Spending cuts mean smaller and smarter government

Much of the debate around devolution has been too focussed on high level political principles and statements of national pride to the detriment of the detail of how to make the National Assembly work effectively for Wales.

Prior to the 1997 referendum, many people (including myself) misunderstood exactly what was to happen. Basically we anticipated the National Assembly would have looked something like a large county council, perhaps similar to the former Greater London Council (which after all had a population well in excess of Wales). This body would have had large scale devolved powers from Whitehall and would have been relatively small in size. It would have had: elected members, a chief executive and a professional management team.

Instead, we got elaborate governmental arrangements which in many ways, and rather ironically, broadly replicate the UK government system. It has grand constitutional arrangements, a separation of executive from legislature,  a presiding officer, fifteen Ministers and Deputy Ministers (out of a total of 60 AMs), a generous members expenses system. It also has a large supporting bureaucracy which is modelled on, and still part of, the UK Home Civil Service.

As we head towards a time of austerity, signalled by today’s Comprehensive Spending Review, we should examine alternative models more suited to our straitened financial circumstances.

The over-arching political and economic issue is the economic and fiscal challenges facing the UK. These are unprecedented and enormous. The size of the UK’s public budget deficit and the associated borrowing requirement (£149 billion in 2010/11) will take the national debt from its current level of £816 billion to a projected figure of £1.4 trillion in 2014. This equates to £24,000 per head of population. The UK coalition government is implementing a severe austerity policy which involves:

• A reduction in UK public expenditure of £6 billion in 2010-11.
• An emergency budget last May which announced tax increases, reductions to welfare benefits and provided an outline of the magnitude of public expenditure reductions that would be implemented over the coming four years.
• The Comprehensive Spending Review, which will be announced today, will provide more detail on where the expenditure reductions will take place. However, the emergency budget indicated that after protection of certain departments such as health and international aid, the average cuts in departmental spending, over a four year period,  are expected to be an average of 25 per cent.

It seems reasonable to assume that the Assembly’s block grant will suffer a reduction of similar magnitude over the four years. This is unprecedented in modern times. The vast majority of politicians, civil servants and managers (within and outwith Wales) have been brought up in an environment of continuous growth in resources. This has now ceased.

Furthermore, there are other, longer-term problems that will not be resolved in just a few years. For instance, last year the Economist published IMF projections which suggested that the costs of the recent financial and economic crisis will be dwarfed by the costs of the ageing population in the UK and most other countries

In this context we need to consider how we can obtain more effective arrangements for the government of Wales. In my view there are four issues to consider.

Firstly there seems an over-emphasis in Wales on unsustainable ideological principles rather than what works best. While ideology is a key aspect of politics, for example equality versus freedom, there are situations where it seems the positions held in Wales are more to do with stubbornness and maintaining vested interests rather than being true ideological issues. To take just two examples:

• A view that outsourcing the delivery of public services to the private sector is undesirable in principle. Most people would see this as a managerial rather than political issue, concerned with identifying the best approach to service delivery. In some case outsourcing might be best while in other cases it might not.
• It sometimes seems that the Welsh Government adopts policies which are opposite to or different from those implemented in England almost as a matter of principle rather than on the basis of would works best. Examples include the failure to use the PFI effectively, and the absence of patient’s choice in the NHS. This is not to suggest that England is always correct in what they do only that sometimes it might be.

Secondly the structures for the delivery of public services in Wales are inappropriate. The Assembly inherited a structure of local government established in the 1990s comprising 22 relatively small local authorities, certainly when compared with other parts of the UK. This has remained unchanged.

In other areas there has been substantial change with the NHS Wales having gone through several reorganisations during the lifetime of the Assembly. Also, a number of Quangos such as the Welsh Development Agency and the Welsh Tourist Board were abolished and their functions absorbed into the Welsh Government.

Unfortunately there exist major weaknesses in the current arrangements including:

• The small size of Welsh local authorities and their inability to deliver certain services effectively and efficiently.
• A lack of co-terminosity between the various public bodies in Wales including local authorities, health boards, and police authorities. This is a major inhibitor of effective strategic planning.
• Limited success of multi-agency partnership arrangements in coordinating the delivery of services.
• A lack of clarity about economic development in Wales and the respective roles of the Welsh Government and local authorities.

One option to consider to resolve these problems would be the creation of a smaller number of larger local authorities which would also have direct responsibility for the management of health services.

The third issue is an emphasis on greater localism. The former UK foreign secretary, Robin Cook stated that the UK was the most centralised country in Europe and the Economist recently suggested that the UK is the second most centralised country in the developed world. UK governments habitually adopt a strongly centralised command and control approaches to the delivery of public services. Such central planning developed when it was fighting in World War II was retained in peacetime. Traumatised by defeat or collaboration, other European countries remade their states from first principles, often pushing power away from the centre. In the UK victory justified and strengthened Westminster and Whitehall.

Unfortunately, this centralisation is replicated in Wales. The Welsh Government operates a regime which is, arguably, even more centralised than that applied in England. Its bureaucracy has grown enormously over the years and as a consequence is stifling local initiative and focus. In some cases, central decision making is leading to wrong decisions being made at local level.

Such centralised command and control models just do not  work. The UK had a budget deficit of £149 billion last year and there are still high levels of dissatisfaction with public services. The new UK coalition government seems to have realised this and is pushing forward strongly on greater localism and providing greater discretion at regional and local level. Examples include: abolition of Government offices and Quangos, and the Audit Commission, together with reductions in the size of Whitehall departments. If the UK government sees the need to devolve power to the local level, the Welsh Government should do the same in terms of a much smaller bureaucracy and greater devolution of decision to the local level and.

My fourth issue is a growing consensus that  the existing civil service model needs reform. Many commentators have questioned whether the civil service is really up to the challenges now faced by the UK. Such views have recently been echoed by Francis Maude the Cabinet Office Minister with responsibilities in this area. Among the points made by him were that the civil service must:

• Play a central part in deficit reduction, that is be smaller in size.
• Provide better value for money and better service delivery for the taxpayer.
• Build its skills and be agile to wrestle with complex challenges it faces.
• Modernise itself as an employer.
• Be clear on the limits of its role and innovate to enable others to deliver.
• Be transparent and responsive.

These points will resonate with many in Wales who believe that similar arguments can be applied to the Welsh civil service. Reflecting this, some specific reforms which might be considered in Wales include having:

• A much smaller Assembly civil service
• An improved skill base with a stronger role for service professionals and technical experts.
• A focus on developing effective public policy rather than protecting Ministerial reputations.
• Greater transparency about decision making.
• Enhanced innovation and reduced risk aversion.
• Enhanced support to, as opposed to control of, local authorities and other agencies.

A failure to achieve such am overall transformation will, I fear, only lead to even greater apathy or hostility to the Assembly, irrespective of whether it takes on any additional powers.