Eat Your Worms

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Public sector reform has problems in store for Blair.

Even though Tony Blair‘s entire demeanour recently smacks of ’nobody likes me‘, it‘s looking as though he might need to eat quite a few more worms before he is eventually put out of his misery. In fact a great writhing bucketful is already waiting in the shape of public sector reform. On the one hand, most members of the general public have no more enthusiasm for further Railtrack-style ’improvements‘ in the NHS, education or the civil service than any of them had for an illegal invasion of Iraq or for university top-up fees.

But big business has become impatient with what it regards as the snail‘s pace of reform in the public services, and - like an addict who just can‘t shake the habit - Blair still talks as though everything will turn out alright after one more fix. His ever reliable accomplice, Peter Mandelson, has been urging Blair to brace himself and ’cross the Rubicon‘ on the same issue and, as Mark Serwotka of the PCS union has pointed out, it is beginning to look like another bidding war between New Labour and the Tories to measure up who‘s got the biggest cutbacks.

The fix might not be as quick as he used to imagine. At the beginning of February, Blair suddenly informed us that, even after seven years in Downing Street, it might take another 15 years to ’turn round‘ some of Britain‘s public services. Biggest whoopsie of the night was his assertion (as he beat down the flames from his underpants) that, in the same way as there had never been any 45-minute claim, ’we never said we could transform the public services in a few years‘.

Just his luck, no sooner had this plea for patience and understanding hit the airwaves than the Financial Times was disclosing government plans for a shake-up of the public sector which, ’if implemented, would represent as big a change in the way the government does business as the privatisations of the 1980s and 1990s‘. They could cut up to 80,000 jobs in the civil service and would also mean job losses in the ’back office functions of local government and the health service‘. Taken with shadow chancellor Oliver Letwin‘s proposal for even bigger cutbacks, the Financial Times predicted ’the biggest shake-up of public services in a generation‘.

All told, the proposals leaked by the Financial Times could mean savings for the Treasury in the region of £15 million, most of which would be achieved by ’cutting bureaucracy‘, getting rid of unnecessary managerial and regulatory layers and making government ’procurement policy more efficient‘. A further £5 billion savings would be made possible through what is described as ’greater productivity in schools, policing and health‘. To put these figures in some kind of context, they compare with the £1 billion in revenues which top-up fees are supposed to deliver, or the £6 billion which the war in Iraq has cost up to now. And for Gordon Brown, they must look particularly tempting, coming so soon after he discovered that the gap between what he raises in taxes and what the government has been spending is currently put at about £13 billion.

All this has come from an interim report to the Cabinet Office and HM Treasury from a commission headed up by Sir Peter Gershon, who was appointed (by Gordon Brown and Tony Blair) to carry out a thoroughgoing review of government spending and procurement policies. The full report is due out this summer. At the time he took on this job, Gershon was the top procurement executive at BAE Systems (formerly British Aerospace) and before that was chief of defence at GEC-Marconi (whose defence interests were transferred to BAE not long before Marconi went bust).

Gershon was brought in by the government to advise how they could get better value for the billions of pounds central government spends on everything from schools and hospitals to battleships. Gershon was well placed to know quite a lot about this, since a fair bit of the weaponry used by the British army in Iraq would have been bought from BAE Systems - the company is the major manufacturer of ground attack aircraft, missile systems and munitions in Britain and one of the biggest arms production companies in the world.

According to his ‘efficiency review’, the government could make colossal savings by local authorities joining forces to buy everything from street cleaning to housing maintenance and care home places, ‘slashing the number of purchasers from 400 to as few as four for each service’. Companies providing goods, services and IT would then be faced with fewer, more skilled purchasers as they competed for the £120 billion spent every year by the public sector on ‘procurement’ and the government would be in a better position to exploit its bargaining position.

Other good ideas include the transfer of more administrative tasks and pupil support roles to non-teaching staff in schools, with innovative approaches to reducing levels of absence, including using non-teaching staff as cover. With more ‘high level’ classroom assistants and support teachers, there might even be a (wholly beneficial) increase in class sizes. According to Sir Peter, this would enable ‘good teachers to reach very large classes’.

The Gershon review was one of two ‘separate but complementary’ reviews set up by the government. The second of these was headed up by another New Labour favourite, Sir Malcolm Bates. In 1997, just months after New Labour was first elected, the government put Bates in charge of speeding up PFI privatisation projects and later on he was put in charge of the privatisation of the London Underground. Like Gershon, Bates also served for a time as a managing director at GEC, and also had close ties with BICC (otherwise known as Balfour Beatty). Mandelson would have known both men well from his days at the Department of Trade and Industry.

The big problem for New Labour is that, even with all of this crew lined up and singing from the same songsheet, they face a barrage of criticism from the City if they take fright at the thought of another all-out confrontation with traditional Labour voters. As if they needed any reminder of the level of bitterness, the Financial Times story was leaked on the very same day as the latest, rock-solid walkout over pay involving about 80,000 civil servants. If they do try to go ahead, the Financial Times noted ominously, ‘the inevitable result of full implementation of the review could upset relations with the unions at precisely the wrong stage of the electoral cycle. Another serious clash so soon after the bitter confrontation over tuition fees is the last thing Mr Blair will want this autumn at what is likely to be the final party conference before the next election.’