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25th Anniversary series: The Future of Government

November 19, 2015

 

Where are we now?

The UK National Government is still largely organised on the lines laid down by the Haldane Committee in 1918.  There are Government Departments in Whitehall, each with a span on responsibility, and then an ever-evolving ecology of Non-Departmental Public Bodies – such as NHS Foundation Trusts – and other agencies charged with specific service areas.

Imagine Whitehall as a High Street in the first half of the twentieth century: there you would find a baker, a butcher, a dairy, a fishmonger, a greengrocer, a grocer, a haberdasher, a ladies’ outfitter, a gentlemen’s outfitter, an ironmonger, a barber, a ladies’ hairdresser and so on.  The shops would be open from 9.00 to 5.30 from Monday to Friday (half day closing on one midweek day) and 9.00 to 5.00 on Saturday.

Whitehall is different, of course.  Instead of shops we have Departments – a Department for Finance (Her Majesty’s Treasury) a Department for Home Affairs, a Department for Foreign Affairs, Departments for Education, Environment, Farming & Rural Affairs, Education, Health, Business and Industry, Work & Pensions etc.  The Ministers’ Offices and the Press Offices are open at the weekend, but most of the system shuts down from Friday evening to Monday morning.

The High Street I describe has long gone.  People no longer go to a dozen different emporia to do their weekly shop.  Instead they shop in one or two supermarkets, or online for home delivery.  They shop in the evenings and at weekends.  To the extent that people do use single-specialist shops, they tend to be in more affluent areas, serving niche requirements – farmers’ markets offering local produce, or shops offering high-value or imported goods.

But the Government High Street of Whitehall survives.  The basic architecture is remarkably unchanged, even though increasing numbers of transactions now take place online.  In part the extent to which Whitehall has stayed the same is a tribute to the robustness of the model that Haldane and his colleagues designed, and the resourcefulness of the people who run the system.  But many are now arguing that reform is overdue.  So what might Government look like 25 years from now?

Big or Small?

The current political direction is towards a reduction in the size of the government machinery, and in particular, radical reductions in the scope of welfare.  It would be easy to assume that this will be a continuing trend.  The UK is seeking to remain competitive in the global economy, and therefore needs to minimise the cost of tax and regulation on UK businesses.  Taxes are becoming harder to enforce, as businesses become more international, and trade more in knowledge and information, and less in physical stock.

However there are reasons to believe that the trend may change.  The Office for National Statistics predicts that the UK population is set to increase to over 70 million by 2040, with the number aged over 80 rising from 3m in 2012 to over 6m by 2040.  That’s potentially an awful lot of pensioners.

The UK spends less on health care, as a percentage of GDP, than any other G7 country.  But the cost of health care continues to increase.  In 1950, just after the foundation of the NHS, the UK spent 3.6% of its GDP on health care.  According to the World Bank, the UK now spends 9.2%, with public provision accounting for 84% of the total.  With the signs of financial stress in the NHS – 2/3 of NHS Trusts in debt, 33, Trust CEO posts vacant or interim – the pressure on Government will grow to resume the upward ratchet of NHS spending.  As one former Chancellor of the Exchequer observed, the NHS is now the closest thing we have to a national religion.

Centralised or Decentralised?

Over the past 50 years there has been a tendency to centralise power in England.  However, we have seen radically increased devolution of powers to Scotland, Wales and Northern Ireland.  Is the centralising tide turning?

The Government is signalling a change.  The “Northern Powerhouse” is bringing together the Greater Manchester local authorities, and will devolve considerable autonomy in local government and health services, and give greater revenue-raising powers.  The Powerhouse model is likely to be rolled out elsewhere – the North East, The West Midlands, and Cornwall have all been identified as candidates.  In this month’s Conservative Party Conference, George Osborne announced plans to devolve Business Rates back to local authorities, reversing the centralisation by the previous Conservative administration.

The UK in the World

The “Big or Small” question also applies to the UK’s international position.  The UK retains its semi-detached position within the EU.  The future development of the EU is quite uncertain.  At one extreme it could break into several parts, or fall apart completely, under the strains of the debt crisis.  At the other, it could decide that fiscal integration is the only way to underpin the single currency and economic union, and move towards a single state.  Will the UK then be able to sustain its “half in-half out” position?

It looks unlikely today that the UK would have any appetite to enter into a fiscal union, but if such a union were to begin to succeed, OR a secondary banking crisis were to lay waste the UK’s financial power, OR the UK’s exclusion from the core of the EU were to begin to be seen as disadvantageous, this might begin to change by 2040.

Similarly the rise of the new economic powers in Asia – and by 2040, probably Africa, and possibly South America – will see the emergence of new international governance structures.  The Asian Infrastructure Investment Bank (AIIB) is an example.  The UK has been enthusiastic in its support, reflecting its desire to be a competitive global trading nation and financial centre.  As long as the UK retains its semi-detached relationship with the EU, it is likely to retain its interest in engaging with the emerging economic powers.

Meanwhile, Back in the High Street…..

Haldane’s Whitehall was built on Departmentalism because it had to be.  There was simply no conceivable and practical alternative.  But that is no longer the case.  Supermarkets routinely offer a complete package of foods, drinks, household items, furniture, clothes, and much else besides – insurance, banking and credit, pharmaceuticals, holidays and travel…  they bring their services to the customer, rather than the customer having to go out and search for them.  Technology has allowed service providers to offer faster response times and offer consumers choice at the swipe of a smartphone.

Could Government be like that?  The intentions are there.  Many transactions – for instance tax returns and passport renewals – can now be done online.  In his “Five year Forward Look”, NHS England’s CEO, Simon Stevens sets out a personal vision of digitised services, of vertical and horizontal integration of services, of franchises of centres of excellence – such as Moorfields Hospital, which truly is the envy of the ophthalmology world – and unification of health and social care.

That sounds a lot like the “virtual” High Street that we use for our daily needs and our weekly shop.  Increasingly people – used to managing their finances, and their households, not to mention control their utilities, from their smartphones – will wonder why they can’t have the same access to, and integration of, public services.

Consumer attitudes to the privacy of digital data more broadly may be changing… If this bet is correct, it has fascinating implications. For one, if consumers—not doctors—control data, the medical industry might have to turn its model upside down. Instead of being arranged according to how doctors are trained (making sharp distinctions between, say, surgeons and physicians), services may be shaped by the way consumers define their own health …”, Gillian Tett, author of “The Silo Effect”, in the Financial Times on 5 November 2015.

Can Government do it?  Whitehall has an unenviable reputation for misfiring IT projects, and IT is central to this sort of renewal.  The pressure on public spending and borrowing will drive the search for solutions, but it won’t guarantee success.  If Government can’t manage on its own, will it seek partners, and make use of the infrastructures that already exist.  Perhaps, instead of shopping between Departments, we will get our public services via a third party platform – perhaps our supermarket of choice, or Amazon, or Google.

Written by David Lye, SAMI Fellow.

The views expressed are those of the author and not necessarily of SAMI Consulting.

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