Three Steps to Public Service Progress

Written by Chris Huhne MEP and published in The House Magazine on Mon 4th Mar 2002

The process of renewing our policy on public services - probably the key battleground for the next general election - enters into its final and critical stage at the spring conference in Manchester. After the consultation session there, the commission on public services will draw up firm proposals to go to the autumn conference. There are three important emerging themes on which we are particularly keen to get feedback.

The first is decentralisation. The evidence suggests that the excessive centralisation of control in England - Scotland and Wales are now enjoying far more responsive decision-making - is a major part of the problem in delivering public services. Whitehall simply cannot deliver responsive decisions in an organisation that employs 1 million people, as the NHS does.

A better example is Denmark, which has a similar health system to ours, delivering largely free care according to need, and funded from taxes. But Denmark's NHS is the most popular in Europe. It is not even controlled from Copenhagen, even though there are only 5.3 million Danes. It is run by 14 counties and 2 cities. It responds to local needs and priorities, and the lines of complaint and control are far shorter than in Britain.

We are the most centralised country in Europe, collecting a higher proportion of total tax revenue at 78 per cent in the centre than either France at 44 per cent or Germany at 29 per cent. Devolved regions should have much greater control over budgets. If regions do not vote for regional government, there could be directly elected boards for regional health authorities, for example, with devolved powers. The paper raises the issues of how to do this.

One important aspect of our centralisation is the lack of flexibility to pay what is needed in particular areas, on top of a nationally agreed package. We present compelling evidence of serious problems - teacher vacancy rates double and treble the national average, and far higher use of agency nursing - in the South East and London. The flexibility to pay more within the public sector is still much less than the 48 per cent gap in the private sector.

Some will argue, of course, that decentralisation will mean differing national standards across the board, as if there were no 'postcode lottery' now. In fact, Whitehall cannot deliver the same standards, because the command and control systems are not sensitive enough. At least decentralisation would allow innovation and experimentation, with a key role for Whitehall in comparing performance and publicising best practice.

The second big issue is how we establish a consensus around the higher level of funding needed for the NHS and other public services. My sense of the Commission's views is that we are in little doubt that the share of our economy going on public services needs to rise further, although not by politically impossible amounts. (For example, 1.2 per cent of gdp would close the health gap with Denmark).

One important suggestion is a special health contribution which would purely fund the NHS. The polls suggest this would be popular, and would have some of the characteristics of a health insurance premium since people would know that funding would be ring-fenced for health care. It would therefore sidestep the recurring political problem of trying to get increased funding for a service that people want to spend more money on.

There are, though, practical problems to be resolved. Taxes are cyclical, whereas health needs are not. But the advantages of such a health premium is that it could also be varied regionally, going with the grain of our proposals on decentralisation.

The third big issue is the relationship between public decisions on what services should be provided, and the ways in which they are provided. The funder versus provider split is now a familiar way of thinking about these issues.

The public sector has always bought in private contractors, sometimes for services and at other times for construction. But the real contribution that I think we can make to the debate is both to clarify how the relationship should be managed, and to broaden the choice available to a funding authority.

We are seeking views, for example, on ways in providers within health or education could set up a public interest corporation involving those receiving the service and employees. Subject to guarantees that any publicly owned assets would not be transferred out of any new structure, this form of mutual-cooperative could be ideally suited to harness the altruism of so many public service employees within a not-for-profit framework. It could therefore make a major contribution to improving stability and morale.

Chris Huhne, Liberal Democrat MEP for South East England, is the chair of the party's commission on public services.