Reforming the stateOctober 19th, 2012
This article first appeared in The Guardian
As the economic crisis continues, and social division deepens, the electorate is asking whether any brand of politics has answers profound enough, radical enough, honest enough for the times in which we live.Ed’s excellent “one nation” party conference speech threw down the gauntlet to the Tories, and set the tramlines for policy renewal.
Labour has identified reform of over-mighty markets – notably in the financial sector – as a political, economic and social priority. Given the financial crisis, and the need for a structural as well as Keynesian response to double-dip recession, this is smart.
Successful economies in the modern world are not sheepish about the power and responsibility of the state. But there is a catch. We need to be reformers of the state to reboot our economy and build a fairer society. We don’t just have to get rid of an awful Tory government; we need to change how government works.
First, the fiscal crunch requires a different kind of state. The failure of the government’s economic policy makes how much less we spend, and how and where we spend it, a core issue. We cannot meet our goals on jobs, health, education, long-term care and tackling poverty without changing the way government goes about its business.
Second, the British state remains far too centralised. Around the world, the 40 biggest cities account for 65% of global GDP and 85% of technological innovation. In Britain, the centrally prescribed welfare to work system short-changes the young unemployed. Transport, housing and education are over centralised.
Third, an increasingly complex society demands a different kind of state. This includes central government and extends to public services. In a more educated society, people want more power to help themselves.Yet the government’s lead clinician for NHS quality and productivity says that we are behind Tonga when it comes to self-management of care by asthma patients!
Finally, there is the politics. Despite the financial crisis or the failings of G4S, the public response has not been a flight from free markets to strong states. They are sceptical of both, and want the best of both. Our case depends on reform of government not just defence of government. A reformed state has clear national goals, decentralised power for consumers and staff over budgets and services, and the integration of services around people and across departmental silos. This is the way to free up money and meet the needs of tomorrow rather than yesterday.
The commission I chaired on youth unemployment proposed decentralising budgets for training and job search to local commissioning boards at city level. The Institute for Public Policy Research (IPPR) has proposed decentralisation of responsibility for housing benefit and housing capital spend to cities.
Reform requires shifts in spending priority. The IPPR has shown how a 10-year freeze on child benefit could pay for a national childcare service. If our employment rate for women was as high as Denmark then a million more women would be in work – generating an extra £4.5bn in tax receipts. A new long-term care system requires a new look at how we direct support to older people, and towards younger people planning for retirement.
It also means joining up services – like health and social care – not fragmenting them.
The whole of government needs to contribute to the shared goal of restructuring the British economy. But that means taking on the myth that the Treasury either knows best or can run it all. It just doesn’t. In local government, Labour is leading by example. Faced with savage budget cuts, they are doing different, and actually better. In Liverpool the Labour mayor has streamlined 87 local authority business units into seven. In the Cooperative Council network of Labour authorities, residents are being given more power, businesses new incentives, the voluntary sector and private sector engaged as an active partner of smart government.
People rightly expect centre-left parties to take on inequalities generated by under-regulated markets. But they want to know the cure is better than the disease. So we need to be as clear about reforms of the state as about reforms of markets. There are huge issues facing advanced western societies. They need strong, strategic government not the minimal state. But that means big change to the structures and systems that were built for the 20th century. Reform of the state will help us govern – and help us win.