What’s driving reform?

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

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

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

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

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
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

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
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service from Community Care for all GSCC-registered

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,

(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,

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

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