HM Government

Strategic government

The role of the state and government will change over time. This partly reflects the progress made as a result of previous public service reforms. And it also reflects the position of the economy and the role of the state in addressing it. At a time of global recession as government increases its role in meeting new economic challenges, so too will there be some areas where it will play its role best by being less hands-on or by withdrawing altogether. The state must be flexible and strategic, adapting its focus over time. The test for government is effectiveness, not whether it is big or small. One inescapable responsibility of effective government is to establish new priorities, to guarantee national standards and to build up capacity within public services. Central government must not hesitate to take determined action in areas where poor results demand it - active government is the only true guarantor of social justice for all. However, where performance is stronger, or where radical innovation is needed,government has increasingly devolved control to others. This greater autonomy for professionals and front-line institutions is a driving force for service improvement and for joining up services locally. Therefore, while the Government has intervened forcefully, for example, to improve reading standards in schools and to tackle infections in hospitals, in many other areas we have been eager to devolve control, enhance the role of the private and third sectors and empower citizens and communities.

Looking to the future, it is clear that rising expectations, demographic pressures and other drivers of demand for public services will mean that the Government will need to continue to take a strategic approach in deciding which services need to be provided directly or exclusively by the state and in which it can achieve its goals more effectively by taking a step back. With reform accelerating and decent service standards increasingly secured for citizens, central government will focus on:

- setting standards and entitlements;
- driving productivity; and
- fostering innovation.

Setting standards and entitlements

A smarter, more strategic state provides leadership on big challenges and puts resources in the right place. It then focuses on improving outcomes and acting to guarantee rights, standards and entitlements. It means that government leads an effective system where empowered users, incentives and accountabilities drive improvement. It means equipping people with far better, richer information and using new technologies and opportunities to foster a dialogue about public services and policy with citizens and professionals. It also means that delivery of services is responsive to local circumstances and priorities. Achieving all of this will demand a more accountable, co-ordinated and higher performing Civil Service.

Focusing on outcomes, rights, standards and entitlements

During 2009, alongside a relentless focus on bringing the country securely through the global recession, government departments will continue to focus on delivering the 30 medium term objectives (the Public Service Agreements) that describe the most important outcomes that the Government has committed itself to achieve for citizens. The Public Service Agreements are focused on some of the biggest challenges facing the UK - from reducing child poverty to tackling climate change; from better health and well-being to housing and employment for all; from higher educational standards to reducing social exclusion. The Service Transformation Agreement, which underpins all of these, sets out our continuing commitment to improve the quality, efficiency and integration of public services. The Local Area Agreement framework plays an important role in linking these national outcomes to local priorities

Meeting these challenges requires the combined engagement and efforts of central government, front-line professionals and citizens. And it demands a focus on the things that really matter. That is why, in setting the public service framework, the Government is looking to improve measures of public confidence, perceptions and experience, and has dramatically reduced the number of national targets. And it is why the Government has committed to reducing data burdens on front-line professionals by 30% by 2011. Successfully delivering on our ambitions across the breadth of the Public Service Agreements in 2009 will therefore lead not only to tangible improvements in people’s lives, but to a major change in the relationships between central government, professionals and citizens.

In the future, the Government will not seek to prescribe how public service managers should change services. Nor will we seek to micro-manage complex systems of public services from Whitehall. Instead, most services will be given greater freedom to manage themselves, working with citizens to find the most effective and efficient ways to deliver improved outcomes. Many outcomes will be translated into the rights, standards, guarantees and entitlements that the public, and the business community can expect, rather than top-down targets.

However, enabling front-line professionals to respond to local priorities and circumstances does not mean that the public should ever face unacceptably low standards in their local services. Therefore, the Government will continue to insist minimum standards of service are met across the board, so that in parallel with offering greater freedoms, we will also intervene much more sharply in those services that fail to deliver decent minimum standards. Whilst our public services must be free to meet the standards to which people aspire, they must also operate in an environment that does not tolerate sustained failure to deliver.

Delivering transparency

A focus on outcomes is only meaningful when it is combined with clear and reliable information on performance. Transparency that delivers accessible and useful information on the performance of services and the outcomes they achieve is at the heart of our strategy for improving public services.

The independent Power of Information Task Force published its report on 2 March. The report contained 25 challenging recommendations to government aimed at improving the use of information in this new world. The Task Force's work has been recognised internationally as providing a cutting-edge vision, with examples of what modern public service delivery might be.

The Government welcomes the task force’s vision, accepts its overall messages and will be responding on the detailed recommendations shortly. We are already taking steps to implement this vision and in 2009 we will seek to deliver the following:

Open information. To have an effective voice, people need to be able to understand what is going on in their public services. Government will publish information about public services in ways that are easy to find,easy to use, and easy to re-use, and will unlock data, where appropriate, through the work of the Office of Public Sector Information.

Open innovation. We will promote innovation in online public services to respond to changing expectations. The Government will seek to build on the early success of innovate.direct.gov.uk by building such innovation into the culture of public services and public sector websites.

Open discussion. We will promote greater engagement with the public through more interactive online consultation and collaboration.  We will also empower professionals to be active on online peer-support networks in their area of work.

Open feedback. Most importantly, the public should be able to have a fair say about their services. The Government will publish best practice in engaging with the public in large numbers online, drawing on the experience of the www.showusabetterway.com  competition and the www.londonsummit.gov.uk, as well as leading private sector examples like www.ideastorm.com.

Civil Service accountability and performance

Strategic government also relies upon a Civil Service that is able to work in new ways, is better equipped to learn from the front line, is innovative and responsive to customer needs and works better across departmental boundaries.

The UK Civil Service has a long tradition of providing impartial advice and support to the government of the day and helping deliver improvements for the public. In the next few years, the service will need to have a sharper focus on outcomes, innovation and value-for-money.

The Cabinet Office and HM Treasury play a crucial role in managing each Whitehall department’s financial competency, service delivery and organisational capability, and will make some important changes to this system in the next year in three areas:

Simpler, more transparent department performance assessments. A new performance management framework for departments will be introduced from autumn 2009 to ensure stronger accountability for government departments. And to ensure that performance is visible to the public, we will develop and publish a new performance management scorecard to show how departments are performing against government priorities - including value-for-money.
Better assessing departments’ capabilities. Capability reviews set out publicly the effectiveness of central departments in leadership, strategy and delivery. These reviews have been very useful in highlighting good and poor performance, but to reflect our changing focus, future reviews will give much greater weight to how effectively departments support innovation and build delivery systems that learn from the front-line and improve value-for-money.
Improving the quality of leadership and management. Investing in high quality staff will be crucial to further improvements to the centre of government. With Civil Service employment falling for 16 consecutive quarters, the Civil Service continues to meet the challenge of doing more with less. We plan to link the new departmental performance management scorecard to Permanent Secretaries’ appraisals. Over the next 12 months, we will review best practice in the management of poor performance, benchmark ourselves, and take action to ensure that the Civil Service standards are consistent with the best in class. In the autumn, we will also undertake a single Civil Service People Survey that will allow us to measure employee attitudes consistently across the Civil Service on a range of issues, including levels of employee engagement.

Driving productivity

Across public services we have now put in place a far stronger set of levers to drive improved productivity and efficiency. At the same time as the Government is seeking to use public investment to support the economy, it is more important than ever that the Government ensures that investment is targeted on front-line services and that efficiency and value-for-money are pursued with increasing vigour.

The Government believes public spending has a crucial role in supporting the economy in a period where private sector demand is under pressure. We have built on the UK’s automatic stabilisers, which are relatively strong by international standards, through recent actions to support the economy including raising the income tax personal allowance by £600 and support for homeowners and households facing rising energy bills. And at the Pre-Budget Report we announced a major fiscal stimulus comprising a temporary reduction to 15% in the VAT rate and the bringing forward of £3 billion of capital spending, as well as increased resources for Jobcentre Plus to ensure that public services play their part in helping families.

This additional stimulus contrasts with government policy in previous downturns. For example, in the early 1980s downturn public sector net investment fell in real terms by over £5 billion between 1979/80 and 1982/83. In contrast the 2008 Pre-Budget Report plans showed that public sector net investment is planned to increase by around £10 billion in cash terms - from £30 billion in 2007/08 to £40billion in 2009/10. By 2013/14 public sector net investment is forecast to be three times higher (as a share of GDP) than in 1997.

Delivering greater efficiency

However, allowing spending to support the economy during the downturn does not mean going soft on value-for-money - far from it. At a time when budgets are under pressure right across the economy it is vital to look for improved efficiency in the way we deliver public services, to see there are transformational ways of changing services that also deliver savings, and to ensure that we pull out of areas in which we need no longer be involved.

Substantial reforms to back-office functions have already delivered real efficiencies. The Gershon programme was a successful top-down drive on efficiency within the public sector, which over-delivered against original targets, to deliver £26.5 billion savings between 2004 and 2008. Now we want to go further and deliver an additional £30 billion of savings in the current spending period plus a further £5 billion of value-for-money savings in 2010-11. This £5 billion of value-for-money savings will be cash-releasing. Together, these are equivalent to £1,400 per household that we will be able to reallocate to front-line services.

We know that our approach works and that it has delivered real savings, for example:

- 98% of benefits are now paid directly into citizens’ bank accounts, providing a more convenient service while saving more than £1 billion over 5 years.
- by renegotiating accommodation contracts for asylum support services and reducing the number of people housed in temporary emergency accommodation, the Home Office has saved £500 million while providing more stable accommodation for asylum seekers.

Building on this, all parts of the public sector are planning further savings, including the following:

- local government will achieve £4.9 billion of annual net cash-releasing efficiency savings by 2010/11 through business process improvements and collaboration initiatives, smarter procurement and better asset management
- HM Court Service plans to make over £140 million in savings through modernising processes and making use of new technology

But far from resting here over the coming years, two particular programmes will drive further change:

- the Operational Efficiency Programme (OEP) builds on private and public sector expertise to go further in achieving better value-for-money from cross-cutting areas of spending right across the public sector;
- the Public Value Programme (PVP) will explore a more tailored sector-specific approach to identifying smarter ways of doing business and taking wider policy decisions.

Transforming operations

The Government’s approach to improving value-for-money brings together a mixture of central and local innovation. Experience shows that both dimensions are required, for example:

- evidence suggests that better value-for-money can be struck by collaboratively procuring services across traditional organisational boundaries so that purchasers are using the collective muscle of the public sector to improve value-for-money and how services are delivered;
- there is unacceptable variation in the costs of standard services;
- there is a lack of transparency in the costs of back office functions such as finance and human resources that makes it hard for local and central managers to be sure value-for-money is being achieved; but
- there is a requirement for incentives and the space to innovate at a local level; local service leaders and front-line professionals are well placed to identify tailored ways to improve their organisations in order to meet the needs of their particular users and need to be given the freedoms, empowerment and accountability to do this.

This is the approach that we will build on in Budget 2009, with external advice from world-leading experts in innovation and efficiency supporting the transition to more strategic, leaner government.

Asset sales

The Government has set out its ambition to dispose of £30 billion of surplus fixed assets between 2004/05 and 2010/11 having already sold £18.3 billion for reinvestment in new equipment and infrastructure by March 2007.

Gerry Grimstone is heading the asset strand of the Operational Efficiency Programme (OEP), and will be working with departments, agencies, and the Shareholder Executive to consider, for a number of government assets, the potential for alternative business models, commercialisation, new market opportunities and, where appropriate, alternatives to public ownership.

Budget 2009 will report on progress and will also take into account market conditions and the views of relevant stakeholders.

Back office and IT

Martin Read, former Chief Executive of Logica, has identified substantial savings from 2010/11 onwards across the public sector through greater efficiencies in back office operations, including human resources, finance, estates, security, marketing, travel and legal services. For example, greater sharing of back-office operations can deliver substantial efficiency savings while still preserving the benefits of devolution in the provision of front-line services to the public. The shared services centre for 128 Prison Service Establishments is expected to deliver just over 30% savings in back-office operations and we know that further savings could be made in back-office operations across the public sector, as considerable cost variation still exists. For example, in areas such as human resources the cost per employee can vary by 300%.

This builds upon existing work to help drive down the expenditure on corporate services across central government. For example, in 2009 the Cabinet Office and the Department for Children Schools and Families will share their back-office functions with the Department for Work and Pensions. Martin Read’s work will also be particularly focused upon improving management information on back-office costs right across the public sector.

We will also look at improving the governance and accountability of major IT projects, improving management information on IT expenditure and increasing the standardisation and simplification of IT systems in order to drive down costs while maintaining or improving the delivery of public services. We know that significant savings could be made, as there remains a large variation in the cost of IT hardware and desktop support across the public sector.

Collaborative Procurement

The public sector is potentially a very powerful purchaser with over £175 billion spent annually on external goods and services. Martin Jay, Chairman of Invensys, has identified substantial savings to be made from 2010/11 for the public sector when buying standard goods and services, (such as energy where there is currently a variation of more than 50% in the rate paid for one kilowatt hour of electricity across the public sector). This work is examining how better use could be made of the expertise and procurement infrastructure offered by professional buying organisations in the public sector.

Property

Lord Carter of Coles is leading work aimed at achieving greater efficiencies from the public sector’s property holdings. He is analysing the size of the public sector property estate and where savings could be achieved. He will be making recommendations regarding the underlying mechanisms needed to achieve efficient management of the estate and considering the scope for rationalisation and running cost efficiencies as a result.

These measures to achieve operational efficiency will supplement measures to radically redesign systems around the needs of citizens and businesses and make better use of information technology to save money and provide better services. According to the National Audit Office only 1% of sole traders and small businesses believe that dealing with government has got easier over the last year. To respond to such problems, for example, all government departments are committed through the Service Transformation Agreement to halving the ‘avoidable’ contact (ie contact that adds no value) with public service contact centres. Secondly, departments are committed to rationalising the confusing proliferation of central government websites by migrating more than 95% of total identified websites offering citizen and business e-services, to Directgov and Business Link by 2011. The result of these measures will be that customers receive a more personalised service and less frustration, as well as saving staff time and money.

Transforming systems

Alongside these cross-cutting measures, we are reviewing a number of key policy areas, focusing on value-for-money issues within individual areas of spending (the Public Value Programme). The findings will mainly help achieve savings in the next spending review period, but will also contribute to achieving the additional £5 billion value-for-money savings in 2010/11. Budget 2009 will announce a package of further conclusions, building on savings already announced in the 2008 Pre-Budget Report such as £150 million in the Highways Agency.

Twenty-one PVP projects have been agreed across 11 government departments covering health, education, transport, skills, defence, justice, development aid and environment. The PVP programme includes:

- Health and social care: Budget 2009 will set out the projected value- for-money impact of World Class Commissioning. Budget 2009 will also report on the scope to increase efficiency further in the hospital sector through the tariff prices paid by primary care trusts and progress on extending pricing to new areas of the health service.
- Education: Building on the success to date of Building Schools for the Future (BSF) and Academies, the PVP will inform decisions on the cost-effective delivery of strategic objectives through the schools capital programmes, including the roll-out of Waves 7 to 15 of BSF. The PVP is also assessing the deployment of teaching assistants and its impact on educational outcomes. The PVP has also developed the evidence base on how best to deliver the Government’s long-term childcare objectives.
- Welfare and skills: The Department for Innovation, Universities and Skills is taking further steps to move to a more demand-led system for skills and will ensure that subsidies are targeted on raising demand in the most economically valuable areas.
- Police and justice: The Ministry of Justice will increase its use of competition to improve efficiency and effectiveness in the National Offender Management Service (NOMS).
- Communities: The Government’s forthcoming regeneration framework will improve the efficiency of regeneration spending, including strengthening accountability for delivering improvements in economic growth and employment, providing clear regional prioritisation of capital investment and strengthening local coordination.
- Defence: The Ministry of Defence is driving efficiencies to find at least £2.7 billion in net cash-releasing savings between 2008/09 and 2010/11. At the same time, we will be ensuring that resources are delivered as much as possible to the sharp end of our activity - the front line. The Ministry of Defence is improving efficiency and prioritisation in all aspects of defence business, and taking advantage of technological gains to ensure forces have the best equipment. This work will build on the achievements of the last spending review in which the Ministry of Defence found innovative solutions in logistics, human resources, training and finance and delivered some £3 billion of efficiencies - more than the target - all of which was reinvested in front line services.

Public sector pay

The government values its workforce and knows that it is the hard work of our nurses, doctors, teachers and police that is at the core of quality public services. During the current period of economic uncertainty, it is even more important that government focuses on delivering value from the investment it has made in the public sector workforce. The Government’s pay policy is to ensure that settlements reflect the recruitment and retention position of the workforce, are affordable, provide value-for-money for taxpayers and are consistent with the achievement of the Government’s inflation target. In addition, the Government is taking action to ensure the sustainability of all elements of the public sector total reward package. Recent reforms to public service pensions, including measures such as cost-capping and higher pension ages, will help to ensure the continuing affordability of these schemes.

Fostering Innovation

Efficient, personalised public services require innovation to be part of everyday business. That requires an approach from government which incentivises and encourages learning, change and improvement but which does not crowd out local innovation with over-powering central direction. We know from the experience of our growing social enterprise sector that a focus on outcomes is critical.

Innovation starts with a responsiveness to the public and to users. More and more, the public’s ideas, ambitions, aspirations and resources are the source of inspiration for how public services can change. We must therefore help unlock a different kind of relationship between public servants and citizens. Choice and competition are important ingredients. But we must add to this a culture in which we move beyond consultation to conversation and collaboration. Third sector organisations have often proved some of the most innovative because of their relentless focus on their users and their willingness to have a dialogue leading to change, rather than a culture of ‘we know best’.

Second, we know public services are full of talented and passionate teams who are committed to radically improving the services they deliver. But processes and systems can sometimes prevent good ideas from taking root and spreading. Innovators at all levels of public services - local leaders, service professionals, social entrepreneurs and citizens themselves - need more incentives and support to flourish.⁷⁰

Third, we have to make sure that government at the centre is supporting not suffocating innovation. In the spring, the Government set out its ambition for the UK to be the best place in the world to run an innovative public service.⁷¹ Now, in difficult economic times, new approaches will be even more vital to improve the efficiency and quality of services, tackle strategic challenges like an ageing society, and build new kinds of services for a new global economy.

Spreading a culture of innovation from Whitehall to the front line
The messages provided by the Civil Service can still too often create a culture of compliance. Therefore, alongside specific new incentives and support, assessments of departmental capability and performance will give greater weight to their ability to support and inspire innovation. A Whitehall Hub for Innovation in the National School for Government will support this drive. The Department for Innovation Universities and Skills continues to coordinate a network of policy makers in Whitehall concerned with innovation in public services and the Cabinet Office will play a strong role in ensuring that innovation is central to the Government’s overall public services reform strategy.

Harnessing the innovation of citizens

Changes in people’s expectations and knowledge, combined with technology are revolutionising the way people find solutions to problems and support each other.

Much innovation in society is undertaken through new channels such as online communities. For example, hundreds of thousands of people share practical ideas through sites such as netmums.com or moneysavingexpert.com. These channels could enable the public to engage with government much more effectively.

In the next year, the Government will therefore move further from traditional one way consultation to a genuine two way conversation and collaboration with citizens, communities and professionals as policies on public services are developed.

This year DirectGov will be building on the success of showusabetterway.com - a call for ideas about improving the way public information is communicated. It will explore new ways for harnessing the general public’s ideas for improving services.

The Government will also continue to give the public more opportunities to drive improvements in local services by giving them a stronger say in how services are run and providing more comments and feedback on performance. As outlined above, patients will have new opportunities to provide comments on GP practices through NHS Choices, and parents will have more opportunities to provide comments and feedback on the performance of child care providers.

Harnessing the innovation of front-line public servants

Front-line staff, managers and leaders are better connected than those in central government to what people need, know and want. Policy making that incorporates front-line insights can help ensure that policy is practical, effective and relevant.

Experience over the last year of working collaboratively with front-line staff, such as the involvement of over 2,000 NHS staff in developing the NHS Next Stage Review, clearly demonstrates the power of building policy from the front line upwards.

Research commissioned by the Cabinet Office and carried out by the Sunningdale Institute will be published on 26 March 2009.

This will set out ideas for how to achieve better front-line engagement through initiatives such as:

- embedding of the use of front-line insight in the way we measure skills and competences and performance manage policy professionals;
- developing a new core curriculum for policy work at the National School of Government; and
- capturing insights through use of professional networks.

We are putting in place mechanisms to ensure delivery of these recommendations and are asking departments to establish better ways of engaging with the expertise of those working at the front line.

Our drive for radical innovation in response to the downturn will be complemented by new local incentives on all services to deliver greater value-for-money. That means going further to work with staff at the front line to help them innovate; finding their own solutions to cutting bureaucracy, redesigning services and focusing spending where it is most needed.

As part of HM Treasury’s Operational Efficiency Programme, the Government has asked Sir Michael Bichard, a former local authority chief executive and Permanent Secretary and now Executive Director of the independent Institute for Government, to explore where we can go further to help local areas and professionals improve value-for-money.⁷² At Budget 2009, he will bring forward proposals, including:

- Better frontline engagement and service redesign: encouraging public sector professionals to innovate and come forward with their own ideas on how to cut waste and continually improve services, along the lines of ‘lean’ initiatives and other successful programmes such as Operation Quest in the Police.
- Greater joint working in local area: services’ performance management systems and accountability arrangements could better encourage greater joined up working across services in a local area, reducing duplication and leading to service improvements and efficiency savings.
- Identifying and cutting unnecessary bureaucracy: examining how central government can go further to continuously identify and cut bureaucratic burdens on the front-line.

Notes

70. Mulgan, G. Ready or not? National Endowment for Science, Technology and the Arts, 2007
71. Innovation Nation White Paper, Department for Innovation, Universities and Skills, 2008
72. Operational Efficiency Programme: Prospectus, HM Treasury, 2008