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A couple of months into the Labour government's third consecutive term of office, it is timely to consider the prospects for public sector reform. A third term is the unprecedented opportunity that Labour sought for its promise of delivering both economic progress and social justice. But how will it deliver this, and what evidence is there of a coherent policy agenda? What, in short, is Labour's big idea for the public sector?

The first term was widely criticised for the rigid adherence of the chancellor Gordon Brown to his predecessor's spending plans. It may have made economic sense, but it constrained the immediate development of public services. Subsequent phases saw significant investment, but much of it about helping services reach basic standards.

However, sustained economic stability and growth across the first two terms did allow considerable extra public expenditure without a descent into the familiar inflationary "tax and spend" pattern. It is projected that investment in education will have grown by 4.8 per cent a year in real terms between 1997-8 and 2007-8, while investment in the health service will have risen by 6.5 per cent.

A new fiscal rule - borrowing only to invest over the economic cycle, thereby establishing a virtuous circle that keeps debt at a stable level - has become the official credo of New Labour.

The transformation of public services that Labour seeks to achieve in this third term has two inter-related main components. On the one hand, continuing a theme already laid down in the second term, Labour's overriding emphasis is on reducing the top-down "command and control" model of policy management, and ending the monolithic, one-size-fits-all approach to services in favour of devolved power and greater autonomy to innovate at local level. On the other hand, it emphasises the rights of consumers, and putting "power in the hands of the patient, the parent and the citizen".(1)

In short, Labour's programme envisages a new radical social contract, with matching rights and responsibilities that will "put the people themselves in the driving seat of our public services".(2) Expectations for change are high, and were talked up throughout the general election campaign.

As the third term begins, fiscal prudence remains Brown's mantra, but the apparent miracle of low inflation
and high growth that the government has been relying upon could be crumbling. Many experts are forecasting a major economic downturn. Weaker consumer spending, rising interest rates and climbing unemployment will all conspire to put pressure on higher public borrowing and lead to inevitable recession, they say. That is the most pessimistic scenario. While there are signs of a cooling down of the economy, with the housing market stagnating or even dropping, and of declining high street sales, much of the talk of recession remains speculative.

However, even if the recession fails to emerge or is less dramatic than predicted, we need realism about the nature of reform being sought in the public sector. While the prospect of services that are more responsive to individual needs and choices has an obvious and seductive appeal, this is clearly not about a libertarian approach to services on demand. The Gershon review on public service efficiency, which has already identified savings worth £21bn, remains as a spectre at the feast and will cast a long shadow with a continuing drive for efficiency and reform.

Scrutiny of the Labour election manifesto, together with policy documents that flooded out of the government stationery office just before the dissolution of parliament in April, provides hints about future priorities and policy developments. Especially relevant are the consultation document Opportunity Age issued by the Department for Work and Pensions (DWP); the green paper on adult social care Independence, Well-being and Choice; the blueprints for delivering the NHS improvement plan Creating a Patient-led NHS; and Every Child Matters: Change for Children.

The themes are clear: promoting choice, independence, health and well-being and social inclusion, and listening to patients and service users. However, mapping the objectives of welfare reform becomes more complex when other policy documents and government departments are involved. As well as the Department of Health and DWP, other central players include the Office of the Deputy Prime Minister (ODPM), the Home Office, the Cabinet Office and the Prime Minister's Strategy Unit.

A key issue for the government is the coherence of its reform agenda. From its earliest days the incoming Labour government of 1997 identified the need to develop "joined-up government" and more coherent approaches to issues that cross departmental boundaries. But this is by no means the first time that Westminster and Whitehall have attempted co-ordination. Closer attention to the experience of earlier efforts - notably the work of the central policy review staff of the 1970s - might have paid dividends.

Central co-ordination these days is primarily the task of the Cabinet Office. The website states that "the Cabinet Office is at the centre of government, co-ordinating policy and strategy across government departments". However, the ODPM - a department created only in 2002 - potentially cuts across this role with responsibilities "to create thriving, inclusive and sustainable communities in all regions".(3) The deputy prime minister himself has personal responsibilities for cross-departmental issues.


As the two subsequent articles in this series will explore, the challenges for public sector reform raise central questions about the coherence of the agenda across children's services and adult social care, and at the interface with communities and neighbourhoods. Just who is responsible for what remains a matter of some confusion. Examination of the DWP strategy document and the adult social care green paper, for example, suggests the two were produced with little cross-fertilisation or mutual awareness.

The scale and nature of the challenges involved should not be under-estimated. At least seven different government departments, for example, have responsibility for major services concerned with older people. Similarly the Change for Children document bore the signatures of no less than 16 ministers, all apparently "responsible for co-ordinating the delivery of services for children, young people and families".(4)

The themes the government has set out for the public sector press all the right buttons and appeal to those seeking social justice. What the government can deliver will be constrained by the complexity of the task in hand, but also - and most importantly - by the cost.

As well as co-ordinating policy and strategy, the Cabinet Office has to deliver the economic imperatives demanded by the Treasury. This is the issue that dare not speak its name in the government's reform plans. In part, it raises the prospect of tax rises to pay for reforms - although there is a manifesto commitment not to raise the basic or top rates of income tax. More significantly, this responsibility points to the issue that is missing from all current debate about the new social contract. That is the respective financial responsibilities of individuals, their families and the state.

Choice, flexibility and responsive public services can be achieved only to a limited extent within a model of the welfare state that is residual and concerned with rationing services for those most in need and least able to afford to meet those needs, and against the continuing demands for efficiency savings. These limitations suggest the biggest reforms are yet to come.

Working out how to pay for public services is a difficult process. But the aspirations for the public sector, if they are to be delivered, are increasingly likely to need a fundamental recasting - however unwelcome - of both moral and financial rights and responsibilities. That, in essence, will be the big idea of the third term. And as Sir Humphrey from television's Yes Minister would no doubt remark, it will be a brave prime minister who finally places that on the table.

Melanie Henwood is an independent health and social care analyst with particular interest in community care, older people and their carers. She is also an adviser to the Joeph Rowntree Foundation, a specialist adviser to the House of Commons health committee and a lay member of the General Social Care Council

Training and learning
The author has provided questions about this article to guide discussion in teams. These can be viewed at www.communitycare.co.uk/prtl and individuals' learning from the discussion can be registered on a free, password-protected training log held on the site. This is a service from Community Care for all GSCC-registered professionals.

Abstract
This article considers the prospects for public sector reform in Labour's third term. It explores the economic context and the contraints imposed by the Gershon efficiency review. Questions about the reform agenda and inter-departmental complexities are raised. The possible recasting of moral and financial rights and responsibilities is also explored.

Further reading
HM Government, Opportunity Age: Meeting the Challenges of Ageing in the 21st Century, Cm 6466i, The Stationery Office, 2005
Department of Health, Creating a Patient-led NHS: Delivering the NHS Improvement Plan, DH, 2005
L Challis and others, Joint Approaches to Social Policy: Rationality and Practice, Cambridge University Press, 1988

References
(1) Labour Party, Britain: Forward not Back - The Labour Party Manifesto 2005, p8
(2) Ibid, p6
(3) Cabinet Office, List of Ministerial Responsibilities Including Agencies and Non-Ministerial Departments, p44, 2005
(4) HM Government, Every Child Matters: Change for Children, p2, 2004

Contact the author
By e-mail: melanie@henwood-associates.co.uk