27 September 2001
Speech by the Chief Secretary to the Treasury, Andrew Smith MP, at the Performance in Government Conference -"Delivering Public Services"
1. We all recognise that delivering public services to a high standard is crucially important. The Treasury is certainly at the heart of driving this agenda forward. So we have worked hard to develop the tools and expertise to deliver on performance, and it's these tools for improving performance that I want to talk to you about today.
2. Delivering real improvements in our public services is the central issue for this Government.
3. We are aiming to combine the best of economic dynamism and social justice. And the challenge of combining the two crystallises around the issue of public services, because for many people public services are the clearest symbol of community, solidarity: what we provide together as a society.
4. That is why the Prime Minister has set out our overarching challenge - to reform and modernise our country's vital public services.
5. When we took office, we inherited the legacy of chronic under investment in public services and a £27 billion deficit on the public finances. Our first task was to create stability and sustainable public finances.
6. We had to make tough choices, but that is what Government is about: we made the tough choices and we delivered a platform of stability:
- inflation close to target and the lowest it has been for 30 years;
- around the lowest long-term interest rates for 35 years;
- the lowest unemployment since 1975, with more people in work than ever before; and
- sound public finances.
7. Because we have cut borrowing and cut unemployment, and encouraged higher growth and earnings, we are freeing up resources for priority areas in a sustainable way. As the fundamentals of our economy are stronger, so we are able to make sustained investment in our public services.
8. In the 2000 spending review, we announced an additional £4 billion of capital spending this year, and the doubling of net investment by the public sector over the next three years, to £19 billion in 2003-4. We are carrying forward:
- the biggest new hospital building programme in the history of the NHS: Alan Milburn has already announced 68 major hospital schemes worth £7.6 billion;
- the 10 year modernisation of our transport infrastructure, investment to replace or refurbish 650 schools ;
- massive investment - but always on a prudent basis.
9. Budget plans continue to be based on prudent and cautious management of the public finances - locking in a tough fiscal stance. Of course no economy can be totally immune to the effects of a global slowdown. But let there be no doubt that this Government is determined to continue with our programme of investment in our public services, which will be affordable because it was made on the basis of cautious assumptions.
10. We are making a massive investment in rebuilding public services, and the people expect a return on that investment. The quality of services does not just depend on how much Government spends; it depends on how effectively the Government deploys its resources.
11. We all know that there are schools with the same social intake and vastly different results. We all know hospitals that, with the same type of patients and the same type of resources, perform well or perform badly. As Alan Milburn has said, these disparities are not the result of a lack of resources; they are the result of the inefficient use of resources.
12. So we are focussing on outputs as well as inputs: not just increasing expenditure but improving performance.
Public Service Agreements
13. One of our key tools for improving performance is Public Service Agreements. We must be clear what our priorities are. PSAs set out what the taxpayer can expect the Government to deliver with the resources it uses.
14. The original PSAs set explicit goals for outcomes across the whole of Government: the first attempt by a British Government to set out the standards against which it could be judged.
15. In the 2000 spending review we improved the structure of the Government's objectives:
- setting more streamlined PSAs covering the extra expenditure we are putting in over the next three years
- we are focusing harder on the things that really matter
- to make the PSA targets sharper we are considering outcomes as well as inputs: not just how many police officers there are - but how much crime is reduced; not just how many nurses and doctors there are - but how long people have to wait for that crucial operation
- and we are working harder than ever before on ensuring we target the right measures of success.
16. We are providing extra resources. The 2000 Spending Review White Paper shows the resources we are devoting to our priorities. The PSAs explain what we will deliver in return, and the new Service Delivery Agreements set out how departments will deliver, and ensure good value for money in their operations. The new PSAs will be an even more effective tool for raising performance, and they will benefit a far wider range of services now we are extending them to local authorities.
Local PSAs
17. National objectives need to be met at a local level. Through local PSAs we will link our targets to local services. This is the framework that will give local government the tools it needs to deliver joined up services, flexible to the needs of their communities, and feeding into wider national objectives.
18. Setting targets - agreed locally and reflecting national priorities - will allow local authorities to focus on delivering services more effectively:
- our targets will free local authorities from unnecessary red tape and regulations that can prevent them from doing their jobs.
- and by setting targets we also make local authorities, like central Government, more transparent and accountable - enabling communities to re-engage with the authorities that serve them.
19. Local PSA were a radical departure from traditional ways of working, so we piloted them with 20 authorities. They were well received, so over the next two years we are rolling them out to 150 upper-tier local authorities with incentives to collaborate with district authorities.
20. Successful local authorities will secure significant financial rewards, but the real winners will be local residents who will see real improvements in the services they receive.
Modernising the machinery
21. Public service agreements are changing the way government sets about delivering services. But to raise our level of performance we need to change the way we devise policy and measure performance.
22. Modernising the machinery means changing the way Whitehall works. Ending social exclusion, modernising the criminal justice system, or encouraging sustainable development all require a wide range of Departments and agencies to work together.
23. We need to join up the different parts of Government - to re-arrange the public sector around the services the public need. Recent changes at the centre need to work through the system at all levels. The Prime Minister has begun this process by setting up the Delivery Unit under Michael Barber to ensure that the Government delivers in the key areas of health, education, crime reduction and transport;
24. He has also appointed Wendy Thomson to head a new Office of Public Sector Reform to take forward our commitment to radical reform of the Civil Service and public services.
25. I chair the Public Services Productivity Panel. Our aim is radical thinking, but with a focus on the practical steps necessary to modernise our public services.
26. The Panel has played a major role in reform of performance management within the civil service, making proposals and leading thinking on reform of performance incentives - tying them into PSA delivery.
27. More recent work by the Productivity Panel has highlighted the need for stronger arrangements to be put in place to ensure delivery of the PSAs. We need to ensure that everyone - from top level management to the staff on the ground - understand the meaning and importance of the targets for which they are responsible.
28. We need to ensure that everyone is bound into the target setting process from the beginning. And we need strong leaders, with genuine understanding and the ability to manage change successfully.
29. We also need to ensure that the public sector can work effectively with the private sector, manage relationships and deliver on investment.
30. We established the Office of Government Commerce to act as a central procurement organisation and with a role in improving the quality of investment by the public sector.
31. The OGC is encouraging the use of modern techniques and a cross government approach to procurement. These approaches are already proving successful - the Government Procurement Card, for example, has already yielded £28m in efficiency savings. These are savings that are now available for them to spend on things that really matter.
32. There is scope for great improvement in the quality of investment, speed of implementation, and delivery of services by Departments. That is why I launched the Gateway review process - a technique for delivering complex projects based on proven private sector practices, designed to ensure value for money improvements in major Government projects.
33. Under the Gateway process experienced senior staff, separate from the projects, consider their development at crucial stages - helping to guarantee the taxpayer a return on their investment. So far 70 projects - or £18bn of Government investment - have benefited from the Gateway process.
34. The pilot projects we ran saved around £150m, and once the scheme is in full operation we anticipate savings of around £500m a year. Again, these savings are not kept by the Treasury but are available to be spent elsewhere, where they can deliver further benefits.
Radical reform
35. So, we have created the basis of stability on which we can build better public services. We have reformed the arrangements for delivering public services through the PSAs. We are reforming the machinery that will enable us to deliver and to measure our performance. And we have established the Delivery Unit, the Public Services Productivity Panel, the Office for Government Commerce, and other forward thinking organisations, to help us deliver.
36. Our public services can be the best in the world. In every field of activity there are examples of where we are the most advanced and the most effective provider. Our aim must be to go beyond guaranteeing a high minimum standard for our services, to deliver responsive and consumer-driven services of a high standard.
37. We want a spirit of enterprise in the public sector, where local leaders have the freedom to innovate and change, and where we can delegate more autonomy and budgetary responsibility to frontline managers who can deliver high standards in partnership with their staff.
38. Our role in central Government should not be to direct and control the detailed delivery of services, but to create a framework in which effective and innovative public service deliverers are able to improve the services they provide, and where all public services reach the high minimum standard the public has a right to expect.
39. But intervention can be in inverse proportion to success. My vision of the future of public services is one where greater autonomy goes hand-in-hand with better outcomes. Where central government sets national priorities and the structures and resources to deliver them locally, but where there are real local choices about how to meet those priorities - a happy marriage between national priorities and local autonomy, and a renaissance for our public services.