Tag: Andrew Smith

The speech made by Andrew Smith, the then Chief Secretary to the Treasury, in London on 4 April 2000.

THE FUTURE FOR PUBLIC SERVICE AGREEMENTS

Introduction

Thank you for that kind introduction, and to Matthew Taylor and the IPPR for inviting me to speak today. I want first to set out our ideas about setting PSAs , and then I want to briefly cover how all this fits in with our ambition of modern, high-performing public services combining innovation and excellence.

As many of you know, PSAs are a unique innovation. Colleagues from other countries in Europe and across the world are intrigued and, sometimes, frightened by our radical approach. Never before has a British Government set out so clearly the aim, objectives, resources, performance targets, and operations targets for every major government Department in one public document. Neither has any government publically committed itself to reporting annually against those targets.

The 1998 Comprehensive Spending Review PSAs were a revolution in this respect. And for our departments, I think they were something of a revelation too. PSAs challenged them for the first time to think about what were the outcomes they really wanted in each policy area. They also challenged departments to think about how their success might best be measured. But most importantly they challenged them to commit publically to delivering the improvements we have targeted within the resources allocated to them in the CSR. Through the PSAs, the Government made clear that it was investing for reform. Reform for better public services and a step change in the way they were delivered.

Not everyone sees it that way of course. PSAs have come in for their fair share of suspicion and criticism. According to Simon Jenkins in the Times, Gordon Brown and I sit at the heart of a “vast cobweb” of targets. In fact, according to Mr Jenkins, I am building a structure like Stalin’s Gosplan! Mr Jenkins even accuses my officials of being “music-loving, theatre-going liberals”. Those of you who have dealings with the Treasury will judge whether that’s and accurate description.

The radical nature of PSAs, and their immediate impact on Departments inevitably led to some shortcomings in the new system the first time round. As John Garrett pointed out in the Guardian, our emphasis on the serious issue of sickness absence in the public sector looks unbalanced when we didn’t have comparable measures in other areas of people management. And some of our targets are simply not very good, because we were new to the business: setting targets to achieve 100% prompt payment of invoices looks good, but will often be unachievable for very sound reasons, if an invoice needs to be investigated.

So the current spending review, is a big opportunity to improve the PSAs and learn from experience – both positive and negative – as we take them forward.

Setting the SR2000 PSAs

We are doing that in a number of ways.

First we are focussing even harder on the things that really matter. PSAs are all about priorities. Openness and accountability about priorities should not be allowed to be fudged by too great a mass of targets.

Second, we are making sure part of this focussing process involves separating out the key overall goals (the “what”), from targets for Departmental processes and operations (the “how”).

Third, we are working harder than ever before on ensuring we target the right measures of success. Determining what it is you want to achieve is the first crucial step. But picking the right measure to avoid unwanted distortions in the system, is as important.

Finally, we are sharpening up our targets, making them as transparent as possible. We should be clear in every case about what the terms of the targets mean, when we are committing to deliver the target, and how it will be measured.

The way we are conducting the review means that we are tackling all of these issues head on.

In the past few months, I have had a series of meetings with Ministerial colleagues to nail down their highest priorities. Everyone is determined to show Parliament and the public the things that really matter to us. Whereas some Departments had more than thirty policy targets after the CSR, most Whitehall Departments will have no more than ten high level PSA targets after SR2000.

I am also making PSAs even clearer by ensuring they are short and sharp, containing only the aim, objectives, and top few political priority targets. New supporting documents, Service Delivery Agreements, will describe how these priorities will be delivered, and the management and operational changes Departments will be introducing to facilitate this.

On measures, departments have been working together with the Treasury to ensure the measures to support the next round of targets are the best possible in the light of evidence. And in another first, the Treasury is leading work with other Departments, the National Audit Office, and the Audit Commission, to agree the basics about what makes for good performance measurement in Government.

Delivering the new PSAs So that’s how we’re ensuring the targets are the most specific, measurable, outcome-focussed targets they could possibly be.

We also want to make sure the right support and structures are in place to allow Departments to deliver public services fit for the 21st Century. I want to briefly examine three reforms here.

First, we are determined to break down artificial barriers in policy-making and delivery, using the PSA process to make Departments jointly responsible for delivering some key policy objectives. It is important to get this right as government increasingly has to organise horizontally, with joint work across departments to deal with challenges which don’t organise themselves conveniently in line with the traditional vertical departmental silos. For this Spending Review we have launched fifteen cross-cutting studies of problems that cross Departmental boundaries.

With subjects as diverse as crime reduction, new gateways to care for the elderly and conflict prevention in sub-Saharan Africa the studies have pulled together expertise from outside and inside Government to propose targets for cross-Departmental working. In some cases they will result in further full cross-cutting PSAs.

Second, Departments are now more than ever drawing on outside expertise to raise their productivity and to produce the step change in our public services that we all want to see. This Government wants to listen and learn from the best practice available. The mantra is “what matters is what works”.

This is why I am committed to the work of the Public Services Productivity Panel, which I chair. The Panel brings together high level experience of the public sector and the outside perspective of the private sector. It brings together people with deep knowledge of the public sector, such as Andrew Foster of the Audit Commission, and Sheila Masters with her NHS experience, and leaders from business like John Makinson from Pearson’s and John Dowdy from McKinsey.

The Panel is an excellent resource for all Departments to draw upon. Each Panel member is assigned to detailed projects, supported by Departmental and Treasury staff. And some Panel members are also supported by their own company staff. This openness and joint working encourages innovative approaches, and puts an emphasis on the practical steps that will help us do things better.

Already good examples of the fruits of this approach have been published. John Makinson wrote an excellent report with the big Government office networks on incentivising good team performance. Andrew Foster has highlighted both good practice and bad in customer service in the big DETR driving agencies, so that we challenge poor performance as well as praising the good.

The reports are only a means to an end. And that end is delivering real changes in the effectiveness and customer focus of our public services. John Makinson’s report represents a bold and radical new approach to pay in the public sector. His proposals have the potential to lever up productivity in the Inland Revenue, Customs and Excise, Benefits Agency and Employment Service. Work is underway to implement new pay systems based on team incentives from 2001. These will deliver real improvements to taxpayers and users of services as well allowing staff to share in the benefits of better performance.

The Makinson report is only one element of the Government’s strategy to empower public servants. For too long, public services have been allowed to stagnate because public servants have been undervalued, and have not been listened to. So the Government third reform is to turn this around, encouraging innovation by front-line staff and by local managers, and celebrating the success of our most outstanding managers and teams, as beacons to others in their sector.

The reforms to the Civil Service inspired by the Prime Minister and being led by Sir Richard Wilson, offer the prospect of transforming our Civil Service – retaining the elements so prized abroad, such as its probity and professionalism, but encouraging more adventurous thinking, greater diversity, and a stronger sense of good management.

Local autonomy versus central direction

I want to touch on the important issue raised by Matthew [Taylor] an issue all major programmes of reform in any institution must face and tackle: that is, to what extent should the centre direct and impose change, and to what extent should local agents be allowed the flexibility to find their own strategies for delivery, shaped to local context and taking advantage of the available expertise.

Some criticism of the Government’s modernisation programme has centred on the perception that it inevitably involves highly inflexible directives from the centre. I do not accept this, and would argue instead that Public Service Agreements and our programme of reform offer an important opportunity to local service deliverers to shape their own strategies within the framework we have set.

We believe that local government and local services are a crucial source of good ideas about improving service delivery, and the vast majority of public servants take pride in the standard of service they deliver. We are determined to learn from good practice at local level, and to tackle unacceptable variations in performance where they exist.

Only last week, I hosted a seminar at the Treasury bringing together experts from inside and outside Government to see how we might best raise the performance of the less good units to that of the best.

The real challenge for the Government is not debating an artificial tension between local autonomy and central direction but in making sure that good practice from some of our most outstanding public services is successfully shared.

This is not to say however, that there are not issues of balance which we need to work on. But I see this as a dynamic process. Different combinations of direction and autonomy will be appropriate for different services and between different units within services. This is a matter which I will be discussing with colleagues, particularly as we make progress on their Service Delivery Agreements, which will state clearly for the first time how they intend to cascade their high level commitment to local agents.

Conclusion

To conclude, I believe PSAs have been something of a revolution. Departments have recognised the real benefits for their own management of clear priorities and targets, and we will see further steps forward in the quality and clarity of the PSAs which come out of this spending review.

But like the Productivity Panel, PSAs should not be about elegantly drafted glossy documents: they must be about driving change on the ground that the public can see. The Government has set out its vision. In PSAs we have published a ground-breaking set of commitments. In our modernisation and investment programme, we are giving public sector employees the tools to do the job. That has raised public expectations. So now they have to see the change we have promised.

Thank you.

The speech made by Andrew Smith, the then Chief Secretary to the Treasury, on 5 April 2000.

Introduction

John has illustrated how PPPs are the cornerstone of our modernisation programme, and with some key examples shown how PPPs can make real difference to Britain’s public services. I want to demonstrate the scale of the benefits that PPPs are bringing, and how these benefits flow from the reforms we have made since the election. And I want to set out our vision to build on this success, extending and deepening the partnership concept to embrace new areas and different ways of doing business.

The scale of the PPP programme

Already public private partnerships are present in every area of the public sector and across the country.

Since May 1997, at our last estimate we had signed contracts for over 200 projects, leveraging in capital investment of over 12 billion pounds.

Compare this with less than 4 billion pounds of contracts signed during the whole of the last Parliament.

Our frontline services have been the main beneficiaries.

In the NHS, since we reformed PFI, three waves of major projects totalling 35 major hospitals have been agreed – that’s over £3 billion of extra investment. This represents the largest investment in new hospital facilities since the NHS was established.

In the schools sector, eighteen individual schools projects and twenty three grouped projects, covering 520 schools, are underway.

But this is just the start. Over the next three years we expect to sign contracts for projects with an estimated capital value of over £20 billion. This will include £8 billion to modernise the tube; more than 60 new education projects, 25 new health projects and 12 other new transport projects.

Getting better value for money

Central to our approach is to use PPPs only where they provide better value compared to public sector investment. Partnerships enable the public sector to benefit from commercial dynamism, innovation and project management and planning skills, harnessed through the introduction of private sector investors who contribute their own capital, skills and experience. In short, getting the private sector in to do what they usually do best, using the disciplines, incentives and expertise they have developed in the course of their normal everyday business. This allows Government to concentrate on what we usually do best – enforcing standards and protecting the public interest.

Better value for money means that, within the resources available, we can deliver more essential services and to a higher standard than would otherwise have been the case. As John says, on average privately-financed projects are delivering savings of 17% compared to public sector alternatives – this represents savings of £2 billion on a £12 billion programme, equivalent to 25 new hospitals or 130 new schools.

The Government’s reforms

What makes a PPP programme of this scale possible, delivering the benefits I have described, are the reforms that we have made since the election. These reforms are designed to:

• deliver significantly improved public services, and
• to share the benefits of PPPs fairly between all stakeholders – this includes customers, taxpayers and employees at every level of the organisation.

We started by reforming the Private Finance Initiative.

To improve the flow of PFI deals, and provide better value for taxpayers we:

• ended the previous Government’s insistence on universal testing which had caused only frustration and delay;
• we took the decision to prioritise PFI schemes;
• and we introduced standardised contracts into PFI deals.
• we have also ensured that ownership of PFI assets will revert to the public sector at the end of the contract.
• and unlike the last Government, we use PFI where it offers best value for money – not to move public sector investment off balance sheet.

To ensure a fair deal for staff, we have provided for better consultation on PPP proposals, announced plans to protect staff pension entitlements, and have ended the requirement for staff providing services such as cleaning, caretaking and catering to have to transfer automatically to the private sector. We do this, because unlike the last Government we recognise that staff are partners in PPPs, and that the future success of the partnership relies on their dedication and commitment.

And to ensure that PFI projects do bring demonstrable benefits to customers and those who rely on the services provided, we have designed contracts with the focus on outputs and performance. Private sector partners are clearer about what is expected of them and the implications if they fail to deliver.

What is particularly encouraging is the way that private sector parties have responded to these reforms we have put in place. Construction companies are prepared to take on new risks – becoming investors in infrastructure, as well as merely providers of the asset. And a new industry in facilities management – providing the long term maintenance of assets – has been created to manage more effectively risks which fell to the public sector under conventional procurement. Increasingly, private sector providers are able to supply whole life costing for new assets, giving Government greater assurance that it is securing value for money.

And the public sector has responded positively too. Privately-financed projects are acting as value benchmarks against which wholly public sector providers can be compared. As a result, the public sector is having to raise its game, both in the way it contracts for, and in the way it organises and manages capital projects.

The Way Forward

These changes in just the last few years point to the further potential of PPPs, as both the public and private sectors deepen and widen our experience of partnerships, to improve standards across the board and deliver the quality of public services that Britain deserves.

On 15 March, I launched a document which for the first time set out the Government’s approach to the full range of partnerships between public and private sectors and which in the last chapter points to new forms of partnership which we need to develop. The same principles and themes underpin them all.

But to make these partnerships work requires public and private sectors to continue develop new forms of relationships and work together in new and innovative ways.

It requires Government to identify the opportunities for harnessing private sector disciplines. And private sector to adapt and organise to make its contribution as effectively as possible.

One example, is the Wider Markets initiative which is helping to release the latent potential of public sector assets. This includes physical assets – land, premises and equipment, and intangibles such as intellectual property.

Examples of PPPs in this area include the Defence Evaluation and Research Agency – transferring technology developed for the military into the civil sector, such as technology for producing flat loudspeakers and speech recognition.

Another example is the increasing use of private sector individuals and parties in the development and implementation of policy.

This can introduce new thinking and relevant experience into resolving policy problems and the modernisation of Government.

But it requires public sector to be open to new ideas and new ways of working; and the private sector to be prepared to challenge traditional assumptions and also widen its horizons.

Partnerships UK, which we expect to launch shortly to help Government develop and implement PPPs, could itself be seen as an example of this type of partnership.

Conclusion

Our vision is see the partnership concept extended. We have already seen what partnerships can achieve through the private finance initiative, as public and private sectors are finding new ways of working together to deliver better public services – for the benefit of customers, local communities, employees and taxpayers. The challenge John and I are setting today, to both public and private sectors, is to build on this success. To develop new and innovative forms of partnerships, so that together public and private sectors can be partners in the modernisation of Britain.

The speech made by Andrew Smith, the then Chief Secretary to the Treasury, on 22 November 1999.

Thank you for coming to this conference today. Having been a councillor myself in Oxford for 11 years and my wife having been one for 12 years for the Blackbird Leys estate in Oxford where we live, I can tell you local government has loomed large in my life. I’ve seen it at its best and I’ve seen it at its not so good. I believe in it and I want to make it better.

So today I want to outline to you why Best Value is a core element of this Government’s modernisation programme, why Best Value demonstrates our commitment to building a new relationship built on partnership between Central and local government.

Britain’s public services are crucial to the fabric of our country. Time and again, people make clear just how highly they value services such as education, health care and public transport. Indeed our commitment to public services was a key reason why we were elected into office and we expect in the future to be judged on our programme for their reform.

Modern, efficient public services lie at the very heart of a productive and fair society. That is why improving public sector productivity was central to the productivity strategy set out two weeks ago by Gordon Brown in the Pre-Budget Report.

We believe in our public services and we believe in the people who deliver them. And precisely because we believe in them, we think there’s a real sense of urgency in making the changes necessary for them to progress.

That is why the next three years see the biggest ever investment in our schools and health services. Not just one year. But the year after that and the year after that as well. And at the same time we are maintaining a prudent fiscal policy. We will not put into jeopardy the platform of stability which has been created through tough discipline both in fiscal and monetary policy.

This new investment is a testament to our faith in public services. But while more money is a necessary condition of success, it is not a sufficient one. Public services must also dramatically improve their productivity, efficiency and performance. Service users and taxpayers have a right to expect that their hard-earned money is not only being spent on the right things but is also delivering value for money, that what is available is being used to best effect

So since the election, we have initiated the most radical reform programme in public services in 50 years. More money is coming on line. Our job now is to make that money work, for the taxpayer and the service users.

We are modernising public services to ensure that they reflect real needs and deliver what people really want. The challenges of change in the modern world are immense. The technological revolution is changing the way consumers buy and the way we work. New markets and services are created daily. Public services must embrace that change too. We do our banking over the phone or the Internet so we expect to be able to pay our Council tax in similarly convenient ways. Business information lines are increasingly accessible 24 hours a day and we expect local authority information services to be equally convenient.

There has already been progress and our public services are steadily improving and those responsible deserve our thanks and praise. We want to see high quality services not just in a few exceptional councils but everywhere. We want to see every council aspiring to Beacon status. We want to reward excellence and crack down on failure.

By doing so we can tackle the variations in performance to bring all standards up to those presently achieved by best. Differences between performance are too marked. For example, a joint Audit Commission and Social Services Inspectorate report covering 29 local authorities found that the cost of home care varied from £7 an hour to £15 an hour. Highlighting and acting on these sorts of differences will help us spread more effective and efficient practice throughout Government.

Of course, our modernising agenda is not only for local government. We are focusing on concrete improvements and service delivery through every layer of government, setting up new mechanisms for delivering progress and new machinery for monitoring it. That is why we have set ourselves tough output and efficiency targets through Public Service Agreements. Agreements that say in return for extra investment, we want genuine improvements in our public services.

These targets are being monitored closely to ensure that services are brought up towards the level of the best and that the best is made even better. We will report on progress against these targets in the spring of next year.

We have also set up a £2.5 billion Capital Modernisation Fund to support innovative capital projects which will further improve the quality of our public services.

We’ve allocated £430 million to modernise Accident and Emergency departments, giving patients better access to primary care. There’s £170 million to improve security in local communities to help our fight against crime.

And we have established a new advisory panel – the Public Services Productivity Panel – of outside experts drawn from the private sector. Leading businessmen and women, bringing to the public sector experience of managing change in large complex organisations.

We are also acting on the need for modernisation in procurement.

The Government is the largest buyer of goods and services in the country. Our procurement budget totals around £13 billion a year. So there is a lot at stake.

Following the report by Peter Gershon, the Managing Director of Marconi, into public procurement, we’re streamlining its procurement processes by creating the Office of Government Commerce. This should deliver over £1 billion of efficiency savings over the next three years.

So our commitment to modernising government is a commitment across the board and it is a commitment for the long term. And Best Value is our commitment to genuine service improvements in local services on the ground where it matters.

Our focus now is on what really counts – what people get for what we put in. As with Public Service Agreements, the Best Value regime ensures that we focus our efforts on what makes a difference in people’s lives: for example, housing and benefits services, services for the elderly, services for our children.

Councils need constantly to look for ways of enhancing the service they offer their clients and customers, and to adapt to their changing needs and expectations if we’re honest not something which has not always been a sufficiently high priority in the public sector.

Best Value is designed to encourage innovation and innovative delivery mechanisms. We need to challenge the tradition which so often in the public sector tilts the risk/reward balance towards the risk averse. There may be something in the nature of public service that tilts the risk/reward balance towards the risk averse. On the one hand, successful initiatives don’t offer material rewards for public sector employees which are available to their private sector counterparts. On the other, a failed approach carries the risk, rightly, of a searching public examination. It is little wonder that public services for years have been run with the goal rather more of avoiding mistakes than trying something new and ambitious. We need to work together to change this into a new culture which encourages the social entrepreneurs which will give us the innovations we need.

Best Value encourages partnerships with communities by ensuring that community strategies and corporate mission statements are reflected in the review programme. I know that Beverly Hughes will be saying more about this later.

It’s important to recognise, as we do, that imposing one set of structures from the centre simply will not work. Public services are delivered locally, so they need to be shaped locally, to meet local needs. That is why Best Value is flexible, always focusing on what works best.

Best Value also allows a marrying of local and of national priorities. Local priorities which are set through local indicators in consultation with service users and local communities; alongside national priorities set by government departments.

Finally, Best Value recognises the importance of accountability, with review programmes published in annual local performance plans. A new dimension to public accountability, providing local people and communities with a basis for demanding improvements where they are most needed.

Big steps forward have of course already been taken to prepare for Best Value’s introduction in April. I thank you for all the work that you have done on that. It is great that we have got this far, so quickly. But we need to ensure that small district councils are fully signed up to this programme of reform as well as larger ones.

We also need to recognise that 1st April 2000 is only the beginning; Implementing Best Value is a major challenge for local authorities in the months and years beyond us.

But if we change the mindset, devolve ownership of Best Value from managers through to local staff, and again through to the public, the potential rewards will be immense: The best councils will get greater powers – more freedoms and flexibilities to manage the way they see best. The best schools will see lighter touch inspection. Local authorities will have more ability to push forward their case for resources.

We will be exploring with local government in next year’s Spending Review whether we can reach a new agreement: more and better outputs in return for more freedoms in the way you deliver services on the ground. I think that there is a huge prize for both central and local government and for the wider community.

Of course these reward for success will not come overnight. Rights need to be earned and trust needs to be built even deeper. But with commitment and dedication, I believe it will happen.

Our modernising programme of renewal and reform is ambitious and it is demanding. We will be driving it forward year on year. But it is a programme that has the ability and the vision to change the way our public services are run and used for the good of everyone. Best value does offer the best future for local government and all of those it serves. I thank you for the contributions you are making.