Ben Lucas on turning the state upside down

Ben Lucas is the director of the Royal Society of Arts 2020 Public Services Trust and a trustee of the New Local Government Network. He was previously adviser to Jack Straw, head of research and communications for a trade union and chair of the Labour Coordinating Committee. He recently co-authored the report Fiscal Fallout which studied the cuts needed to get the government’s spending plans back on track and suggested a new approach for public services.

Room 151: Did you find much encouraging news in the Autumn Statement?

Ben Lucas: I think that the initial response to the Heseltine report suggesting that there should be a bid process for a pooled fund by 2015 is a move in the right direction. It seems to be the case that the most exciting new thinking in government is around the potential for a form of negotiated autonomy, which is what City Deals, Community Budgets etc are.

The reason that they are a breakthrough is that they go beyond the previous position where everything had to be done on a lowest common denominated basis: the principles had to be ones that could be applied equally to every place. The advantage of this approach is that it is a much more negotiated approach to do with the capability and capacity of particular places.

What I would say is that while it is clear that that is an important direction of travel, the pace of movement is still far too slow. It is notable that some significant government departments are not part of that dialogue in the way that they need to be, particularly the DWP.

To me this isn’t just a partial way forward. In our report we argue that this is really fundamental. What I don’t think the Autumn Statement did (nor the original 2010 spending review or any of the spending reviews of the end of the Labour government) is create a more fundamental conversation about the fact that we can’t carry on as we are. So I still don’t feel that politicians are being frank enough with the public and with public bodies about the scale of change that will be required.

This isn’t just about fiscal pressures and spending cuts, significant as they are. It is also about the demand crunch, and that part of the equation is at least as significant, but we are not talking about it enough.

The fact that some local authorities are in a position where they could be overwhelmed in a relatively short period of time simply by responding to demand on current statutory services illustrates how significant the issue is, particularly around an ageing society. I think a number of councils recognise they need to grasp this issue quickly and start to do what they can to manage demand downwards, otherwise they will be utterly overwhelmed and unable to provide any other kind of place-shaping services beyond social care.

Room 151: In that context, was it shocking to hear Eric Pickles accusing councils of scaremongering about lack of cash because they are holding cash in reserves?

BL: The scale of the challenges facing local government is such that it is not in the interests of local or central government to get involved in uneccessary scaremongering against each other. We should all recognise that a grown up response requires collaborative working, to a degree, between central and local government and a recognition of the scale of the challenge.

Things are going in the right direction but too slowly. Our view is that you need to fundamentally think through the public service settlement. In the report there were three elements. We said there needs to be a new starting point between the state and the individual, that the key should be how public expenditure can help promote social and economic productivity.

The three principles that we articulated that flow from that are: rebalancing and realigning services – which takes you into City Deals, Total Place, Community Budgets, that kind of collaboration and integration. Then there is what we call citizen side innovation, which is in part about demand management, then managing social productivity. Those three need to be thought through to get to the detailed policy changes that would flow from them.

Room 151: Can you give us an example of what you mean?

BL: For instance under citizen side innovation it would be re-thinking how welfare needs to work so that you move to a more flex-security system. Things like promoting the living wage become an important part of strategy locally and nationally because it is about reducing the need for the state to effectively bail out employers who aren’t paying enough, with six out of ten people currently in receipt of benefit being low-paid workers.

So it calls for a different approach. There are fragments of that emerging. And there are places that are working on it: what councils like Manchester are doing with running a pilot of a Community Budget where they’re looking at how they can manage demand of all of their public services and see the relationship between that on the one hand and creating a strategy for growth on the other. Another point we make in the report is that if you are going to spend 40% of GDP through public expenditure on services for the foreseeable future, you shouldn’t just see that as unavoidable drain but you should think about what productive capacity you can get for that expenditure. How can it help growth?

Room 151: What do you say to the councils who feel that concepts like City Deals are unfair and cater to areas which have greater opportunity to begin with?

BL: I understand that but I would say you have got to start from somewhere. There are other dimensions, so for instance Graham Allen’s work through the Select Committee of the House of Commons which is looking at whether or not you should codify the independence of local government is also an important part of it.

I agree that it shouldn’t just be a process controlled by the speed at which central government can negotiate.

On the other hand the reality is that, especially when it comes to the large departmental silos, they are currently government-run, Whitehall determined. If you are going to disaggregate them to regions and cities you need a process to enable that to happen.

It partly depends on what you are talking about. There are some places that receive proportionally less, for instance, DWP expenditure. So for them perhaps other vehicles for achieving greater autonomy are more appropriate. But certainly for the big cities where there is on the one hand a question about how you can agglomerate power to create growth strategies and on the other hand a question about the effectiveness of national, silo-based expenditure approaches which are not sufficiently attuned to local need, then you can see that moving forward on the basis of negotiated decentralisation makes sense.

Ultimately this will raise questions about departmental accountability and our whole system of universal public services, which will have to be resolved down the line. If you think of the Heseltine Report, it paints a picture of the destination but there is clearly a lot of thinking to be done about how you get there because what you are really doing is turning the state on its head and upside down. You’re saying that the bulk of decision-making and expenditure control and accountability should be at a regional level. We would completely support that but it is huge change. It requires quite big changes to the way that government departments work and it should lead to departments becoming much smaller, especially the big-spending ones.

Room 151: To some extent it is coming from councils taking the initiative though isn’t it? With councils like Lambeth and Oldham going co-operative for example?

BL: Yes, the co-operative councils, you have a number of really interesting models emerging. Sunderland is also doing interesting things on promoting devolved services and community leadership, and there are the big city models like the Manchester one. A lot is happening and it does seem to me that the most interesting policy development and experimentation is at a local level.

Room 151: Can you see that entrepreneurial mindset spreading in local government?

BL: Yes, but it’s not everywhere. It’s in a pretty grim context but the places that we have just talked about are not immune from the economic and social pressures that better off areas might be affected by and yet their decision is to think about their role in a different way, maybe because of how challenging their circumstances are.

Room 151: What did you think about the project rate on PWLB loans being channeled through Local Enterprise Partnerships?

BL: Initially, when RDAs were scrapped, the new economic apparatus that was set up almost consisted of virtual entities because they didn’t have any significant powers or resource. One of the points that we would make is that if you are going to flip the state upside down, if you think of the amount of resource that is currently concentrated in Whitehall, in terms of money and people, that is going to have to be disaggregated. So I think that these borrowing powers and the new fund that LEPs can bid for is going to be important.

Room 151: Is it taking financial power out of the hands of the individual council finance officer?

BL: That is one of the things that is going to have to be resolved because it is also important that there is a base of proper accountability in these arrangements and ultimately that sits with elected bodies like local authorities.

They have got to create the platform to be the leading players in this but they have also got to be effective at building partnerships. The most successful places are those that have created a broad economic leadership that includes business leaders and other organisations as well as the local authorities. You need all of those people involved.

It seems to us that what the Heseltine agenda envisages is a new grassroots corporatism. That requires all economic and social institutions and public bodies to work together.

Room 151: What do you think the most exciting opportunity out there at the moment is in terms of the agenda you are looking for?

BL: I think one of the game-changers would be to include DWP budgets and welfare in the transfer of power to cities. I think that starts to change the balance of decision making; it aligns the requirement to manage demand with the other side of reducing numbers of benefit claimers and enables you to start aligning public service reform and economic development.