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Patrick Spencer: Some advice for the new Conservative leader. Stick to these three ideas to boost productivity.

Patrick Spencer is Head of Work and Welfare at the Centre for Social Justice.

The Conservative leadership contest has proved to be the battle of ideas that the party wants, needs and should probably have had back in 2016. Yes, Brexit has dominated the discussion, but in amongst chat of proroguing, No Deals and backstops, we have heard interesting ideas about, for example, tax reform, a national citizens’ service and early years support for young mothers. During the Parliamentary stage of the contest, the Centre for Social Justice hosted the Social Justice Caucus of Tory MPs, holding their own hustings event for the Conservative leadership, and the candidates didn’t disappoint.

The litany of new ideas stem from the fact that most of the candidates felt it is time to reshape the Government’s fiscal strategy. The last nine years have been defined by successive Coalition and Conservative government’s support for fiscal rebalancing. David Cameron and George Osborne successfully formed governments after two general elections on a platform of fiscal prudence.

However, the political landscape has changed. Younger voters who weren’t around to vote in 2010 now make up a sizeable chunk of the electorate. Years of austerity, job growth and a much healthier national balance sheet has meant that ‘austerity’ is increasingly unpopular.  Combine this with the perceived economic harm that a No Deal Brexit may cause, and the case for loosening austerity is compelling.

In this vein, Boris Johnson has argued for lower taxes on higher earners as well as increased spending on education. Esther McVey wanted to cut the International Aid budget and spend savings on the police and education. Dominic Raab called to raise the National Insurance Threshold and cut the basic rate of income tax. Michael Gove hoped to reform VAT so that it becomes a Sales Tax. And Sajid Javid said he would slow the rate of debt reduction, which would free up £25 billion for new spending commitments.

Even outside of the leadership circle, Tory MPs and right-of-centre think tanks are advocating for a new spending strategy.  Neil O’Brien has coined the ‘O’Brien Rule’, which allows for budget deficits as long as debt as a percentage of GDP is falling. This sentiment was echoed by Philip Hammond, who called on every leadership candidate to commit to keeping the deficit under two per cent of GDP as long as the national debt was falling.

Considering the appetite to do something, the next leader of the Conservative Party and Prime Minister should be warned that spending for spending’s sake is not a good idea. If the decision is taken therefore to loosen the fiscal taps, it should be carefully targeted so that this increases growth and more importantly, productivity.

The Centre for Social Justice released a report in 2017 that highlighted a clear policy agenda that used tax and spend policies to boost productivity across the UK. It is roundly recognised that the productivity conundrum in the UK has not been the result of any one issue but, rather, is a confluence of factors that have taken hold of our economic and social machine.

First and foremost, British companies do not invest and innovate enough. Compared to other countries we have lower levels of capital investment, lower uptake of new-generation technologies such as robotics, and entrepreneurs sell out too early. Britain has a proud history of innovation and technology, and yes we do have several world beating unicorn companies, but in recent years we have lost ground in the innovation stakes to the US, Germany and the Asian economies.

The CSJ recommended a raft of policies that could help reverse this, starting with a ramp up in public funds available for research and development. Public cash for R+D has a crowding in (as opposed to crowding out) effect. We also called (counter-intuitively) for the scrapping of Entrepreneurs Tax Relief. It is expensive and does little to help real entrepreneurs, and only acts as a tax loophole for asset strippers (this policy has recently been advocated by the Institute for Fiscal Studies and the Resolution Foundation). We also called for simplification of the tax system. Look at the Annual Investment Allowance, for instance, that was decreased by 75 per cent in 2012, increased by a factor of 10 in 2013, doubled in 2015, only for it to then be almost cut in half in 2016.

Second, the CSJ called for a radical increase in support for vocational education in the UK. While businesses needed some help to innovate and compete, the labour market needs support in terms of skills and competencies. Recommendations included a new spending commitment for FE colleges and more support for adult learners who are in low skilled work. The Augar Review called for the Government to make £1 billion available for colleges, a good start but realistically the Government will have to go much further in the future. here is an example of where public money can make a big difference in public policy.

Last, if the next Prime Minister wants to support productivity growth, they can look at rebalancing growth outside of London across Britain’s regions. London is home to less than a quarter of the UK’s population but contributes to 37 per cent of our economic output. It attracts a disproportionate number of high skilled and high paying jobs. Public spending on infrastructure in London dwarfs that spent in the North and Midlands. Reversing this trend will of course take a generation, but by boosting transport spending on inter-city transport (most obviously Northern Rail), tax breaks for companies that set up in struggling cities such as Doncaster, Wigan or Bradford, as well as more money for towns and cities to spend on green spaces and cultural assets (such as museums, public art, restaurants and bars) that attract young people.

These three productivity-generating policy areas will allow any Government to loosen the fiscal taps without bankrupting the country. When the next Prime Minister appoints his Chancellor, he or she would be well advised to stick to the basics of cutting taxes, spending more on education and rebalancing growth outside of London.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Wigan Council is seeking to be the servant not the master of its residents

It is estimated that public spending this financial year will be £840.7 billion. That is an increase of 3.6 per cent of the total of £811.8 billion in 2018-19. As inflation is currently 1.9 per cent, that means we are likely to see an increase in “real terms”. In 2009/10, the total level public spending was £634 billion. If we allow for inflation to get the “real terms” figure, that would be £835 billion for last year. The upshot is that state spending continues at roughly the equivalant level of extravagance that we had under Gordon Brown – all the talk of “austerity” is nonsense. At least that is for central Government. Within the total, there is some variation. If we look at items of state spending for 2009 and for the current year, we can see some have risen very sharply. Debt interest is up from £31 billion to £52 billion. Then we have “net expenditure transfers to the EU” up from £6.4 billion to £15 billion – no austerity there. Some other areas have seen significant “real” increases – pensions (mostly as there are more pensioners), the NHS, overseas aid…

For councils, it is a bit different. Total local government expenditure this year is due to be £182 billion. In 2009/10, it was £162 billion. If it had been increased in line with inflation, it would have reached £213 billion by last year. There is lots of complexity beneath those figures, but I think it is fair to summarise that overall, central government has not had spending cuts, while local government has. I am the first to say that we stll have vast sums of wasteful and extravagant municipal spending. But let’s also throw the occasional bouquet. Savings have been found while the satisfaction rate with local services has generally held up pretty well.

Voting Conservative is generally a rather good idea if you want the mission to achieve value for money to be pursued in your town hall. But in general the response from councils, of all parties, to finding they have less money to spend has been positive. Some have just shrugged, cut front line services, and blamed central Government. However, most have risen to the challenge to be innovative, to find efficiencies, to reform the way they operate and reflect on what they do and what they achieve.

In this context I was pleased to see a report from the King’s Fund regarding Wigan Council. It says:

“Over a period of six years, public services in Wigan have been through a major process of transformation, based on the idea of building a different relationship with local people. The new approach to delivering services has become known as the ‘Wigan Deal’….The Wigan Deal is an example of ‘asset-based’ working, in which public services seek to build on the strengths and assets of individuals and communities to improve outcomes. Although other areas have explored similar approaches, Wigan is notable for the scale and consistency with which these ideas have been applied….a key part of the process has been closer working with the NHS, voluntary sector organisations and others to establish a common approach. A citizen-led approach to health and care…Wigan’s journey shows it is possible to achieve substantial savings while protecting or improving outcomes, but only if services are genuinely transformed and upfront investment is available to help bring about new ways of working.”

The Council employs a thousand fewer people than it did in 2010. Some of the changes have been politically senstive. For instance, the report says that the “deal” involved closing day centres, providing a better alternative. The savings for adult social care were as follows:

  • “Reassessing all care packages to identify opportunities to deliver care in a more cost-effective way, making better use of individual assets and tailoring care to personal needs.
  • Moving away from a building-based model of day care support, which has meant that the number of day centres that the council operates has reduced from 14 to 4, with the council instead investing in community organisations providing a more diverse range of alternatives at less cost.
  • Redesigning supported accommodation based on multiple-occupancy housing, with care and support shared across several tenants, strengthened community connections and investment in assistive technology.”

While spending has gone down, the quality of the services provided has gone up:

“Healthy life expectancy has increased significantly, bucking the trend for stagnation seen in the England-wide figures. Care Quality Commission assessments indicate that the quality of social care services in Wigan has improved, and Wigan performs well compared with national and regional benchmarks at supporting people to leave hospital and to remain in the community rather than in long-term residential care.”

The Council has switched from “a transactional commissioning model to a more collaborative one in which voluntary and community sector organisations are seen more as partners than service providers and are actively supported to develop and improve.” The approach is “to allow families to progressively take greater control over their lives, with professionals working as facilitators, helping participants to make their own plans and to strengthen their capabilities – including their ability to build positive relationships, to work, to be part of a community and to live a healthy life.” The staff feel they have “permission to innovate”. One social care manager was quoted as saying:

“It is having the freedom to work in a way that makes it better for our residents in Wigan. I have got freedom to work in a different way.”

James Winterbottom, the Director of Children’s Services for Wigan Council, gives a sense of the change with reference to case conferences in child protection. “In the past, case conferences were dominated by large groups of professionals meeting with parents, each taking their turn to describe their concerns about the family, ” says the report. “Everyone started to describe how terrible this family was… At the end of the meeting, everyone agreed the need for a child protection plan, and ideally the family would understand what this meant from being involved, but they did not have a clue what had happened to them.” Now we have fewer social workers and better outcomes:

“A similar meeting today might involve eight members of the child’s extended family and only two social care professionals….The answer is here in this family – how can we help you to resolve these issues? They own the issues. The whole family wanted to come to a solution. In the old model, that child could well have ended up in care.”

Innovation was applied to ensure enough foster care was available:

“The council on at least one occasion has offered to pay for an established foster carer to have their home extended because the family were willing to accommodate more children but could not do so because of space limitations. The council calculated that the cost of building an extension would be less than the cost of placing a child with an independent foster carer out of the area, and that this solution would also be better for the child. Interviewees told us that there is a culture of being open to trying out bold ideas like this where a case can be made for them.”

Red tape was cut:

“There was also a recognition that staff needed to be freed up to work differently, spending more time working directly with residents and service users. The bureaucratic burden needed to be reduced so that less time was spent on processes and procedures that did not directly contribute to improving outcomes. The intention has been to build a culture in which the ideas for improvement come from the front line, with managers then enabling changes to take place.”

Margaret Thatcher once described her aim for Britain “the State as servant and not as master”. Wigan might  be run by Labour councillors. But it strikes me that is the principle they are seeking to apply. It is greatly to be welcomed.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

The local elections revisited: an analysis of results in the north west

Our series, on the impact of the local elections on the political parties in different regions, rolls along. This week it is the turn of the north west.

No elections were held in Warrington.

These metropolitan boroughs had a third of their seats up for election:

  • Bolton
  • Bury
  • Knowsley
  • Lancaster
  • Liverpool
  • Manchester
  • Oldham
  • Rochdale
  • Salford
  • Sefton
  • St Helens
  • Stockport
  • Tameside
  • Trafford
  • Wigan
  • Wirral

These unitary authorities had all their seats up for election:

  • Blackpool
  • Cheshire East
  • Cheshire West and Chester

While for Blackburn with Darwen, and for Halton, there were a third of the seats contested this time.

Then for the district councils the following had all the seats up for election:

  • Barrow-in-Furness
  • Carlisle
  • Copeland
  • Eden
  • Fylde
  • Preston
  • Ribble Valley
  • South Ribble
  • Wyre

For these districts a third of the seats were contested:

  • Burnley
  • Chorley
  • Hyndburn
  • Pendle
  • Rossendale
  • South Lakeland
  • West Lancashire

There was also a contest for a directly elected Mayor of Copeland.

Conservatives

The reasonably encouraging results in Wirral have already been recounted here by Cllr Ian Lewis.

Elsewhere, the news was less good. Cheshire East was pretty grim. The Conservatives lost 19 councillors, which resulted in this local authority falling to No Overall Control. This is the first time it hasn’t been Conservative since its creation in 2009. It is now a Labour-led council with the backing of independents.

The Conservatives lost control of Eden. It is now hung, but has a Lib Dem leader.

Craven slipped from Conservative control after the loss of three seats to independents. The Council is still Conservative-led.

Pendle was another loss. It now looks as though there will be a Conservative/Lib Dem coalition.

On the other hand, the Conservatives gained a couple of seats in Blackpool. Although it is still Labour-run, it is quite a bit tighter as Labour also lost four seats to independents. The Blackpool Independents don’t have a terribly clear ideological remit but they suggested they might persuade other councillors to defect to their ranks. The Conservatives also picked up a seat in Salford.

Lib Dems

The results in Liverpool show how the Lib Dem recovery has been at the expense of the Conservatives far more than Labour. The Lib Dems used to run Liverpool City Council. In last month’s elections, they gained a couple of seats in the City. But it remains Labour dominated. The Lib Dems gained a seat in St Helens, a seat in Manchester, a seat in Blackburn, a seat in Bury… Even allowing for councils being elected in thirds it is pretty modest.

The Lib Dems saw their majority increase in South Lakeland. Stockport is an important council for them. They gained four seats to draw level with Labour although Labour will still lead the Council.

Labour

Trafford traditionally hogs the limelight when it comes to local elections in this region. For decades winning here was a measure of whether the main opposition party nationally was making the electoral progress needed. So Labour was fortunate to gain it from no overall control and thus win that high profile prize.

As noted above, Labour kept their grip on the big cities. But even in safe territory for the Party there were some warning signs. In Wigan while Labour still have a big majority, they lost three seats – a couple to independents and one to the Conservatives. Burnley also saw Labour lose seats to independents; this time it cost them control of the Council. The Burnley and Padiham Independent Party highlighted “the Brexit betrayal” along with the need to improve community safety and reduce dog mess.

Labour lost control of Lancaster with big gains to the Morecambe Bay Independents. However, Labour have managed to cling on after a deal with the Lib Dems and the Green Party.

Carlisle remains a hung Council. Labour lost control and the Council is now Conservative-led with backing from the independents.

Labour also lost control of Cheshire West and Chester – although so far they are continuing as a minority administration.

Conclusion

In past decades this was an area where Labour faced being challenged by the Lib Dems. This time they tended to be in more trouble from the independents. In the big cities, Labour maintained big majorities, but elsewhere there were some warning signs for them. Did they have a lucky escape because the Brexit Party was not properly up and running at the time?

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com