Speech to Progress, London, 16th January 2008

In the last decade New Labour has made two significant advances when it comes to the public services.

The first is to have delivered substantial improvements in their delivery.  Of course there are some very real problems but there is much progress.  The creaking estate of Victorian schools and pre-war hospitals has been modernized.  Staff numbers, whether police or nurses or teachers, have increased - in some cases dramatically.  The same is true of childcare places and criminal offences brought to justice.  Overall crime has fallen.  The bugbear of the old NHS – long waits for treatment – has been beaten.  Standards in schools and admissions to universities have both risen.  Compared to a decade ago public services are in a far better position practically.

Second, New Labour has put them in a far better position ideologically.  A decade ago the grass was always supposed to be greener on the other side: whether that was the French health system or the German welfare state.   Today our continental cousins are the ones experiencing turmoil and it is often British reforms in health, education and welfare that attract attention and imitation. The old consensus was that public services were part of Britain’s problem. Today they are seen as part of the solution. Even the Conservatives now claim that public services come first. It is a seismic shift in the political landscape and an ideological victory for progressive politics. 

The courage to invest and the courage to reform is delivering results.  And as last week’s health speech by the Prime Minister demonstrates New Labour’s reform drive is being reinvigorated.  There is unfinished business to complete.  Public services today are in transition - between an old model of state control, monopoly provision and a provider-dominated culture and a new model where the citizen is in control, there is a mixed economy of provision and a user-led culture.   Some services have progressed more than others along this path of change but none have yet reached their final destination. 

The question now is whether the journey is completed or truncated.  And the reason why we should be moving forward not back is simple.  Public services are getting better but they are not yet good enough.  The issue is not so much structural.  It is cultural.  Too many NHS patients still too often feel they are treated like numbers not individuals.  Too many parents have to fight their way through a labyrinth of bureaucratic appeals processes to get their child into the school of their choice.  And too many elderly or disabled people still find themselves unable to get the seamless service they want from health and social care.  They find themselves in a kind of no man’s land stuck between a rhetorical future where the citizen is in control and the present reality that all too often still denies them control. 

Further reform is needed to cope with the modern challenges public services face.  Let me mention just two.

First, the equity challenge.  A fair society requires strong public services. And here Britain has much of which we can be proud.  An NHS where care is based on need not ability to pay. An education system which rejects selection and is comprehensive.  Poverty falling both in relative and absolute terms.  And an economic and welfare policy that has helped 2.5 million more people into work.  But ours is not yet a fair society and the equity principle in our public services has now always been matched by practice. In health, over decades inequalities have widened not narrowed.  In education selection by academic ability may have largely gone from our schools system but selection by social position lingers.   And all too often the poorest services are still in the poorest communities which is why – in survey after survey – it is the poorest groups in society who most strongly want more choices over the services they receive.  If we are to achieve our vision of public services personalised to the needs of the individual then we must recognise that big State bureaucracies are invariably hopeless at that and instead that we have to change the distribution of power within the public services to put the user in the driving seat. 
Second, the expectancy challenge.  We live in a world where people are more informed and inquiring.  And they are demanding a greater say.  Ordinary consumers are getting a taste for greater power and control in their lives.   They expect services tailored to their individual needs.  They want choice and expect quality.  It is not that the public want schools or hospitals to behave like supermarkets or salesrooms.  The relationship people desire is not merely a transactional one.  They want a personal one.  To be treated as an individual not just another number.  As the post-war baby boomer generation grows old for example it seems unlikely to me that we will tolerate the inevitability of a council-decided care home in the way previous generations of the old have done.  We are far more likely to want to live out the end of our lives cared for in our own homes by people we choose with budgets we control.

And that is why I very much welcome last week’s speech by the Prime Minister in which he advocated precisely this sort of reform in the health service.  The question is how we apply such a bottom-up approach to improvement across the whole of the public services.  Not just in health and social services but in welfare, training and education reform.  So that individual citizens are able to take control and make the choices that are right for them.

Standards, inspection, devolution, competition, commissioning, incentives – all of these have a part to play in improving public services.  But in this next phase of reform it is the distribution of power across the whole of the public services that needs to change.  The truth is that the wealthier you are the more power you exercise.  Better-off parents stand a much better chance of getting their kids into better schools than poorer parents.  Conversely, despite having higher health need, poorer NHS patients got fewer hip or heart operations than wealthier ones.  Our reforms should empower the people who have least power, usually the poorest.  So what have sometimes been seen as competing objectives – public service reforms and social justice programmes – should in future be reconciled as compatible one with another.   It is not slowing down on reform that will deliver greater equity.  It is speeding up.
So, what would this mean in practice?

First, power would move from the centre to the local.  Whitehall should not just be re-organised but should be capped in its scale and scope.  The civil service is the one part of the public services that has largely escaped our reforming zeal.  It should do so no longer with departments in future working to transparent outcome-based contracts and senior civil servants pay more dependent on performance against such contracts. Local government and its system of funding should be freed from much central government control.  Where services are failing communities should have the legal right to have them replaced.  Building on the Foundation Hospital model a new form of public ownership - community-run mutual organisations - could take over the running of local services like children’s centres, estates and parks.  And both the local police and health services should be made directly accountable to local people through the ballot box as part of a wider raft of policies designed to democratise our democracy.

Second, the transition from public sector to public services should be completed.  Of course competition pure and simple cannot bring about improvement in what are complex services delivering multiple outcomes to their users.  In some services competition is inappropriate or impossible – hospital A&E services are a case in point.  But where it can be applied, managed competition gives organisations a sharp reason to focus on delivering better services to users.   That is why it should be extended not retracted.  And in turn that means new assumptions guiding policy.  Services should be subject to a level playing field where public, private and voluntary sectors are able to compete to be providers.  Commissioning and providing should, wherever possible, be separate functions.  And existing services which fail to meet a minimum standard of provision – such as GPs who fail to tackle health inequalities – should be subject to external competition. The destination should be a genuine mixed economy of provision across the public services in which the public sector partners providers from other sectors.

Third, the governing model in our public services should move from one that is driven from the centre by standards and targets to one driven from below by incentives and users.  Resources should follow results.  Schools, for instance, should receive part of their funds according to the value they add to their pupils’ education.  In turn, health and local council services could adapt the value-added tables that measure how far pupils have improved as part of a radical rethink on how we measure local service performance.  The move should be away from assessing inputs and activity rates towards measures that assess outcomes and experiences. And to ensure the focus is on improving the quality of the user experience, the payment of providers should in part depend on how users themselves assess how local services are performing.

Fourth, reform should move beyond merely giving individual citizens choice to giving them control.  In social care direct payments already allow some older and disabled people to customise care according to their own need.  The next stage is to give far more people the option of their own individual budgets so that rather than having to choose from a pre-ordained menu of services citizens can formulate their own menu.  Parents who have children with special needs could choose to have a budget – worth the annual cost of the conventionally provided service – so that they can personalise care according to their specific family circumstances.  So too could people who are in training, avoiding the mistakes made with Individual Learning Accounts.  And we should not shy from applying the same principle in both health and education.  In the NHS patients are already able to choose their hospital.  The next stage is to let them choose forms of treatment.  An NHS Credit should be payable to patients with chronic conditions - starting with those in the most deprived areas - to give them the choice of direct control over the services they received.  In parallel, an Education Credit could be made available to parents with children in failing schools so they could use it to choose an alternative school.   Again since the schools that are failing are often in the poorest parts of the country the benefits would disproportionately go to the least well-off. 

And to those who fear that this all smacks too much of an American-style market model they should look instead at social democratic countries such as Denmark and Sweden where such reforms are common-place.  Progressives would make a huge strategic mistake if we shied from this ground in the mistaken belief that it belongs to the Right rather than the Left.  David Cameron wants less State.  We should want a different sort of State – one that empowers not controls.    By advancing not retreating from this radical centre ground we can leave Cameron’s Conservatives stranded on the margins of British politics which is where elections are lost not won. 

This is the moment to seize the opportunity of Labour becoming the party of citizen and community empowerment.  So that we apply for the modern age our party’s historic insight that disadvantage is overcome not just by fairly distributing wealth and opportunity but also by more fairly distributing power in society.  Reforming public services is not a betrayal of those values.  It is a means of realising them.