`Bang Off Target? Public Service Agreements And The Road To Reform’

`Bang Off Target? Public Service Agreements And The Road To Reform’

Rt Hon Michael Howard QC MP

Speech To The Social Market Foundation
4 February 2003

Introduction

First, may I thank the Social Market Foundation for agreeing to host this speech and discussion.

The SMF has a proud inheritance. Its influence has been multi-faceted. There was a time, for example, when it was renowned for providing the Conservative Party with a never-ending stream of Directors of Research. I know your political leanings may have changed a little since then. But your imprint on Smith Square lives on, and my Party has reason to be grateful for that.

By a happy coincidence I am speaking here the day after you hosted a speech by Gordon Brown. In it he was billed as putting the case for a free enterprise economy and for reform of the public services. You will not be surprised to learn that I do not have a problem with either of these two principles. Rather my concern is over the yawning gap which exists between the rhetoric of the Government in these areas and the reality of their record in office.

That is precisely what I am going to look at now – focusing today on the issue of the public services.

The Government’s Claims

At its heart, this is a debate about the nature of reform to those public services.

In their 1997 Manifesto the Government said: `The level of public spending is no longer the best measure of the effectiveness of government’.

The way forward, we were told, was to improve the public services through a twin programme of investment and reform.

The first has undoubtedly occurred. By 2005-6, Government spending will have risen by nearly 30 per cent in real terms on its level when the Government first came to office.

But what of the reform?

‘By tying the money to reform and modernisation’, the Prime Minister explained, `we shall ensure that it is spent well and wisely and goes to the front line of services’ (Hansard, col. 402, 15 July 1998).

The Chancellor was even more emphatic: `I am going to insist [that] any additional resources must be matched by reforms so that we get the best value for money. There is not to be one penny more until we get the changes’, he said (The Sun, 30 November 2001).

At the centre of that promised reform agenda were the Public Service Agreements. Launching them in 1998, Gordon Brown described PSAs as an `essential change’ (Hansard, 14 July 1998, Column 188). Andrew Smith, as Chief Secretary, said PSAs would be `yoking investment to reform by holding departments accountable for the delivery of improvements’ (Andrew Smith, Speech to the Institute of Actuaries seminar, 6 February 2002).

Today, there is often a tendency for ministers to downplay the importance of a department missing its PSA target. But in fact PSAs started out as much more than targets. Rather, they were ‘Agreements’ that departments entered into with the Treasury in return for the additional resources. In the words of the Chancellor, they were a `contract’ for the renewal of public services (Hansard, 14 July 1998, Column 188).

And if the `Agreement’ was not adhered to, there were meant to be consequences: money would be withheld. Gordon Brown told Parliament that money would be released `only if Departments keep to their plans’ (Hansard, 14 July 1998, Column 188).

The Reality on PSAs

That was the theory.

It is now four and a half years since the PSA programme was launched. This means that one full four-year cycle has been completed. In the interim period there have been two further Spending Reviews, each with a revised set of targets.

That is sufficient time for an assessment to be made of how the programme is working in practice.

I want to spend a little time looking at this, before asking what lessons can be learnt for future reform of the public services.

It is now widely acknowledged that the current PSA system has failed, although you would hardly think so from what Gordon Brown told you yesterday.
This is what he said: `Where objectives are clear, well defined targets can provide direction; where expectations are properly shaped, they provide the necessary ambition; where people can see and assess the impact of policy, and where national standards are achieved and can be seen to be achieved, targets can make for the consistency, accountability, equity and flexibility to meet local needs that the traditional delivery of public services has often seemed to lack’.

That’s the rhetoric. Now let’s look at the reality.

Let’s look at some of the targets themselves.

The Government describes them as SMART - specific, measurable, achievable, relevant and timed. Yet many of them are none of these things.

The DTI, for example, has the target of `bringing UK levels of competition, consumer empowerment and protection up to the level of the best by 2006’.But `the level of the best’ is not defined. So how will the DTI or anyone else know whether `consumer empowerment’ has reached the required level by 2006?

And what about this target set for the Department of Culture, Media and Sport: `Facilitate and promote our competitiveness both at home and abroad of the creative industries?’

That target has been declared as met – without any explanation of how this supposedly SMART target was assessed.

The Treasury set itself an efficiency target before subsequently announcing that it was unable to measure its own output. So why was the target set in the first place?

Others have been set targets to set targets – so that all the department has to do to accomplish its target is to set one.

With that background of vague and often ludicrous targets, it could perhaps be expected that everyone would be able to meet their targets quite easily. But not at all.

We have studied the Government’s targets, in a 200-page dossier supplied to the Treasury in November at their request. And our preliminary assessment, based on the Government’s Spring Annual Reports, was that it had failed or was on course to fail up to 40 per cent of the targets it had set itself in 1998.

Of course, this has not resulted in money being withheld, as the Government had said. When asked if this happened when targets are not met, the Chief Secretary said last year: `we are not in the business of holding money back in that way’ (Newsnight, 15 July 2002).

Instead, a whole new lexicon has been invented by government departments in order to describe progress on failed targets. `Falling a little short’, ‘progress has not been as fast as the Government wanted’, `further progress is needed in some areas’, `challenges remain’, and, in relation to the Treasury’s own failed target on productivity, `outcomes mixed so far’.

Furthermore this increasing failure to meet the targets has been matched by a failure to provide information to allow proper scrutiny to take place. The Chancellor’s Pre-Budget Report promised as a `major reform’ that all departments would now publish reports every Autumn assessing progress against their targets.

Autumn has been and gone and Spring is now on the horizon, yet five departments – including Health and the Home Office - have yet to publish any document at all.

There could not be a greater chasm between this reality and Gordon Brown’s rhetoric. Yesterday Gordon Brown was playing fantasy politics.

Deeper Problems

So why has this failure occurred, and what should we do about it?

Matthew Taylor of the IPPR has criticised the Government’s approach. He highlights monitoring which diverts attention from principal functions; monitoring which encourages officials to work to the targets by any means necessary – including cheating; and monitoring which takes no account of the defining and assessing of an institution’s own values and purposes. He called on the Government to address the centralising momentum of its policies (Freedom for Modernisation, September 1999).

I want to look briefly at these criticisms in relation to the current PSA regime.

First, the sheer number of targets, and quite often their nature, has actually diverted time and attention away from the task of improving front-line services. It has encouraged instead a kind of `tick box’ culture in which the overriding aim is to satisfy Government demands for a particular target to be achieved, irrespective of whether it is actually tangential to the needs and wishes of the users of the services.

The monitoring process alone can consume substantial amounts of time. Only yesterday, in his CPS pamphlet, consultant oncologist Maurice Slevin criticised ` deeper and deeper layers of bureaucracy, with more and more monitoring of more and more targets and other such administration’ (Resuscitating the NHS, CPS, February 2003).

Dr Ian Bogle of the BMA has criticized the ‘multitude’ of national targets in the Health Service. He said: `what they are causing is a distortion of clinical priorities at patient level, a failure to use the increased monies being put into the Health Service effectively’ and `managers having to reach targets at all costs and at times taking measures that are not acceptable’. Dr Bogle continued: `Fulfilling the targets has led to unacceptable changes in behaviour based on target achievement, not on improved care for patients. Just to highlight this, there is the diverting of ambulances to lower priority cases, the hidden waiting lists, not putting patients on waiting lists overtly but holding them either at GP level or somewhere else in the hospital, downgrading the clinical conditions that have not reached target status, so that if you are unlucky enough to have a condition that has not got a target attached then you may find that treatment and care is not funded correctly; re-designation of trolleys as beds on wheels’ (Evidence to Select Committee on Public Administration, 31 October 2002).

A National Audit Office Report published in July 2001 found patients with life-threatening illnesses had their treatment delayed because priority was given to those with minor ailments who had waited longer.

Last Autumn the press reported the case of an orthopaedic surgeon at a leading London hospital who was told to give priority to routine surgery on local patients, instead of more badly injured accident victims sent from elsewhere, because of the effect on waiting lists. He said the policy was leading to 'disastrous outcomes' as there was a chronic shortage of specialist pelvic surgeons in the South East. Some emergency operations would now be performed by non-specialists with the risk of significant disability occurring as a result (Daily Mail, 23 October 2002).

The NHS is not alone in being affected by this culture.

The Government set a target for reducing school exclusions by one-third in order to promote social inclusion. They succeeded in reaching their target, but at the cost of a massive decline in standards of discipline in schools. Assaults on teachers rose fourfold between 1998 and 2001.

However laudable the intention, an over-obsession with targets – and often not the right targets - means that targets may be achieved at the expense of serious adverse effects elsewhere.

Second, the Government’s rigid target programme stifles local initiative. It has helped to reinforce a centralising mindset in the delivery of our public services.

Even the BBC on the night of his Spending Review Statement compared the Chancellor’s approach with the ten-year plans of the Soviet Union.

The third adverse effect of the Government’s programme is one which the ten-year plans also produced: they encourage cheating. One of the reasons why a hungry populace seemed to go hand in hand with annual proclamations of record grain harvests is that the figures were fiddled.

Similarly with the Government’s PSAs. If targets are being met, as Dr Bogle suggested, by redesignating a trolley as a `bed on wheels’, then it is clear that an improvement in service has not occurred. Indeed, the definition of what constitutes a bed in the NHS changed officially last December, and now includes trolleys in day surgery wards.

That is not the only `redefinition’ to have occurred. In 1997, Labour said it would abolish mixed wards by 1999 and provide separate bathrooms and lavatories for male and female patients. Having first put the target back and then watered it down, the Department of Health finally decided to include wards partitioned into bays in its figures for single sex ‘accommodation’.

The BBC found in October that almost one in ten hospital managers admits to distorting figures to fit government NHS targets. One stated: `All chief executives in the region contrived to make the same 100% return to the Department of Health on absence of waits in A&E. This was done with the encouragement of the regional director because we all agreed the requirement was meaningless’ (BBC Online, 7 October 2002).

Absence of Reform

But perhaps the most serious indictment of all is that the Government has used targets as a substitute for real, decentralising, reform.

To use an analogy, the Government has acted like the owner of an old car which has, alas, long since seen better days. He wants to get from London to Birmingham. So he fills it with petrol, knowing it needs ‘resources’. And he sets himself a target of getting there in two hours. But he does nothing at all to deal with the car’s clapped-out old engine, faulty steering and flat tyres. He is unlikely to get to Birmingham on time.

The Need for Decentralisation

Real reform means decentralisation. A rigid approach, especially laid down from the centre, simply does not work. The centralising mindset says that local professionals cannot be trusted to make decisions on the services they provide, and must have their priorities dictated from the centre. And it sees such central diktat as a more reliable way of improving service delivery than trying to increase the autonomy of local providers and expand the range of choices available to the users of the services. It undermines professional judgement and ignores the twin roles of diversity and consumer choice in driving up standards.

In fact a rigid, centralised, top-down approach is destined for failure. No centrally planned system can ever hope to satisfy the multiple needs and priorities of a wide range of individuals. And no centrally planned system will secure the improvements in front-line services which we all want to see.

The current centralised approach helps to explain why, despite extra resources and the best of intentions, a recent 20 per cent rise in health spending led to a rise of less than 2 per cent in the number of people receiving hospital treatment. And why one in every four children leaves primary school unable to read to write and count properly and more and more children in inner cities are leaving school without a single GCSE.

People are simply not getting the better public services they deserve in return for the higher taxes they have paid.

The Alternative

The answer to such failure is not now to set targets which are so bland, so vague, so hard to measure that it will be impossible to fail them.

It is to embrace the need for real reform and change in the way we provide our public services, learning from the best examples around the world.

We have made a start in the policies we have begun to outline.

First we want to see greater professional autonomy. In education, we have proposed giving schools back their power on exclusions, and giving more autonomy to head teachers to set terms of pay and conditions in their schools. And in health, we have put forward plans to give all hospitals foundation status, with the power to raise funds and take decisions to provide better care for their patients. Likewise we want police officers to have more freedom to do their jobs.

Second, along with autonomy comes diversity. Local providers should be allowed to respond to the needs of their communities. We want to break away from the assumption that just because the state pays for services it should provide them.

For example we want to see more voluntary organisations bidding to take over work currently carried out by local and central government.

In some cases there should be more diversity in funding, as well. On health care we want to recognise people’s contributions towards their own healthcare, to the benefit of others waiting behind them in the queue.

Third, people should be empowered to make the choices which will bring responsiveness about. Our State Scholarship initiative, for example, aims to extend the opportunity to attend excellent, successful schools to all children, regardless of income or ability – beginning in inner city areas where thousands of children are being left behind by failing schools.

Our proposals are based on new schools, not run by the state, accepting pupils in return for state funding. Parents would not need to pay extra.

The Challenge of Decentralisation

This is a fundamentally different approach from that of the Government. It means less interference. Instead of rigid centralisation, this approach recognises that standards are likely to be driven up far more quickly in many cases if government gets out of the way and professionals are allowed to use their professional judgement to achieve the results we want to see.

But it is not an easy process. There are pitfalls for any politician choosing to take the path of decentralisation. For example, while standards will be driven up across the board, this will not happen at a uniform pace. But as Iain Duncan Smith has pointed out, if you won't allow one foot to move in front of the other, you will stay standing still.

This is often difficult for politicians to accept. Their instinct is often to do what ministers in this Government set out to do – to set down from the centre precisely how local services will improve. But in inhibiting professional autonomy, diversity, and empowerment, that very process helped to ensure that those improvements in service did not materialise.

Tony Blair pays lip service to reform of the public services. His rhetoric heralds the end of the `one-size-fits-all’ approach. But in practice his Government follows the opposite course. Government policy is `one-size-fits-all’ writ large. Yet the tighter the Government seeks to control, the more it stifles the very improvements in services which it wishes to see.

We shall do things differently. We must dare to contemplate the possibility of differences in schools and hospitals. We must dare to believe that quality is more important than uniformity. We must dare to recognise the importance of innovation as a driver of higher standards. Sometimes we must dare to let go.

No other country runs its public services as we do. If we want to achieve world class standards in our public services, we must learn the lessons which the rest of the world can teach, and come up with some of our own as well.

That is the challenge we face. It is a challenge we are determined to meet.

Rt Hon
Michael Howard QC MP