimed some fantasy figure for delivered Gershon savings, the National Audit Office says the Government only delivered £3.5 billion in real, hard cashable saving. That is less than 0.1 per cent. of total public spending over the period in question.

Today, Sir Peter Gershon has joined our public services advisory board, along with Mr. Bernard Gray, the author of the defence procurement report whose conclusions were so damning that the Prime Minister tried to suppress it, and Dr. Martin Read, whom the Chief Secretary has just mentioned and who chaired the Government operational efficiency review. They will advise us as we develop our agenda for a truly radical, bottom-up reform of public service delivery, based on the principles of transparency, alignment of incentives, freedoms to innovate and support for change. They will help us to deliver a genuine culture change in Government and public services by ensuring that efficiency gain and productivity improvement become a central part of the day-to-day business of our public sector, not some alien imposition visited upon it whenever an election is approaching.

The truth is that our front-line public services can be protected for future generations only by genuine reforms—reforms that will close the productivity gap and ensure that those services are affordable for future generations. For 12 years, Labour has demonstrated that it can talk about efficiency but it cannot deliver. The Government’s record speaks for itself. Between 1997 and 2007, according to the Office for National Statistics, public sector productivity fell by 3.4 per cent. while private service sector productivity grew by more than 20 per cent. That is a measure of the scale of Labour’s failure on public sector efficiency. When the Government have failed so comprehensively for 12 years, why should anybody believe that they will succeed with this mishmash of reheated announcements and stolen clothes in the dying months of their rule?

The Government are ducking the hard questions. The Chancellor is talking about reducing spending while the Prime Minister is making new spending pledges at his party conference and the Schools Secretary and the Transport Secretary are telling us that their budgets will not be cut. Will the Chief Secretary confirm today that there will not be a departmental spending review before the Budget in the spring? Is that what the Chancellor of the Exchequer was telling us yesterday?

As the Chief Secretary has adopted a raft of our policy proposals, let us see whether he will match some of our pledges. Will he, for example, match our pledge to cut by one third the administrative cost of Whitehall bureaucracy and quangos during the lifetime of the next Parliament, saving £3 billion a year for the front line? Will he cap the biggest Whitehall pensions, as we have pledged to do, so that the taxpayer will not contribute any further to pensions that are already worth £50,000 or more? Will he give some clear purpose to these efficiency savings by matching our pledge to deliver real-terms spending increases year on year to the national health service, protecting our most important public service?

The Prime Minister said in his speech this morning that

“there will be no hiding place for Ministers or civil servants who fail to drive increasing efficiencies”.

Let me tell him that there is no hiding place for a Prime Minister who has not only failed to deliver value for money in public spending, but been the roadblock to real reform for a decade. Today’s offering is too little and, for the Prime Minister and his Government, it is too late.

May I say for future reference that the response from the Opposition Front-Bench spokesman was longer than the statement itself, and we really do not want that to happen again?

I shall be brief in my reply, Mr. Speaker. That was an extraordinary response. The hon. Member for Runnymede and Weybridge (Mr. Hammond) claims that there has been no reform in public services. Crime down by a third is reform. He says that there is no reform, but exam results are 50 per cent. better for our young people. That is real reform. He says that there is no public service reform, but getting people in to hospital in four and half weeks instead of 18 months is real reform that the public care about.

The hon. Gentleman prayed in aid the NAO. The truth is that when the NAO considered the Gershon savings, it said:

“Projects across the Programme are making”


“improvements to the efficiency of public services.”

It went on to say that all of the £26.5 billion savings met the most robust category in its conclusions. The hon. Gentleman went on to talk about productivity and tried to pray in aid some contributions from the ONS. Of course, the ONS said:

“These are experimental statistics and work continues to develop the measures.”

I know that there is a taste for experimentation among some people on the hon. Gentleman’s team. I hope, however, that it does not extend to the selective use of statistics.

The hon. Gentleman talks about our matching his plan to save £3 billion from Whitehall. We are saying that we will save £12 billion, not only from Whitehall but from the wider public sector, over the next three to four years. Of course, there are a few proposals that I have examined in drawing up these efficiency plans today. I could, for example, have set out proposals to scrap ID cards, which I was told by some quarters would save £2 billion. In fact, on closer inspection, it turns out that that would save no more than £50 million to £100 million. I was told that abolishing regional development agencies would save “a huge amount.” It turns out on closer inspection that it would save merely £180 million. I was told that capping public service pensions at £50,000 would save hundreds of millions of pounds. In fact, it turns out that it would save but a small fraction of that. I was told that taking child credits away from families who earn more than £150,000 would save £400 million a year, but it turns out that it would save only £45 million a year. I was told that bringing forward changes to the retirement age could save £13 billion a year, but it would make no impact whatever on the deficit in the next Parliament.

The truth is that every one of those proposals was put forward by the Conservatives, but it turns out that none of them was worth the paper it was written on. No wonder the hon. Member for Runnymede and Weybridge has had to hire a group of Government advisers to answer an SOS—stand up our savings—from the shadow Chancellor, and no wonder he told us this morning that the front line would suffer under the Conservatives, because he has nothing else to pay for the £10 billion-worth of tax cuts that he has promised to people who are rich enough not to need them.

Much of the statement is uncontroversial and, indeed, blindingly obvious. Let me start with the efficiency savings. Is not there a basic problem with announced efficiency savings in Government? If they knew that there was inefficiency, why had not they dealt with it already? To what extent is this new?

Let me pick up on a particular item to clarify what the Government are doing. They say that they are cutting the consultancy budget by 50 per cent., but 50 per cent. of how much? What is their consultancy budget? There are estimates that it could be in the order of £20 billion. We discovered on Friday that they are paying more than £100 million a year for consultants who are advising on the bail-out of the banks alone, so what is the consultancy budget that is now being cut by half?

The Chief Secretary said that he is personally going to vet pay of more than £150,000 a year. He is going to be a very busy man. How many people in the public sector are paid more than £150,000 a year, whose salary he will vet personally? Are we talking about GPs and dentists, heads of quangos and the dozens of people in the BBC who are paid more than the Prime Minister? Whom does he mean and how many of them are there? Are we talking about hundreds or thousands of people?

The Chief Secretary also suggested that he will save lots of money by reducing the number of targets for, and the amount of, monitoring of local government. That is admirable, but I understand that the Government currently spend £1 billion to £1.5 billion on various audit bodies, notably the Audit Commission, in overseeing local government. How much of that budget will be saved and how many officials who are employed in overseeing local government will no longer be required? If he is genuine about restoring autonomy to local government, why does not he consider ideas such as giving them significantly greater freedom over the business rate system?

Let me make a specific point. The Chief Secretary says that the Government are to give away, free of charge, data from the Met Office and the Ordnance Survey. That sounds straightforward, but those organisations survive by selling data, so if they have to give their data away for free, how will they function as organisations, especially now that the Government plan to privatise them? How can the Government privatise organisations that do not have any income?

I am grateful for the hon. Gentleman’s welcome for at least some of these measures. I think that there is a direction of travel in some of the reforms that Liberal Democrat Members will welcome, not least the move towards greater freedom and flexibility for local authorities. When he has had time to study the report in some depth, I think that he will welcome some of the flexibilities that we have talked about. On Wednesday, my right hon. Friend the Chancellor will announce further measures, which attempt to bring a degree more freedom from the regime of inspection and performance setting that has helped to drive up service standards over the past 10 years. We will be able to retire some of that regime in the years to come, and there will be significant savings as a result. It is right that many of the relevant reductions in targets should wait until the next comprehensive spending review, so that the plans that are drawn up reflect the resources that are provided.

The hon. Gentleman asked some specific questions that I will try to answer. First, he asked about consultancy bills. My goal is to save about £512 million from the consultancy bill by 2011-12, by reducing it by 50 per cent. He asked about pay, and I reiterate that we have asked Bill Cockburn, the chair of the Senior Salaries Review Body, to draw up proposals on how to bring greater transparency to the system of setting senior sector pay and how to make sure that value-for-money bodies such as the Audit Commission and others are given a greater role in scrutinising those offers. The simple answer is that I believe that too many people are paid more than £150,000, and my goal is to exert downward pressure. That is partly why I say that we should cut the costs of, for example, the senior civil service by 20 per cent. in the next couple of years.

On data, we must get the balance right. Organisations such as Ordnance Survey can make a great deal of money by supporting specialist engineering and mapping companies with high-quality data. Ordnance Survey runs one of the best—if not the best—mapping services in the world. When there are opportunities to make available information such as low-resolution maps or boundary data, the public should be able to get hold of it free of charge.

Does the Chief Secretary agree that some of the biggest public expenditure is on late intervention and is the cost of failure—of prisons, magistrates courts, welfare benefits and so on? Does he therefore accept my welcome to the green shoots in the Green Paper, including the social investment wholesale bank—perhaps we can tidy up the names—and the social impact bonds? Those constitute early intervention and are cheaper and much more efficient because they ensure that society benefits from the consequences of success, rather than suffering those of failure.

May I put on the record my personal thanks to my hon. Friend for his work in not only championing new approaches to early intervention, but bringing pressure to bear on finding innovative forms of social finance? Social impact bonds appear in today’s Command Paper partly because of his work in lobbying for such change. In my authority of Birmingham, we have found that investment in early years can produce savings later in life. I think that Birmingham city council found that for every pound invested in early years, something like £4 could be saved in the criminal justice system later. Sometimes, different agencies from those responsible for early intervention reap the rewards of such intervention. Social impact bonds are a new way of bringing some of the incentives back into line. It is therefore right to test them out.

The Prime Minister said this morning that in health, schools, policing and social services, there had been

“excessive salaries and unjustified bonuses”.

Why were they allowed?

The hon. Gentleman knows that in the British administration a great deal of flexibility is given to, for example, local authorities. That is why it is right to look hard now at not only what constitutes the right level of pay for senior executives in different parts of the public sector, but the legislative changes that may be required to enable Ministers, when necessary, to exert downward pressure. I do not think that such legislative power is currently available in some parts of our public life, such as universities, further education colleges or local councils, but we have asked Bill Cockburn and his advisers to tell us a little more about that.

I am delighted that my right hon. Friend is looking to scrap or rationalise 123 quangos for starters—not before time. One chief executive of a quango told me that he was on £1,000 a day. That is disgraceful when there are public sector workers at the bottom who are paid £10,000 a year. We need to protect them and keep them in work to keep the economy going, and we need to ensure that we get rid of some of the fat cats.

There are obviously some complicated parts of public administration in this country. For example, the health service is a big and important organisation, which spends somewhere north of £90 billion a year. We want first-class people running such organisations. However, in such times, it is incumbent on senior leaders in public life to show leadership on pay. The Government have therefore said to the pay review bodies that we expect a pay freeze for the senior civil service, and pay awards of no more than zero to 1 per cent. for civil servants more generally.

The Chief Secretary has talked about reducing senior civil service costs by 20 per cent. by 2012-13. What has he planned for redundancy costs? Will redundancy be voluntary or involuntary?

Obviously, we hope to achieve most of our cost savings through voluntary redundancy, natural wastage and so on, but I certainly cannot stand here today and rule out the possibility of compulsory redundancy. The hon. Lady will know that we introduced reforms last week to the compensation arrangements available to civil servants, which are projected to save something like half a billion pounds over the next couple of years.

The Chief Secretary will remember—and you will, too, Mr. Speaker—that about six weeks ago, I asked him about this crackpot proposal to privatise the Thurrock-Dartford crossing. I asked how it was going to be done and what his brief said, and he held up a blank sheet of paper. He will understand why I am irritated. What is the answer to my question of six weeks ago, and how is he going to do it, bearing in mind that tolling is only allowed under the European directive as a mechanism against congestion? It is not a cash register for the Treasury. How does he propose to sell this and offer the purchaser some return? I just do not understand it; it is crackpot—daft.

The answer is that there is no European or other legal impediment to the proposal that we have introduced for the future of the Dartford crossing. My hon. Friend will know that it remains within the Government’s power to regulate tolls on the crossing.

Will the Chief Secretary do me a very great favour? Will he read an account of Britain after 12 years of Labour rule written in plain, simple English, shorn of the jargon with which his statement was laden? It is “Bog-Standard Britain” by Mr. Quentin Letts.

Will my right hon. Friend reflect on the exchange that took place earlier today about disability living allowance, and look at this as an opportunity to re-examine business processes and why we do things in a particular way? There are lots of areas in which we can make significant productivity gains by making delivery more customer-focused. DLA is a classic example, but the relationship between, for example the Department for Work and Pensions and housing benefit is another, and there are many others in which a more customer-focused approach would benefit not only the customer but the Treasury, too.

My hon. Friend is right and, as I said, I am particularly grateful to Sir Michael Bichard and public servants across 65 local authorities and a number of constabularies and primary care trusts who are looking at how we can bring together the administrative services run by central and local government to eradicate exactly the kind of inefficiency to which my hon. Friend points. We will have more to say about how we take those findings forward in the Budget next year.

I thank the Minister, both for the statement and for giving us early sight of it. Some of the measures are sensible, not least the ending of ring-fencing for council budgets. The Scottish Government have already done that. At its heart, though, this is £12 billion of additional cuts, some beginning next year, over and above the 10 years of austerity promised by Lord Mandelson. Given that even the CBI has argued that additional fiscal tightening should not take place until 2011-12, lest it risk a fragile recovery, what steps has the Minister taken to ensure that the cuts in the document do not lead to the weakening of recovery from recession?

If we want to grow our economy in the years to come, we have to make sure that we have strong public services in this country that stand behind families who want to get on in life. The hon. Gentleman knows that if we want to raise standards in public services at the same time as halving our deficit, we must make sure that our economy grows and that we make the right decisions on public spending and on tax. That is a presentation that my right hon. Friend the Chancellor will make to the House on Wednesday, but the hon. Gentleman will surely admit that if we want to raise standards and investment in front-line services, it is right to look for inefficiencies that we can cut at the centre of government, and today’s plan sets out a way to do that.

I am very pleased that my right hon. Friend has decided to keep standards at the top of his agenda and to axe many of the targets and inspectorates that maintain those standards, but can he elaborate on how he expects consumers of monopoly suppliers who know no other standards to raise those standards? What role does he see for professional external scrutinisers in maintaining or raising standards?

There are two ways in which we can exert greater popular pressure to push up standards in front-line services. The first thing that we can do is set out a range of guarantees to high-quality public services. That means, for example, the right to see a cancer specialist within two weeks if a specialist is worried that a patient has cancer, the right to a good local police team and the right to one-to-one tuition for a child who is falling behind at school. With those rights in place, it is much easier to judge whether public services are delivering for consumers. That is why, in today’s Command Paper, we have set out steps to free up the kind of comparative information that allows people to see how services in their area are doing compared with others, and whether they are performing in a more efficient way than others.

Neither in the statement nor in the earlier urgent question has the Minister made it clear how much he will save on the NHS supercomputer. The NAO says that the Government have spent £3.6 billion already. Can he confirm that that figure from the NAO is accurate?

I would need to check the date of the figure that was published by the NAO. The basic point is that, at a time when we are trying to drive standards up and the deficit down, in some parts of Government we will have to make difficult decisions about whether programmes that are in place are contributing enough to front-line care or whether they can be put off. There will often be difficult decisions. The decisions that we have set out in the Command Paper are difficult but doable.

Will not the smarter state end up looking very stupid if we outsource, sell off or transfer to the private sector and then are ripped off down the line? Are there any functions from which the Government intend to withdraw entirely? Does my right hon. Friend worry, as I do, about the morale of those working in a public sector that is constantly denigrated and told that it is useless?

I do not have quite the same apoplectic vision of public service reform as my hon. Friend. Sometimes there are efficiencies to be had through outsourcing certain services, particularly in finance, IT and so on. I make no apology for that. The prospectus that we set out this afternoon will be enthusiastically received by front-line public servants, not least because of its promise of greater freedom to innovate and do things in a different way locally.

I do not know whether the Chief Secretary has been watching too much of “Bargain Hunt”, but it is clear that the Government are keen on selling off the family silver. His listed a raft of things that would be sold off, but he did not mention Urenco. Will that still be sold off?

I welcome my right hon. Friend’s statement, but I urge him to go a little further in respect of quangos. He suggests saving only £500 million by abolishing or rationalising 123 of them. May I ask him to give me an early Christmas present—less quango for Marris?

I think I can promise that. The final report from the review of arm’s length bodies will be published at the Budget next year. The 123 arm’s length bodies that I set out this afternoon are merely an interim step.