Tuesday, 13 July 2010

UK public spending cuts: Good news, bad news

Yesterday evening I was interviewed on BBC Midlands Today on the current UK spending cuts, which are dominating the local news headlines, as budgets are cut daily for social care, schools, etc. As usual, it was not possible to say what I really wanted to say – the questions were narrow and my reactions were too slow to bend them to my message!

So my core argument didn’t get across – there’s good news and bad news about the cuts so far. And no political party is spelling out what is really going on.

The bad news is pretty clear. Overall, the current estimate is that the ringfencing of health and overseas aid, plus the ‘protection’ afforded to education and defence, means the average expenditure cuts in the rest of public services will amount to around 33-35% over the next five years. This is savage and not remotely possible without affecting frontline service staffing. The level of consequent unemployment of public service staff will be at least 600,000, possibly nearer 1m.

What will this mean for service users? First, a lot more people will be told they are not eligible for a service, where public agencies can exclude them– eligibility criteria will be drawn much tighter. If you are eligible, you will have to wait longer, you’ll get less service, it will be delivered by less experienced and trained staff and you will have less choice (if any) in what type of service is available to you. If you try to book an appointment (e.g. with a doctor or a social care worker), you’ll have to wait for it, it may well be cancelled before it happens and you’re unlikely to see the same professional staff as the last time.

Of course, you may well be able to turn from the Big State to get some help from the Big Society. But there’s likely to be bad news there, too. The recession has increased the number of people volunteering to help out others – but reduced the capacity of third sector organisations to use them productively, because they too are short of funds to organise themselves.

So, some tips:

• Don’t get ill (just protecting NHS spend won’t be enough to provide the likely number of future users with current service quality levels).
• Don’t let anyone you depend on for support get ill (or leave the neighbourhood).
• Be (VERY) nice to your neighbours (you may be needing them a lot more in future).
• Start saving – if you need any public service in the future, you may well not be able to get it or you may have to pay a large part of it when you do get it.
• If you’re young, start learning a foreign language (you may need to go abroad if you want a public sector job in the future – or a public service).
• Take up ‘easy access’ leisure activities like walking and birdwatching – anything that requires public sector provision, like swimming or sports centres, may be too expensive for you or too far away from you in the future.

It’s a pity that the coalition government parties don’t want to talk about these inevitable consequences of their decisions. The new era of ‘transparency’ is being spun as fast as the previous era of ‘transformation’.

But there is some good news as well. The first is that the cuts are possible – the number of public sector employees who are due to retire in the next five years is huge. This means that the spending plans can indeed be implemented and at relatively little cost (at least, compared to redundancy payments – of course, this will hit the public sector pensions bill but that would have happened anyway, irrespective of this round of cuts).

Second, we have just emerged from a period of higher public investment on capital than at any time in UK history (both in terms of money spent and in terms of spend as a proportion of GDP). This is particularly evident in the new schools and hospitals all over the country. This will mean that quality in services where the budget has been cut will not be so badly savaged as it would have been in the past – at least the service buildings and equipment are now in tiptop shape, at last putting right the damage from the 1976 IMF cuts and the abandonment of public service infrastructure in the Thatcher-Major era.

Third, not all the cuts in staffing will mean that services will be worse in ways which matter to users. We’ve slowly come to realise, particularly as a result of the Best Value regime in local government ten years ago and the ‘transformation’ agenda of the last five years, that the way we do local public services is probably NOT the best way. Many of the changes in the next few years will be for the better - e.g. social media will make access to services much easier and revolutionise understanding of how to get the most out of them. However, we don’t know which ones will be positively affected in this way – for most public services there is still no consensus on how to reconfigure them to improve them. Many of the changes in the next few years are likely to turn out to be blind alleys – at best, not leading to improvement and, at worst, making services significantly worse.

This applies both to ‘traditional’ public services – those that continue to be delivered by the professionalised public service providers – and also to the ‘co-produced’ services which in future will become the joint responsibility of public service agencies, service users and other members of the community. While the coalition is placing huge hope in the potential for the Big Society to mop up the service needs which will no longer be covered by public spending, the truth is uncomfortable – all our research indicates that the public sector (managers and staff) does not understand co-production, that professional public service staff are reluctant to get involved in it, are largely clueless on how to stimulate it and are poorly prepared to manage it systematically. Moreover, the public is likely to be given the message that they are being sold short by being palmed off with second-rate, non-professional services.

Funnily enough, the Labour party hasn’t been talking much about these ‘good news’ items. Maybe that’s because it wants to exaggerate the damage done to public sector jobs by the cuts, is embarrassed by rather than proud of its capital spending record in government and nervous about attacking public sector workers for the way they coldshoulder co-production. This is a pity, as Labour can only prepare for future government if they recognise the realities faced by the current and immediately previous governments.

Unfortunately, each of the ‘good news’ items has a sting in the tail. The early retirement of a huge part of the public service workforce will leave most public services to be delivered by relatively inexperienced staff and managers in agencies with seriously depleted organisational memories. The huge Noughties capital spending programme is being terminated early, leaving at least 20% of the high need schools, hospitals, transport and housing projects high and dry, so that some areas of the country will be massively disadvantaged for the next five years, compared to their luckier neighbours. And the big gains which will come from reconfiguring public services in intelligent and imaginative ways will be offset by the damage done by the precipitate speed with which the programme is being rushed through - too soon to find out what works, so that service changes imposed in a panic will cause pain for years and over a wide area, even when it’s quickly apparent that they are truly dumb.

Of course, there is still the battlecry from the coalition government that radical spending cuts are needed soon. We have to ask: “Really? Whatever damage they do?” That is hardly a rational approach.

Rather, we need to weigh up the pros and cons of radical and rapid spending cuts. We have on one side of the balance the avoidance of the high interest costs which would arise from a longer period of high debt levels (substantial, but not crippling) and the risk of a UK credit rating downgrade (very low).

On the other side of the balance, there is the major damage done to the quality of life of much of the UK population over the next five years, particularly those most vulnerable. In addition, there is the danger of a double-dip recession, which even the Office of Budget Responsibility has admitted has been increased by the government’s emergency budget.

There are red herrings to throw out of the scales entirely – e.g. the argument which has recently reappeared (though it was hardly voiced during the election campaign) that public sector spending crowds out private sector investment and production. This hoary old non-sequitur will surely not confuse as many people in 2010 as it did in the heady Bacon-and-Eltis days of 1976. Again, there is the argument that the debt will ‘crush future generations’ – the ‘one hand clapping’ argument which I’ve written about in this blog previously, which ignores the fact that public sector assets cover a large proportion of the debt and, as the economy recovers, will reflate fast in value and reduce the net debt value. Not to mention the fact that it is largely public spending which has stabilised housing values and reflated the stock UK market by 40% since the bottom of the recession and has therefore been responsible for a huge increase in the value of private wealth (corporate wealth and household pensions), far from ‘crowding out’ the private sector.

So, the verdict is very simple – the bad news outweighs the good news. These UK public spending cuts are too much, too soon, too fast.

Saturday, 8 May 2010

Why Red and Yellow might lead to 'Go'

So, just two days after the general election, Clegg is being courted by both Tories and Labour – and being encouraged to jump for one or the other. I think that he would be unwise to jump for either at the moment, if he is not to throw away his hard-won cards.

My bet is that Clegg won't (or won't be allowed by his party) to enter into ANY arrangement with the Tories, mainly because they won't offer any real promise of PR and his party will make it clear he MUST vote against their '50 day' budget, if it goes beyond the bare minimum cuts that Cable would recommend.

So what then? It’s clear he has to make at least a show of talking to Labour. (My bet is that Gordon Brown will make it clear at such talks that he is willing to resign, now or before the autumn party conferences, if that will smooth the way to an agreement). However, I believe that Clegg will conclude (as other leading figures in Labour will also conclude, whatever Brown’s view) that a coalition with the Scottish Nationalists, Plaid Cymru, SDLP (plus Green/Alliance/Indep MPs) will be too greedy in its demands and too vulnerable to last. In any case, there could be no ‘easy fix’ which could quickly align their two manifestos in a way which would be acceptable to EITHER set of party members, so that any patching together would anger key party members, including MPs. So that won't work either.

This means that David Cameron will have to run a minority government. However, his '50 day' budget (presumably in mid-July) won't get through Parliament – all the opposition parties will lose face if they do not vote it down. Consequence – another election, presumably early September. Same result! Utter mess.

So, is there any way to avoid this? No doubt there are several – probably mostly unappealing. However, there is one route which would appeal to me – and, I guess, to many who fear the damage which a long-running Tory government would wreak, if allowed by the LibDems.

If Brown and Clegg agree that the foregoing scenario would be disastrous, they might also steel themselves (whatever their tribalistic tendencies) to agree that it requires drastic measures. So, it would make sense for them to agree to discuss the basis for a joint manifesto, over a period of months. It would be presented to their respective party conferences in the autumn. (Under a different Labour leader, probably). Both parties would have to swallow and accept that only such a manifesto gives any real chance of power after the following general election. I think they would buy it (while spitting forcefully, naturally).

In the meantime, Brown and Clegg could give Cameron notice that they will not vote on ANY economic or financial legislation until the Budget in March 2011 - he will have carte blanche to put through whatever he wants. But they would simultaneously put him on notice that, if they cannot accept Budget 2011, or any subsequent economic or social legislation, they will force a vote of 'no confidence' and intend to fight the next election together, with a view of forming a coalition. Finally, they should agree the subsequent coalition will run for four years, but then be reconsidered by both parties, with a view to returning to independent running for the subsequent election.

In my view, they would win (especially after the Tories have had a year to make a mess of the economy). And they would sacrifice relatively little of their core policies by working together for four years. And they would save the UK what might otherwise be some years of utter indecision.

Thursday, 18 March 2010

Not all complex adaptive systems lead to system growth

This picture provides a stark reminder that complex adaptive systems sometimes exhibit behaviour that leads the whole system to termination rather than growth. As ever, the lesson for social systems is whether we can identify that the 'strange attractor' underlying the system's behaviour contains system termination points - and whether there is a lever available in our meta-planning toolkit either to eliminate such points from the set of possible options or to make them less likely as system destinations.

For the starfish, the answers to these two questions appear to have been 'Yes' and 'No' respectively. If our social systems are to avoid the same fate, it would be good for us to find the answers which apply to us. We still seem some way from this position.

Wednesday, 17 March 2010

Why the Times wouldn’t pass Politics 101 in its analysis of universities v. Sure Start

A strange and wildly misguided editorial in today’s Times (‘Politics ABC’ at http://bit.ly/cxhPsJ) argues that “In the context of a looming budget deficit, Sure Start expenditure of more than £1 billion a year is exactly the kind of line item that politicians should be scrutinising, not protecting”.

It is particularly risible that the Times leader suggests that “the regrettable reality of the public finances would make this necessary …even if some [children’s] centres had not morphed into middle-class crèches from the route out of poverty that they were originally supposed to be”. Given the stranglehold on university applications held by the middle classes, turning many parts of the university system into middle-class finishing schools, this is very rich indeed.

The Times recognises that “extensive research clearly indicates the importance of investment in the early years” but goes on to argue that “the prize of greater social mobility will not be won if investment in early years comes at the expense of opportunities later in life”. Is this seriously meant to suggest that the UK university system is major vehicle of social mobility’? Clearly, the idea of ‘extensive research’ by Times leader writers doesn’t include most of the current public policy literature on higher education.

For example, in the UK, the recent Milburn report on access to the professions (http://bit.ly/a1Daun), drawing on the current academic research (nationally and internationally) concludes that social class has been, and remains, “a strong determinant of participation in higher education, and this gap has not closed substantially in the last half century”. It reports that the participation rates by higher social groups (III, IV and V) have risen over 1960 – 2000 from under 30% to about 50%, while for social groups I and II the rise has been from around 5% to about 20%. The Sutton Trust report in 2007 found that 44 percent of those from the richest 20 percent of households attained a university degree compared to just 10 percent from the poorest 20 percent of homes (http://bit.ly/cZT9OZ).

In a direct test of social mobility, the OECD found that, in the UK, 50% of the economic advantage that high-earning fathers have over low-earning fathers is passed on to their sons - in Australia, Canada and the Nordic countries, by contrast, less than 20% of the wage advantage was passed on( http://bit.ly/c9jOUI). It concluded that the chances of a young person from a less well-off family enjoying higher wages or getting a higher level of education than their parents was "relatively low".

In the US, the picture is little different – Robert Haveman and Timothy Smeeding (http://bit.ly/9447FU) have concluded “The US system of higher education reinforces generational patterns of income inequality and is far less oriented towards social mobility than it should be. If university education is to improve the chances for low- and middle-income children to succeed, the current system must be radically redirected”.

And what are we to make of the figures cited by the Times leader, that “Britain is now at or above the OECD average for spending on pre-school and school-age children, but below the OECD average for spending on tertiary education”. Given that higher education mainly provides the finishing touches to a cruelly skewed system, ensuring the reinforcement of the advantages already conferred upon children by accidents of birth into the right income and social class, why should public spending on the tertiary education of well-off young people be regarded as a priority? This would only make sense, if the argument were that we should expand public spending in order to give zero and low university tuition fees to a wider group of young people from families with low incomes, along with significant subsistence grants to compensate them for not earning for three years (never mind not contributing wages to families that badly need it).

However, even this argument, while at least logical, is questionable. Surely it is the continuing system of low tuition fees to young people who come from better-off families (i.e. the majority of university students) which “is exactly the kind of line item that politicians should be scrutinising, not protecting”, to use the Times leader’s own phrase? Up to recently, there has been a lot of mumbling that the tuition fees being charged by universities, and the consequent debts being amassed by students, would eventually choke off the demand for higher education. This argument is certainly not open to the writers of the Times leader, given that they are starting from the ‘shocking’ premise that more than a quarter of a million university applicants may be denied a place this year. It seems that young people (or, more accurately, their parents) see the long term economic and social payoffs from a university education as well worth the (relatively minor) investment they have to make.

I do not want to argue that those who can’t get a university place this year are not being disadvantaged – in public policy, any initiative which is promoted for good reasons (like Sure Start) crowds out other initiatives which could have significant net advantages, as some forms of university expansion in the UK would surely have. It’s a matter of priorities, as all politics must be.

However, I do want to argue that our concern for those not getting a university place this year should lead us to different conclusion from those reached by the Times leader writers. From the point of view of the applicants themselves, we should recognise that most of them, if they have the required grades, will get into university a year or two later – this is the normal pattern every year. Nor is it an unambiguously bad thing that they have to wait a year longer – indeed, there are good arguments that we are allowing far too many young people into university at too young an age, without the experience or maturity to make best use of their university experience. It is also interesting that many young people in Europe now choose to study in other countries, either because they want the international experience (and we should seriously ask why such a low proportion of British students takes this route) or because they cannot pursue their chosen course in a university in their own country. (It is now common, for example, for young German students who want to study medicine but cannot get a place in a German university to enrol in courses in Hungary or elsewhere – and those who do well can then transfer later back into the German system to take the places of those who fall by the wayside in those courses). Of course, it may cost more to study abroad (although this is often not the case, given the relatively high cost of living in the UK) – but for the majority of this ‘blocked’ quarter of a million, their application to universities across the UK already suggests they are willing to pay the necessary costs. The Times leader writers seem to see this quarter of a million students as locked into the UK university system. This is a symptom of how narrow and restricted is the conventional view of the role and potential of higher education in this country.

For policy makers, the implications of this argument are quite radical. The current university funding system is failing dramatically to achieve the social mobility which is often claimed to be one of its most important purposes. It is time to institute a serious of policies which will actually make it more likely that this key purpose is achieved in the future (see bit.ly/8LaBn4), including:

• no more tax breaks for private universities (or the private schools which dominate admissions to the UK’s top universities);
• free choice of state universities for all students with the right entry qualifications, with lotteries where universities are oversubscribed;
• attractive bursaries for all students whose parental income means they do not have to pay student fees, so that more low income students are attracted to university;
• an end to the wholly artificial division between full-time and part-time higher education, particularly in relation to its funding and student support mechanisms;
• a radical extension of degree study opportunities within further education, so that talented individuals have access to degree qualifications, where their study programmes merit it;
• two-year exemption from national insurance contributions (by both employers and employees) for the top 10% of every degree class in the UK, whatever sector they are employed in
• a guarantee for the top 5% of performers in every degree class in the UK that they can enter a two-year training programme in the public sector, so that entry into the public sector is on merit.

In passing, I do not want to argue that Sure Start has had an unambiguously ‘green light’ from its various evaluations – although they have highlighted a mainly favourable picture. Nor am I arguing that it is enough, by itself, to focus on children at the start of their lives - the Sutton Trust report in 2007 ((http://bit.ly/cZT9OZ) pointed out that children from poor households who are in the brightest group at the age of three slip back in developmental tests by the age of five, and are likely to be overtaken by those from affluent backgrounds by seven. However, this is an argument for continuing to experiment and improve Sure Start, and other early years programmes, not cut them back.

In sum, the argument in the Times leader today that funding of the university system should be increased at the expense of Sure Start in order to promote social mobility is not only logical nonsense, it is arrant hypocrisy – it betrays an underlying desire for Middle (and Rich) England to continue to hijack public expenditure for its own purposes, under the guise of ‘making the most of the younger generation’. Perhaps we should not be surprised to see such arguments in a Times leader?

I think it is safe to assume that the wholly unconvincing Politics ABC which appeals to Times leader writers will be seen through by those who have done Politics 101 at the universities they seek to advantage. Let us hope it also seen through by the majority voters (voters whose children and grandchildren have gone to or are likely to go university still make up well under a half of the population) and by politicians. For the moment, let us be thankful for small mercies – it would have been worse if these fatuous arguments had appeared in the Daily Mail, a newspaper to which politicians actually pay some attention.