Home > Labour Party News > Baumol vs Milibandism: Can Labour’s public service reforms succeed?

Baumol vs Milibandism: Can Labour’s public service reforms succeed?

Like Rafael Behr in the New Statesman before him, Janan Ganesh in the FT (£), , thinks Ed Miliband is avoiding the public services reform elephant in the room:

If choice and competition are so desirable in the private sector, why is he [Miliband] averse to their presence in the public sector? Aside from foreign policy, there is no subject on which he has moved further from Mr Blair than public service reform…….

This is not merely an intellectual rumple to intrigue wonks and technocrats. It goes to the gut question of what kind of prime minister Mr Miliband wants to be. He says he will stand up against “vested interests”. How would he describe the teaching unions? He says he will take on producer lobbies. What is the British Medical Association if not that? He wants an annual competition audit with consumers on board. Why not put public services within its remit?

See what Janan’s doing there?  In his world, reform is the breaking of the unions and  privatization.

Meanwhile, away from FT towers, the Labour party is starting to engage in a root and branch review of public services.  As the phase 1 discussion document for the Zero-based Review sets out:

First, building on the ideas in this document each Labour shadow ministerial team will prepare a report on Public Service Reform and Re-Design setting out how we now  deliver better public services with less money, involving employees, charities, and the  voluntary sector in our deliberations, as well as business and public providers, employer groups and trade unions. We will publish a summary of these reports in the  spring (p.7).

Unlike Janan, Labour gets that public service reform is about more than the latest carve up.  As Rafael correctly said in his piece*:

The idea that services can be improved by outsourcing key functions to the likes of Serco, Capita and G4S has been pretty well discredited. Likewise, there is mixed evidence at best when it comes to the belief that public sector efficiency and quality are raised when service users (parents and patients) choose between competing providers (schools and hospitals) in quasi-markets.

Whether or not Janan Ganesh is a competent journalist need not detain us here.  The point is that Labour as a party is doing its best to grapple with how public services will need to develop when it comes into government, and the important question is whether it might succeed.

So will it?

Well, I like the determination to do so set out in the document**, and I like the way it effectively firms up the commitment to investment spending, where the benefits can be quantified, through its very commitment to restraining “day to day” spending, as that allows quite a lot of leeway once in government.  In addition, the timelines are canny, in that there’s a quiet recognition that little major investment will be possible in the first year of government anyway, as it takes time to get such stuff underway, thus allowing the full zero-based review to be completed when in government (and with the resources then to do so).

But will such a review  ultimately overcome the Baumol effect?  Will Britain’s public services be remodelled to such an extent that the lag in productivity growth in public services, as compared to other sectors can be ‘rectified’?

No, I think is the answer to that.  To this extent I agree with Rick, that something will have to give.  In the end, a person to help dress in a hospital is a person to help dress in a hospital, and someone who needs a job remains the same person who needs a job, and in the end ‘efficiencies’ end up as reduced quality.

Even so, I’m hopeful that the review will start to look beyond productivity gains, beyond the Baumolian inevitability, and address the other side of the public services equation: not the services bit, but the public bit. I’m hopeful that long-term investment in the broadening of the whole concept child welfare***, for example, will create less need for (the relatively) massive expenditure on statutory child protection services.

I’m hopeful not because I see many radical solutions emerging just yet but because, unlike blinkered journalists who can’t even be bothered to read Labour policy before pontificating about how crap we are at it, I can see that at least Labour under Miliband is trying to open up to radical reform of public services.

That’s reform – as in re-forming.

[Update 23/01/14 : this has become 1 of 2 pieces on Public Sector Reform Labour-style.  2 of 2 gets down to the nitty-gritty of what it needs to be if it's to overcome Baumol]

*My mini-beef with Rafael is not his analysis that public sector reform is something more than privatisation.  My mini-beef with him is that, because Miliband glazes over a bit when asked about public services, then Labour mustn’t be doing anything about it.  Yet the Zero-based review document I refer to above, in which the plan of attack is laid out (albeit badly), appeared before Rafael’s piece.

Likewise, it’s taken his colleague George Eaton a month to work out the distinction between day-to-day spending and investment spending (though he’s still too hooked on the capital/revenue split), basing his analysis on a speech by Balls, when in fact that distinction is set out clearly enough in the Zero-based review document (and was obvious enough to me five months ago that I spelled it out here).   The document is even signed of by Balls (and Miliband)

** Actually the document itself is startlingly badly written, with lots of repetition, and it’s not even properly proof-read.  It’s almost as though it was released without fanfare and in this uncooked state so that people would ignore it for now, but that it could be referred to later as proof of the long-term planning.  In which case, it’s worked.

*** I choose this example because grassroots-led radical change to child welfare action is what I’m working on at the moment, and I’m very excited about it.  More news soon.

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Categories: Labour Party News
  1. Metatone
    January 24, 2014 at 9:47 am

    I can’t see the link to part 2 of 2, so it’s probably too late.

    But I’d note that the “Baumol” effect is not a particularly meaningful inevitability. It’s actually mostly an artefact of the way we measure inflation. Which in turn is an artefact of prior assumptions in classical economics about what constrains growth. Now those base assumptions are not wrong, they are just incomplete – but the upshot is that Baumol should not be the first worry most of the time.

    In terms of winning the next election, Baumol needs to be addressed – but in terms of making the world a better place, first we need to educate the world on what Baumol really means – and crucially what it doesn’t mean.

    Finally, wrt Janan Ganesh – I don’t read (£) articles in the FT at the moment – it’s worth noting that Baumol affects the private sector equally. Most of the “productivity improvements” in the British private service sector come from degrading service quality. The fact that prices don’t go down is more of a hidden inflation than a productivity gain.

  1. January 25, 2014 at 9:49 pm

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