Public Finance July 2013 by Public Finance

PublicFinance

The business monthly of the public sector

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Issue 07/08 July/August 2013

PublicFinance JULY/AUGUST 2013

PLAN Permanent pain

Lord Heseltine tells PF why it’s time to intervene

Tim Montgomerie says austerity is only the start

Jaki Salisbury CIPFA’s problem-solving president rolls up her sleeves

Market myth-busting Mariana Mazzucato on the states that just keep on giving

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UNIT4: continual flexibility in the Public sector UNIT4 is a global business software company that creates, delivers and supports adaptable software and services worldwide, to help you manage your business needs effectively, both now and in the future. Visit us on Stand 43 at the Annual CIPFA Conference on 10 - 11th July at Novotel, London West. Change is a constant in todayâ&#x20AC;&#x2122;s world and those organisations that appreciate and plan for this will be best equipped to not only survive, but thrive in these challenging times. UNIT4 Agresso is designed to give Public sector organisations the agility to react to rapid and continual changes. We are the leading supplier of Enterprise Resource (ERP) Solutions to the Public Sector in the UK & Ireland, with in excess of 600 clients including: 130+ Local Government Organisations 15+ Central Government Departments/Agencies 50+ Healthcare organisations 20+ Police, Fire and Emergency Services 45+ Third Sector These figures include many shared service collaborations and UNIT4 has recently joined in partnership with arvato to supply software for shared service centres in UK Government institutions. Find out more about UNIT4 Business Software: Visit Stand 43 at the Annual CIPFA Conference www.unit4software.co.uk 01275 377205 @unit4_uk UNIT4 UK

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PublicFinance

CONTENTS

July/August 2013

Features 24 COVER STORY Grandee Designs Plan H is the new Plan B. And putting it in place is the veteran Tory who wants a return to bold intervention by the state. Lord Heseltine talks to Judy Hirst

30 Delivery guaranteed Jaki Salisbury is the can-do council chief who takes on the CIPFA presidency in July. She tells Mike Thatcher what she has in mind for the next 12 months

‘THE FREE MARKET VIEW HAS A DEGREE OF NAÏVITY ABOUT IT – IT’S FAR TOO SIMPLISTIC’

34 Nothing ventured It’s a global myth that innovation relies on private ﬁnance. Even in the entrepreneurial US, it is the state that takes the risk funding new ideas, argues Mariana Mazzucato

38 Doing the zero sums More workers are being put on zero-hours contracts across the public sector. This will undermine services, warn Vidhya Alakson and Matthew Pennycock

24 30 Regulars 4

Leader Sell-offs, spending reviews and single pots

Second thoughts Tim Montgomerie says there’s a lot worse to come for the public sector

Need to Know 42 43

News Analysis Nick Mann reports from Brussels on the move towards European public sector accounting standards

Opinion Views from Paul Johnson and Owen Jones, plus people and readers’ letters

Management Development How to move your career up a level, by Chris Brown

Restless Nation Iain Macwhirter says Scots are still doubtful about independence

Smart Thinking? The dos and don’ts of social media

Numbers Game

PublicFinance

Voice of the Nations

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Cipfa Events

On Account ‘Smart skills’ will be vital as cuts hit central government

News Shadow business secretary Chuka Umunna talks to PF; Treasury launches major projects tracking team

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CONTACTS

Leader Don’t tell Sid

he chancellor has what some might call a conflicted relationship with the state. In theory, he wants to pay down the deficit, hold a fire sale of state assets, and generally ‘clear up the mess’ the other lot left behind. In practice, it’s not that simple. The Spending Review, for all the pain it will inflict, goes nothing like as far as the Treasury would like. The government’s hands are tied by the proximity of the 2015 election. Similarly, the heavily trailed reprivatisation of Britain’s state-backed banks has turned out to be a rather more messy affair. In his annual Mansion House speech, George Osborne claimed that the banks – and the economy – are out of intensive care, and moving ‘from rescue to recovery’. It’s just that the healing process, particularly for RBS, is taking a lot longer than planned. Don’t tell Sid, but – even allowing for the proposed sell-off of the government stake in Lloyds – taxpayers will have a long wait for a return on their £65bn bank bailout. The chancellor wants ‘a banking system that works for the economy,’ not the other way round. But the facts stubbornly refuse to stack up. Growth levels are still far too weak to make continued state support for under-capitalised banks redundant. This is where ‘Plan H’ – as the chancellor has dubbed Lord Heseltine’s growth review – could come in. As the former minister for Merseyside argues in this special CIPFA conference issue (pages 24–29), free market orthodoxy is ‘simplistic’ and ‘naïve’. A much more interventionist approach is needed to rebalance the economy, he says; a point underscored by Mariana Mazzucato’s analysis of the ‘entrepreneurial state’ (pages 34–36). By skimming departmental budgets – and redistributing funds to the regions via a ‘single pot’ – the total spend could be greatly enhanced, maintains Heseltine. It’s the politics of place writ large. Plan H also holds some attractions for the Opposition – especially now it has broadly accepted the government’s spending envelope. Whitehall reconfiguration (see interview with Chuka Umunna on page 6) and ‘switch spending’ is increasingly the name of the game. Redesigning the state – figuring out how to squeeze more from much less – will be the focus of debate at the CIPFA conference. Ironically, it looks like a heavy dose of state activism could be a key way to achieve it.

REDACTIVE PUBLISHING LTD 17-18 Britton Street London EC1M 5TP 020 7880 6200 www.publicfinance.co.uk Editor Mike Thatcher 020 7324 2768 mike.thatcher@publicfinance.co.uk Deputy editor Judy Hirst 020 7324 2769 judy.hirst@publicfinance.co.uk News editor Vivienne Russell 020 7324 2788 vivienne.russell@publicfinance.co.uk Senior reporter Nick Mann 020 7324 2794 nick.mann@publicfinance.co.uk Reporter Richard Johnstone 020 7324 2796 richard.johnstone@publicfinance.co.uk Contributors Jane Cahane, Keith Aitken Chief subeditor Anne Lawton 020 7324 2789 anne.lawton@publicfinance.co.uk Art editor Gene Cornelius 020 7324 6227 gene.cornelius@redactive.co.uk Editorial assistant Henry Manners 020 7324 2793 henry.manners@publicfinance.co.uk Digital content manager Harriet Patience 020 7324 2733 harriet.patience@redactive.co.uk Sales manager Katy Eggleton 020 7324 2762 katy.eggleton@redactive.co.uk Digital sales executive Leila Serlin 020 7324 2787 leila.serlin@redactive.co.uk Recruitment sales executive Gill Rock 020 7324 6234 gill.rock@redactive.co.uk Advertising production Aysha Miah 020 7880 6241 aysha.miah@redactive.co.uk Printing Pensord, Blackwood, Gwent, Wales To subscribe to Public Finance at the annual cost of £100, call 020 8950 9117 or email publicfinance@alliance-media.co.uk. Public Finance is editorially autonomous and the opinions expressed are not those of CIPFA or of contributors’ employing organisations, unless expressly stated. Public Finance reserves the copyright in all published articles, which may not be reproduced in whole or in part without permission. Public Finance is published for CIPFA by Redactive Publishing Ltd. Public Finance 17–18 Britton Street, London EC1M 5TP Tel 020 7880 6200 Fax 020 7324 2790

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The September issue of Public Finance will be published at the end of August. Please visit publicfinance.co.uk for regularly updated news and views

■ Judy Hirst DEPUTY EDITOR letterstoeditor@publicﬁnance.co.uk

Tel 020 7543 5600 Fax 020 7543 5700 Email corporate@cipfa.org Address CIPFA, 3 Robert Street London, WC2N 6RL

PublicFinance JULY/AUGUST 2013 SEPTEMBER 2011

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Second thoughts pfOpinion

■ Tim Montgomerie

Beyond austerity: the bad news Austerity might hurt but it’s not the only problem facing the public sector. Radical solutions will be needed to drive down costs in the years to come Some people in the public sector think they need to hunker down during these years of austerity and life will eventually return to normal. They know austerity is a challenging time – with hundreds of thousands of public sector jobs in jeopardy – but they are looking forward to when it has passed and those still with jobs can return to the good old days. I have bad news for those people – and not just because deficit reduction is likely to last another five to seven years. The bad news is that austerity is not the only or even the biggest pressure that public sectors in advanced economies are likely to face for a long time. The public sector is caught between two long-term trends that mean the search for efficiencies and new models of service provision will not only have to continue but accelerate for the foreseeable future. On one side of the long-term pincer movement is the rise in the cost of caring for developed nations’ ageing populations. On the other side is the decline in the vitality of economies.

Half of state expenditure is already spent on pensions and health care with the rise in health care bills reflecting the increased cost of treating elderly people. In the years ahead the pressure on all other public services – schools, policing, defence, local government – is going to become even more intense as the health and pensions budgets hungrily demand a bigger share of the nation’s resources. At the same time those resources – the other side of the pincer movement – might not grow at the rate they once did. Even before the great credit crunch, the wages of many lower skilled workers were declining. They were declining for many reasons but the main ones included global competition and immigration. Today’s world is one where prosperity is being extended at a dramatic and liberating rate. Hundreds of millions of poorer people, notably in Asia and now in Africa, are becoming consumers and enjoying self-sufficiency. In this context we need to become a different kind of economy or we won’t enjoy the same levels of growth (and tax revenues) that we’ve had in the past. The global economy is not the only reason why we won’t simply be able to tax our way out of the public sector’s overall predicament. There is a case for

MORE SERVICES WILL MOVE TO MODELS OF CO-PAYMENT, JOINING TOLL ROADS AND PRESCRIPTIONS

Photo: Alamy, Illustration: Dave Eastbury

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rebalancing our tax system – away from income to property, for example, and away from taxing good things like families to bad things like pollution. But it’s going to be hard to extract much extra tax from either business or workers. If economies are taxed much more than 36% to 40% of gross domestic product for any length of time, they become uncompetitive and slip down global league tables. Britain is probably at its taxable limits or even beyond them. In this context we are going to need much more far-reaching and ongoing changes to the way our public services are designed, staffed and financed. More competition in the provision of public services and for users of public services should drive down costs, as it does in almost every walk of life. We should welcome profit-making companies into the management of schools, prisons and policing if they can maintain standards at lower cost. Lower costs will involve lower wages for many people working in the public sector but, more importantly, it should also mean much higher rewards for the best head teachers, the most effective medical centres and the best run courts. Finally, there is financing. Some public services will almost inevitably move to models of co-payment. We already have paid prescriptions in the NHS and some toll roads. We should expect more such mechanisms if accident and emergency and other public services are to be used with restraint and responsibility. Austerity might not last but other challenges will. Britain’s public sector needs to be ready for permanent revolution.

Tim Montgomerie is the Comment editor of the Times and former editor of the ConservativeHome website. He will be speaking at the CIPFA conference in London on July 10 JULY/AUGUST 2013

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News Exclusive: Chuka Umunna interview

Labour to review business rates, says BY RICHARD JOHNSTONE

Labour is re-examining the level of business rates and the way they are set, shadow business secretary Chuka Umunna has revealed. In an exclusive interview with Public Finance ahead of his address to the CIPFA conference, Umunna said Labour could not yet commit to retaining the coalition government’s business rate reforms. He also spelt out a number of ways that Labour would promote economic growth, including ‘reinventing’ the Department for Businesss, Innovation and Skills and other Whitehall departments. Under the rate changes introduced in April this year, local authorities will

keep 50% of business rate growth in their areas. Umunna has asked the British Retail Consortium to submit a report on the new business rate arrangements for Labour’s policy review. This will examine ‘both the level and the way in which it is set’, he said. Asked if he thought the coalition’s reforms had encouraged local authorities to boost growth, Umunna said rates remained ‘the number one issue’ for many businesses in the UK. Labour was therefore examining how the tax operated, he added. Although he would not now commit to speciﬁc reforms, he said ﬁrm policy proposals would emerge before the 2015 general

Doing the business: Chuka Umunna said Labour was examining the ‘level and way’ business rates are set

election. ‘We’re looking at it overall at the moment, and we will give a more definitive indication of our priorities, and how we see business rates working, at the time of the next general election.’ Umunna’s address to CIPFA delegates will be on ‘designing the future state’ and he shared with PF the Whitehall reforms being considered by Labour. He said the party wanted to enhance the role of the public sector in fostering the conditions for prosperity and growth. Criticising the government’s economic policy, he said there was both a shortterm need to ‘get the economy moving again’, and a medium-term requirement to ‘reconfigure our economy so that it is fit for the future’. To do this, the Department for Business, Innovation and Skills would be ‘reinvented’ to play a ‘powerhouse’ role in boosting the economy, including creating new government-backed plans for industries that would get state support. He said Labour wanted to make the department a ‘strong advocate’ for what firms need from the public sector, and would work across Whitehall to support sectors of the economy that would be the focus for future growth. He compared proposals to ‘pick’ sectors to the pre-Olympics strategy of focusing on sporting events where the UK had a competitive advantage. However, for such an approach to work, he said government needed ‘commercial acumen and nous’, which was currently missing due to a lack of real business experience across the civil service. ‘I think the state needs to be acting in a more entrepreneurial fashion. ‘Because BIS is called the business department, it gives the impression that business is only a concern of that department, when it should be a

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publicﬁnance.co.uk/news

MajorProjects ■ Richard Johnstone

Treasury team set up to get major projects off ground

Umunna concern of every department. So I’ve talked about how we can get departments, when they make procurement decisions, thinking about what impact that is going to have on our strategic capabilities in the sectors they procure services from,’ he told PF. Despite proposing reforms to business policy, Umunna also called for party politics to be taken out of some critical decisions, including on infrastructure developments, in a bid to avoid ‘policy uncertainty’ that made it hard for ﬁrms to plan for the future. For example, he said Labour would not reverse the coalition’s decision to abolish regional development agencies and create Local Enterprise Partnerships. ‘I’ve said to the business community, in the interest of giving you certainty, would we be looking to do to LEPs what the government did to RDAs, which was just to throw the baby out with the bathwater, tear them up and seek to put in place something altogether different? No. We will be seeking to improve on the LEPs and properly empower them to do what they are supposed to do for regional and local growth.’ Umunna also indicated that he broadly supported the plan to devolve Whitehall cash for skills, housing and transport to LEPs through a single Local Growth Fund. Following Lord Heseltine’s Growth Review, ministers plan to localise some funding streams to boost economic development. Heseltine’s ‘overall approach is not too different from my own’, Umunna said. However, without ‘overhauling and turbo-charging’ the LEPs, he warned it would be ‘very difﬁcult’ to implement the policy. David Frost, chair of the LEP Network, told PF that Labour’s commitment to retain the bodies ‘had to be good news’. Photo: PA/Wikipedia

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The Treasury is to increase its scrutiny of a host of public and private sector infrastructure projects to help get the schemes under way. It is forming a Major Infrastructure Tracking team as part of Infrastructure UK to monitor 40 priority schemes across the country. Covering roads, public transport, airports, ports, energy, communications, water and sewerage schemes, these flagship developments have been defined as being ‘of national significance and critical for growth’. The new tracking team will attempt to ensure that the schemes progress and will also examine ways to help stalled private sector developments. IUK chief executive Geoffrey Spence said the reform was needed so the Treasury could ‘up the game in terms of tracking these projects’. More real-time information on major schemes would be provided and any ‘road blocks’ identified, he added. Once the enhanced monitoring is in place by the autumn, IUK would have ‘the

tools to intervene when projects are going wrong in a more senior level within government, and I think that’s important’, he added. However, only 11 of the top 40 projects are wholly public sector schemes, meaning that the government would be examining private sector developments, such as enhancement projects at both Heathrow and Gatwick airports. Investment in new energy generation capacity and improvements to ports are also part of the priority list and are private sector led. Spence told Public Finance this monitoring would allow the Treasury to ensure developments were not being blocked by ‘indirect government action’, and steps would be taken to get involved based on individual circumstances. He added: ‘Sometimes private sector projects are held up by planning issues, which government can help with. ‘There may be ﬁnancing issues that government can help with. ‘In the public sector we pay

for it one way or the other, and that gives us levers to help. With private sector projects we facilitate them in some way or another, either through the planning process or through the regulatory process indirectly. ‘What we want to be very clear about is where there is a hold-up, there is something that we could do to help.’ The news was welcomed by the Major Projects Association, which represents private sector companies developing and building infrastructure schemes. Executive director Malcolm Noyce told PF: ‘I would be supportive of anything that tries to improve how major projects are delivered – and, in particular, how they can speed the process up through initiation from business case to ﬁnancial support, to achieve the earliest possible start date for construction on the ground.’ The government would also need the skills to intervene, he added. ‘I would welcome the support they can give, but they need to develop over time the experience to help bring that together.’

Taking off: the monitoring team will also examine private sector projects, including Heathrow airport enhancements

Frost, a former director general of the British Chambers of Commerce, said he agreed with Umunna that ‘if we are keen to rebalance the economy, then BIS has to play a central role in that process’. He added: ‘What has really disappointed businesses over many years is the frequency with which policy initiatives come and go in the ﬁeld of economic development. ‘We have agencies that are set up and in ﬁve years they’re scrapped and we

reinvent. All we end up doing is having a series of agencies with new acronyms trying to do much the same things but too much time is wasted in initially setting them up. So my ﬁrst reaction is that has to be a good thing, to build on something rather than start all over again.’

Chuka Umunna is speaking at the CIPFA conference in London on July 10 JULY/AUGUST 2013

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News

Analysis Public sector accounting reform

EU moves step closer to Epsas After years of talks, it now looks as if the EU is ready for European public sector accounting standards. But, as ever, the devil is in the detail, as Nick Mann found at a conference on the project held in Brussels Back in November 2011, the European Commission began exploring whether a single set of public sector accounting standards should be introduced across the European Union. But it took until March 2013 for the project to really take off. That’s when the commission published a report concluding there would be ‘distinct beneﬁts’ for member states approving a single set of accrual-based accounting standards. It also recommended that International Public Sector Accounting Standards should serve as an ‘indisputable reference’ for these European Public Sector Accounting Standards. Then, in a move that suggested things were gathering pace, hundreds of accountants, auditors, academics and politicians from across the EU met in May to discuss the next steps for the project. The name of the event itself – ‘Towards implementing Epsas’ – gave a sense that this was now a initiative with purpose, as did the attendance of some of the EU’s leading figures, all of whom endorsed the project. Topping the bill was European Council president Herman Van Rompuy, who told the conference in no uncertain terms: ‘We need harmonised public sector accounts in Europe. The deeper economic and financial integration of the union calls for further harmonisation of public sector statistics.’ 8

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Van Rompuy said the EU’s revised ‘two-pack’ fiscal framework – which includes the reinforced Stability and Growth Pact and further measures aimed at increasing budgetary surveillance – required closer monitoring of countries’ public finances. ‘Such enhanced fiscal surveillance needs adequate accounting underpinnings, where country monitoring takes place on a level playing field, where there is no room to shun responsibility through budgetary gimmickry,’ he explained. ‘The reliability and timeliness of fiscal statistics is essential for the smooth functioning of a rules-based budgetary framework that includes recommendations and even sanctions to member states in breach of the rules.’ Van Rompuy’s enthusiasm for the project within the context of closer European integration was unsurprisingly echoed by Algirdas Šemeta, the European commissioner for taxation, customs, statistics, audit and anti-fraud, who has overall responsibility for the Epsas initiative. ‘The prospect of further fiscal and economic intervention in the EU highlights the need for harmonised public sector accounting standards in order that budgetary decisions at a national level can be assessed at an EU level,’ he told the event.

Epsas would also lead to the strengthening of a ‘common European culture’ in public sector accounting. ‘Supreme audit institutions will share common standards when auditing Epsas-based accounts and it will benefit the efficiency and effectiveness of their work,’ he explained. With glowing endorsements for the project also coming from bodies such as the European Court of Auditors and European Central Bank, you could be forgiven for thinking the argument for Epsas – with Ipsas playing a key role – was a done deal. But nothing in the EU decision-making process is ever that straightforward. Various speakers during the event made it clear that there were still major issues to be addressed before concrete proposals could be made. As anyone who read the responses to the commission’s consultation on Epsas will know, there is no unanimity on exactly what part Ipsas should play in any standards. Throughout the conference, there were rumours of discord from some member states. France, for example, is understood Photo: Sam Kesteven

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QuoteUnquote ‘The prospect of further ﬁscal and economic intervention ention in the EU highlights the need for harmonised public sector accounting standards’ Algirdas Šemeta, European commissioner for taxation, n, audit and anti-fraud customs, statistics, statisti

‘We already see reform initiatives in member states being lost due to the uncertainty of moving forward’ bein Thomas om Müller-Marqués Berger, public sector committee chair, Federation of European Accountants chai

Herman Van Rompuy: ‘We need harmonised public sector accounts in Europe. The deeper economic and financial integration of the union calls for further harmonisation of public sector statistics’

‘IPSAS EXIST AND ARE RECOGNISED AS THE INTERNATIONAL REFERENCE POINT. THERE IS NO NEED TO REINVENT THE WHEEL’ François Lequiller, Eurostat

to want a greater emphasis on individual countries’ experience of the shift to accrual-based accounting, where Ipsas haven’t always played a significant role. Thomas Müller-Marqués Berger, chair of the Federation of European Accountants’ public sector committee and a partner with Ernst & Young, acknowledged there was still a lack of consensus in the accountancy profession over whether a separate set of public sector standards was needed. ‘European governance of the standards could also be reached by an endorsement process, such as that used for International Financial Reporting Standards, or a process such as that in the UK public sector,’ he explained. ‘The question is still valid whether it is worth creating a new body for standards. Concerns still exist.’ Some member states have highlighted a lack of EU public sector involvement in the Ipsas-standard setting process as a key barrier to these standards forming the basis of any Epsas. Müller-Marqués Berger stressed that this needed to be addressed as soon as possible to provide clarity for member states. ‘We already see reform initiatives in member states being lost due to the uncertainty of moving forward,’ he explained. He warned that if the next couple of years were spent purely agreeing exactly how Epsas were to be set and implemented, ‘I would not see the advantage of Epsas anymore’. With that in mind, it’s little surprise that the governance question was right near the top of the ‘to-do’ list of François Lequiller, director for government finance statistics at Eurostat, the EU’s statistical service, which is exploring the potential for the standards. Having the right system of governance was an ‘unavoidable condition for any advancement of the project’, he stressed.

The commission planned to consult on this issue before publishing a paper later this year, he said. However, he defended the role the commission currently envisages for Ipsas in any standard-setting process. ‘Epsas governance should be independent from the Ipsas board, but these mechanisms should be implemented using Ipsas as a starting point. Ipsas exist and are recognised as the international reference point. There is no need to reinvent the wheel.’ At a time of tightening public purses across Europe, the commission will also look at the potential costs of moving to Epsas. ‘On flexibility, we will be analysing the possibility of reducing the burden and complexity of the standards for small public entities,’ Lequiller said. He even mooted the possibility of introducing standards in stages to reduce the burden on member states. The range of issues under consideration shows how much work has to be done, but Lequiller held out the tantalising prospect of a framework regulation being submitted to the European Parliament and Council in 2014 or early 2015. ‘This would set out the general principles – accrual, double-entry – which would confirm a reference to Ipsas as a starting point, which would define the governance and which would set the process of adoption of Epsas,’ he said. His comments clearly indicate the commission not only believes the argument for Epsas has been won, but that the real challenge lies in getting the project off the ground. Or, as Lequiller pointed out: `‘We are nearly all here convinced more or less that Epsas – harmonised accrual accounting – is beneficial and is an essential project for the EU and its citizens. But it’s up to us to demonstrate that it is realistic and achievable.’ JULY/AUGUST 2013

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■ The spending pain to come, by Paul Johnson

■ Reclaiming the reform agenda, by Owen Jones

Opinion ■ Paul Johnson

The spending pain to come The June Spending Review only covers 2015/16, and only tells a partial story. For a full picture of the unprecedented cuts coming down the track for public services, we need to look far beyond the next election By the time you read this, the gory details of the Spending Review should have emerged. While I am writing before the details have been announced on June 26, I don’t need a crystal ball to predict that further sharp reductions in public spending across a range of government activities will be announced. Nor does one need great powers of foresight to know that the Spending Review will leave a great deal unsaid – importantly, the allocation of cuts within departments. A lot of the real work on spending in 2015/16 will actually start on June 27, when departments begin the tough process of working out where the actual slashes will fall. But because this Spending Review is, for understandable political reasons,

looking at spending for one year only – 2015/16 – it will inevitably feel somewhat partial. We are promised that it will not include any specific proposals to reduce social security spending, and it will not deal with the possibility of any tax changes after the election. It will not say much about the years after 2015/16. The point about the period after 2015/16 is that a very significant additional fiscal tightening – spending cuts or tax increases – will still be needed to balance the books. The working assumption is that this will come from additional spending cuts, which is what is implied by the numbers in the Budget Red Book. Current plans suggest that these cuts will be very severe. So even on top of the 9% reductions planned for this Parliament, and almost 3% planned for 2015/16, it looks like there could be an additional 7.6% cut in public service spending in the period to 2017/18. So the total real-terms cut between 2010 and 2017/18 could be well over 18% – almost a fifth. Nothing remotely Join the queue: Without action, the demographic shift that will soon see baby boomers entering retirement means more money going into health and pensions

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similar has ever been attempted in the UK. And the impact on many parts of government will be even more substantial than that. The continued protection of health and schools in particular ensures many other areas of spending will be slashed by a third or more over the period as a whole. Up to now, cuts have been achieved pretty successfully. Indeed, the Treasury managed to engineer a substantial underspend in the past financial year. Ongoing cuts of this scale must seem increasingly hard to deliver, yet that is not where the current debate is focused. Assuming that something approaching current fiscal rules are adhered to, there are only two other alternatives. The first one is to reduce spending on pensions and/or working-age social security. One reason for the eye-wateringly tight settlements for Whitehall departments is that the unmanaged bits of spending – social security, public service pensions and debt interest – continue to rise. Actually, over the next couple of years, it is debt interest and public service pensions that will account for much of that. But the over £100bn a year that goes into benefits for pensioners is also very much on the protected list. Don’t expect a serious debate about these issues this side of the election. And in this context, talking about taking winter fuel allowances from pensioners who pay higher-rate tax does not qualify as serious debate – the amounts of money involved would be entirely trivial. The second alternative would be to raise taxes. The chance of a serious debate about this option before the election is even more remote. Photos: PA

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pfOpinion

Lead us not into taxation: Tax rises have a future role to play in the substantial additional fiscal consolidation that the government is planning beyond 2016

Nevertheless, tax rises may well have an as-yet-unannounced role to play in the substantial additional fiscal consolidation that the government is planning. Even if we didn’t know that the next government will be looking for tens of billions of pounds’ worth of fiscal tightening after 2015/16, we might want to take on board the knowledge that post-election budgets have a curious tendency to be big tax-raising events. Looking back over 30 years, post-election budgets really do, on average, involve much bigger tax-raising announcements than other budgets.

But this involves big choices about the size of the state. The remarkable fact is that after eight years of public service spending cuts, public spending in 2017/18 will be about the same as a proportion of national income as it was back in 2004, about halfway through the past government’s term in office. All of this pain will get the state roughly back to taking its long-run average as a proportion of the national cake. That partly reflects the shock to national income and partly the increases in spending on pensions and debt interest. But the state will not look remotely the same as it did in 2004. If we

‘After 2015/16, there will be very significant additional tightening. The total real-terms cuts between 2010 and 2017/18 could be well over 18%’

continue along the current path, we will see the shape of the state change rapidly, becoming more and more focused on paying for health and pensions (and debt interest), with much less to go on everything else. There are big choices to be made here over the composition of spending cuts – can we really afford to continue to protect health and pensions at the expense of other areas? This takes us to the last question, which I conﬁdently predict will not be answered in the Spending Review: what is the plan for the long term? We will soon start the major demographic transition that will see baby boomers entering retirement in large numbers. Without action, that means yet more money going to health and pensions. We might be able to delay answering questions about the amount we want to raise in tax to pay for services, and about the shape we want the state to take. But we cannot put them off forever.

Paul Johnson is director of the Institute for Fiscal Studies JULY/AUGUST 2013

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Opinion ■ Owen Jones

Reclaiming the reform agenda Reform should mean change for the better not a euphemism for cuts and privatisation. It’s time progresssives took back the initiative and saved our services ‘Reform’ is a term that was once championed by the Left. It had a very clear meaning. The NHS, the foundation of the welfare state: all these historic triumphs were labelled ‘reforms’. But these days the word – along with, say, ‘modernisation’ – has become a euphemism for privatisation, cuts and a race to the bottom in workers’ rights. It’s clever stuff: it paints opponents of such policies as the real conservatives, or ‘roadblocks to reform’, as the Tories once put it. With the NHS, it means a policy of privatisation via a ‘top-down reorganisation’ that the 2010 Conservative Party manifesto explicitly pledged not to introduce. Section 75 of the legislation demands that all NHS services are put out to competitive tender unless commissioning groups are satisfied a ‘single provider’ can deliver the service: a ‘free-for-all’ beckons. In education, rather than addressing the root causes of educational inequalities – Britain’s intense social divisions – Michael Gove is embarking on an ideologically driven crusade to marketise and dismantle the comprehensive system. Back in July 2011, David Cameron pledged to end ‘old fashioned’ state delivery of public services and open them all up to private companies. The government is planning to re-privatise the East Coast mainline, for example, even though Office of Rail Regulation figures found that it’s the ‘most efficiently run franchise in terms of its reliance on taxpayer funding’. Bear in mind that the taxpayer is forking out up to four times more on public subsidies for the privately run railways than in the ‘bad old days’ of British Rail. Indeed, there have been plenty of reasons recently to doubt the dogma of the private sector being best placed to 12

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The way we were: taxpayers now fork out up to four times more on rail subsidies than in the ‘bad old days’ of British Rail

run public services. When G4S failed to deliver Olympic security as required, it was the state that had to step in, leading Tory minister Phillip Hammond to confess the episode had made him rethink his ‘prejudice’ about the private sector. And look at the private companies dependent on the state like welfare-to-work firm A4e. Then there are the banks: it wasn’t free market dogma that came to the rescue in the global financial meltdown of 2008, but rather trillions of dollars of public money. Then there are the cuts to local authorities, with deprived areas such as Hackney and South Tyneside taking a battering, while more prosperous communities like Windsor and Richmond escape almost unscathed. The impact is frightening. Eight Bristol care homes face closure; Somerset has cut its youth services by 71%; women’s refuges have lost up to a third of funding when 1 million women are victims of domestic violence each year. Does this mean that progressives should retreat into a defensive posture? ‘Stop the cuts’, ‘Stop privatisation’: or ‘Stop the world, I want to get off’? No. It does, of course, require an alternative to cuts. A good start would be a clampdown on the £25bn lost through

tax avoidance a year – compared with the £1.2bn benefit fraud bill. But it also calls for a different sort of reform or modernisation. That doesn’t mean a return to top-down nationalisation or selling chunks off to profiteering companies that don’t have the interests of service users at heart. It could mean public services democratically run by service users and workers. How about a publicly run British railway with passengers’ and workers’ representatives on the management board? ‘Never let a crisis go to waste,’ Rahm Emanuel, Barack Obama’s then-chief of staff, was reported as saying back in 2008. ‘And what I mean by that is that it’s an opportunity to do things you think you could not do before.’ That’s a concise summary of the Right’s approach since Lehman Brothers came crashing down. Time for others to adopt the same principle, and go on the offensive in the battle for the future of our embattled public services.

Owen Jones is a columnist and author of Chavs, the demonisation of the working class. He will be speaking at the CIPFA conference in London on July 10 Photos: Alamy

20/6/13 18:23:19

publicﬁnance.co.uk/opinion

OpinionLetters You can e-mail your letters to letterstoeditor@publicﬁnance. co.uk. Please include your name and address and a daytime phone number. The editor reserves the right to edit letters

Don’t hold your breath for tax crackdown It would indeed be nice if the chancellor did make progress with income-raising alternatives to austerity, as your leader “Every little helps’, and the chancellor’s own opinion piece , ‘Nowhere to hide’, suggested (PF, June 2013). However, I wouldn’t hold my breath too long for this to happen any time soon. The chancellor’s, or rather his senior civil servants’ and political advisers’ article in PF was well constructed and said all the right things. However, the problem is that the UK

Rich pickings: the UK and overseas territories like the Cayman Islands gain from the current tax-avoidance regime

and some of its overseas territories are some of the biggest gainers from the current tax avoidance regime, as the Economist recently reported. The City and the large accountancy firms make shedloads of money out of such schemes and will be defended by the mayor of London, whose political fortune is in the ascendency. The excuse that is likely to be handed out when this policy fails to work is that the UK could not obtain the necessary international agreement. TONY KNAPP Gulldford, Surrey

pfPeople Public servants honoured Three prominent CIPFA members received awards in the Queen’s Birthday Honours. They were:

Dennis Hone (top), chief executive officer at the Olympic Delivery Authority, received a CBE for helping to ensure a successful delivery of last year’s Olympic and Paralympic Games.

Geoffrey Driver (middle), leader of Lancashire County Council, received the CBE for services to local government. And there was an MBE for Ian Summers, (bottom) the former ﬁnance and governance adviser to the National Assembly for Wales. Elsewhere, economist Andrew

Dilnot was knighted. Dilnot led the review into long-term care funding, which reported in 2011; he currently chairs the UK Statistics Authority. Knighthoods also went to: Brendan Barber, former general secretary of the Trades Union Congress; Malcolm Grant, chair of NHS England; and Stephen House, chief constable of the new Police Service of Scotland; Edward Leigh, the Conservative MP and former chair of the Commons Public Accounts Committee; and former Liberal Democrat local government minister Andrew Stunell. Gary Porter, Conservative vice chair of the Local Government Association, and Peter McNaney, chief executive of Belfast City Council, received CBEs for services to local government. OBEs for local government service went to Lesley Clarke, chair of the Women in Local Government Association, and Steve Reed, former deputy chair of the LGA. Karen Sussex, of the Department for Communities and Local Government’s local government ﬁnance team, received an OBE for services to local government ﬁnance.

Suarez leaves Lambeth for Cheshire Lambeth finance director Mike Suarez has been appointed chief executive of East Cheshire Council. . Suarez has been director of finance and resources at the London borough since 2005. He started his career as a CIPFA trainee at the neighbouring borough of Southwark, going on to hold senior roles at Slough Borough Council and Westminster City Council. Lambeth chief executive Derrick Anderson said: ‘Mike Suarez has made a major contribution to the transformation of the council in the eight years he has been executive director of finance and resources. Mike has overseen a rigorous

approach to spending which has focused on delivering value for money in everything we do, and he has developed a formidable and talented senior team. Suarez said: ‘It has been fantastic to be part of the story of Lambeth’s success. The support over the years from members, colleagues and partners has been brilliant and I’m so pleased that the team’s hard work has led to better services for residents, business, visitors and users of services. ‘I’m really looking forward to my role at Cheshire East and have been warmed and energised by the well wishes I have had.’

Brindley retires after 40 years Paul Brindley has retired as treasurer in the Office of the Police and Crime Commissioner, Staffordshire, after 40 years serving local government. His ﬁrst job was at Stoke-on-Trent Council in 1973, and he passed his CIPFA exam in 1978. After Stoke, he worked as a consultant for Staffordshire County Council before moving on to the police in 2008.

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Voice of the

Nations NEWS FROM THE DEVOLVED ADMINISTRATIONS Scotland

College deal agreed under NPD BY KEITH AITKEN IN EDINBURGH

Work has started on a public project financed under Scotland’s non-profit funding model after the deal to build the £47m Inverness College was struck in record time. The Scottish Futures Trust, which developed the Non-Profit Distributing (NPD) financial model as an alternative to the unpopular Private Finance Initiative, sees the college as proof that the NPD has come of age. In its early days, the trust was widely criticised for the time it took to replace the PFI, and there was scepticism that NPD could be a practical option. Further NPD projects on a similar or bigger scale, worth a total of £2.5bn, are also in the pipeline, including a £200m Glasgow college. Major improvements to the Scottish

road network and a number of new health care facilities are also planned. The process for Inverness College, which is part of the University of the Highlands and Islands, took 17 months from initial tender to financial completion compared with the 18-month target the Treasury set for PFI deals and the 25-plus months these schemes typically take. Peter Reekie, director of finance at the SFT, told Public Finance: ‘This was a really, really fast procurement process for this kind of job. ‘This was the first stand-alone project in the NPD programme that was announced in November of 2010, which means it’s been the test bed for our thinking on a new way of doing things in respect of revenue-funded projects in Scotland.’

Fast work: Building work has already begun on the new £47m Inverness College, procured under the Non-Profit Distributing model

The NPD raises finance for major public projects against future revenue budgets. There is no dividend-bearing equity, and returns to the private sector are capped; any surplus reverts to the public purse. Reekie believes a key element in its successful use at Inverness has been to simplify the bidding process – and therefore the risk allocation. The traditional contest between competing designs has been replaced with a single ‘reference design’ commissioned by the public authority (in this case, the college) and inviting tenders to deliver it, generally with only minor agreed variations. ‘The process of three bidders developing designs in the tendering stage suck up resources, not least from all the people who will use the building at the end of the day,’ he said. This system is increasingly being taken up south of the border, notably for building new schools. Two further innovations are, first, to ensure the project team includes at least one member with personal PFI experience; and secondly, to conduct a ‘key stage review’, to be overseen by the trust, at each stage in the project to make sure everything is in order before moving to the next stage. Reekie sees the former as a way of levelling the contractual playing field: ‘It gives the public sector the same level of expertise as the private sector developers who do these things all the time. We’re now making it conditional of this kind of finance that they take on procurement skills.’ On the key-stage review process, Reekie stressed that the trust’s role was a supportive one.

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publicﬁnance.co.uk/news

InBrief PENNIES SAVED Frugality aids infrastructure spend Careful management has enabled the Welsh Government to spend around £1.3bn more on infrastructure in the past year. In an update on the May 2012 Wales infrastructure investment plan, Finance Minister Jane Hutt said the funding rise, derived in part from local government borrowing and capital reserves, had enabled the government to spend more on housing, health facilities and schools.

INDEPENDENCE BENEFITS Scots ministers back shared admin Scotland could provide its own pensions

and benefits if it votes for independence next year, but would share administration with the UK for an interim period, Deputy First Minister Nicola Sturgeon has said. Her comments echo the first report from the Scottish Government’s working group on welfare, set up to assess the practicality of welfare benefits post-independence.

RETHINK REQUIRED Rise in repossessions ‘worrying’ Northern Ireland Assembly members have called for the ‘extremely worrying’ levels of local housing repossessions to be tackled. Social development committee chair Alex Maskey said the Housing Rights Service

Wales

CIPFA will train AMs in ﬁnance The Welsh Assembly is working with CIPFA on a programme of financial scrutiny training for Assembly members and their staff, believed to be the first of its kind in a parliamentary context. The move follows the Silk Commission recommendations. Reporting last year, the commission called for more fiscal autonomy for the Welsh Government in the form of greater tax-raising and borrowing powers, but matched this with an enhanced scrutiny role for Assembly members. In particular, consideration should be given to increasing Rosemary Butler: ‘Understanding the technical the Assembly’s capacity and expertise for complexities of the public finance system is crucial’ financial scrutiny, Silk said. Following some successful pilot sessions, the Assembly has awarded CIPFA a contract absolutely crucial in any parliamentary to provide the training. setting, and I am pleased to see that we are Five sessions have been scheduled for leading the field by developing skills for the next 18 months. These will cover areas legislators in this area.’ such as the budget process, committee Butler added that the Welsh Assembly inquiries, in-year and end-year monitoring, was like any other workforce, and should and the financial considerations that should therefore receive proper training. ‘It’s done apply to policy development. in all leading organisations where you try The Assembly said it was likely that to review and improve your work and further sessions would be developed once respond to change.’ the UK government had responded formally Northern Ireland to the Silk Commission. ‘When anyone is elected or recruited into a job that requires a range of skills, it’s important to have training and professional development in place,’ Assembly presiding officer Rosemary Butler told Public Finance. ‘Understanding the technical complexities of the public finance system – particularly Chief executive appointments to Northern in relation to holding the government to Ireland’s 11 new councils will be made account in times of tightening budgets – is through open competition, environment

Council CEOs ‘to be hired by open competition’

had seen a 30% jump in families seeking help on repossession. He added: ‘My committee is further concerned that local repossessions far exceed those in Great Britain and the South [of Ireland]. It is clear that this requires a complete rethink.’

INTERVENTION ENDED Anglesey Council to self-manage The Welsh Government has handed the running of the Isle of Anglesey County Council back to councillors after taking it over in March 2011 because of councillor disputes. Local Government Minister Lesley Griffiths said ‘the council can now manage without intervention’.

minister Alex Attwood has announced. The minister said this would be the fairest and most effective way of filling the posts. Northern Ireland is undergoing a major local government restructure, which will cut the number of councils from 26 to 11. The authorities will also gain new powers over areas including planning, housing, local economic development and tourism. Said Attwood said: ‘These posts are complex and challenging, and are key to the successful implementation of local government reform. They are fundamentally different to the current chief executive posts. ‘Not only will all councils cover a geographically larger area and serve a bigger population base, they will also deliver significant new functions and operate within a new governance framework. ‘The job specification should clearly reflect this growth and the task of building a new organisation, and reflect the transformation challenges inherent in the job.’ Attwood said that to ensure success, a full range of candidates needed to be available and the applicant pool widened. Statutory transition committees will soon be established for each council. Once they are in place, they will make the chief executive appointments. It is anticipated that the new post-holders will be in place by the end of this year, transferring across to the new councils once they are elected in 2014. The executive said any current local government chief executives who choose not to apply for the new roles, or whose applications are unsuccessful, would be able to apply for voluntary severance or other suitable senior local government positions via internal procedures. JULY/AUGUST 2013 PublicFinance 19

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Enhance your CIPFA Annual Conference experience Download the CIPFA Conference app to connect, engage and learn with a great conference experience. You’ll ﬁnd easy-to-use interactive tools to enhance your day including:

Conference schedule and workshop agenda with ability to create your own tailored programme with one click Information about speakers Information about exhibitors Great way to connect with others at the conference General venue information and maps Information about sponsors Works on all smartphones and tablets

Visit cipfaannualconference.org.uk/app for download instructions today and receive exclusive updates in the lead up to the event

Annual conference 2013

beyond austerity Designing the future state

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9 - 11 July, London cipfaannualconference.org.uk

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18/06/2013 13:28

publicfinance.co.uk/voice of the nations

Restless nation A VIEW FROM NO RTH OF THE BORDER

■ Iain Macwhirter

pfOpinion

Not taking the bait Far from being delighted with the prospect of independence, it seems the majority of Scots remain unpersuaded that it really offers them a better deal It’s not going to plan. With 15 months to go before the referendum, the Yes Scotland campaign had hoped that, by now, Scots would be embracing independence – that Scots voters would be dismissing the unionist scare stories about losing jobs, EU membership, the pound and even giant pandas in Edinburgh zoo if they vote for independence. But it isn’t happening. Week in, week out, the Scottish press is filled with warnings about pensions, benefits, immigration and debt levels in an independent Scotland. The Scottish Government dismisses it all as the gurning of the unionist press, and Alex Salmond says he no longer bothers to read papers like the Scotsman because he believes they are biased. But media coverage is only going to get worse from the point of view of the Yes campaign. This is because the UK press has hardly begun to engage with the issue. Once militantly unionist papers like the UK Sun, the Daily Mail and the Daily Telegraph get started in earnest, the Nationalists are in for a torrid time. The problem is not bias as such, although that clearly exists, but the susceptibility of Scots to negative stories about independence. Many have yet to be convinced that they need to leave the UK in order to improve Scotland’s economic prospects. There are too many imponderables, uncertainties, unknown unknowns. Independence is a very novel concept for most Scots, as I was reminded while researching and writing my book, Road to Referendum, which STV presented on June 4, 11 and 18. Scotland is not like Ireland, where Photo: Alamy

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THE YES CAMPAIGN HAD HOPED THAT, BY NOW, SCOTS VOTERS HAD DISMISSED SCARE STORIES ABOUT LOSING JOBS, EU MEMBERSHIP, EVEN GIANT PANDAS there was a century of political nationalism before the Easter Rising of 1916 and the subsequent civil war that led to Ireland’s departure from the UK. Not only was political nationalism absent from Scotland, the Scots were enthusiastic British nationalists until very recently. In the 19th century, Scots regarded themselves as junior partners in the British Empire. They fought Britain’s wars, kept the books, ran the colonial administrations and evangelised the natives. Scots’ sense of national identity did not diminish after the union with England; it continued in a different

form. Paradoxically, being a Scottish patriot became a part of being British. This commitment to the Union reached its zenith after the Second World War. The only party that has ever won a majority of seats and votes in Scotland was the Scottish Unionist Party in 1955. Even under the rule of Margaret Thatcher and her poll tax in the 1980s, Scots expressed their dissent not by voting SNP, but by voting Labour in huge numbers. It was Labour that initially benefited from the creation of the Scottish Parliament in 1999. The Nationalists were going backwards, electorally, as recently as the 2003 Scottish parliamentary elections, and it was only the return of Alex Salmond in 2004 from self-imposed exile in Westminster that led to the 2007 breakthrough. The SNP landslide in 2011 wasn’t a vote for independence as such, but a reaction against Labour’s poor performance in Holyrood. So, it is hardly surprising that the Scots have difficulty coming to terms with the idea of independence – they’ve not had to think about it until very recently. This doesn’t mean that the Yes campaign has lost the referendum. But it does help explain why the Nationalists are having such an uphill struggle. This is not Czechoslovakia in 1993, or even Catalonia today, where passionate nationalists take to the streets in huge demonstrations against rule from Madrid. Scots want a better deal, but not at the expense of a messy divorce. The Yes campaign is going to have to refashion its message if it wants to persuade a doubtful Scotland that theirs is the right road.

Iain Macwhirter is political commentator on the Sunday Herald. His book Road to Referendum is published by Cargo in conjunction with STV JULY/AUGUST 2013

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Watchdog

Watch WHAT’S GOING ON IN THE WORLD OF REGULATION AND INSPECTION National Audit Office The National Audit Office has labelled the challenge facing financial managers in Whitehall as ‘stark’ as the government extends its deficit reduction programme. In a report, published in June, the watchdog acknowledged that the finance profession now had a greater presence in the upper levels of Whitehall. But it added that further improvements to the finance function would be needed to support sustainable public service provision as resources continued to decrease. Departments were also criticised for not integrating financial management with their strategic and operational planning. The government’s Finance Leadership Group should take responsibility for diagnosing and addressing the main financial management problems facing the finance profession and the wider civil service, the NAO said. Meanwhile, the watchdog slammed the Department for Transport’s ‘unclear’ business case for the High Speed 2 rail line. Examining the early planning for the project, the NAO said it had ‘reservations’ about the proposal. The DfT had ‘poorly articulated the strategic need’ for the line and failed to explain how it would boost regional economies. There was also a £3.3bn ‘funding gap’ in the planned first phase of construction.

Care Quality Commission Sir Mike Richards has been named 22

the Care Quality Commission’s new chief inspector of hospitals. The post has been created in the wake of the Mid-Staffordshire report into serious care failings in NHS hospitals. An expert oncologist, Richards was the Department of Health’s first national cancer director. More recently he has been working at NHS England, with a remit to reduce premature mortality across all conditions. He said he was ‘delighted’ to be joining the CQC and would ensure patients came first in all hospitals.

examine why they had a disproportionate number of underperforming schools. Ofsted head Sir Michael Wilshaw said local authorities had ‘a duty to ensure that schools provide the best education for every child in their area’. Ofsted will not be inspecting all local authorities, just those where there are particular concerns about school performance or where it is directed to do so by the secretary of state. Local authorities receive five days’ notice ahead of the inspection.

Ofsted

EHRC

Norfolk and the Isle of Wight were the first local authorities to be subject to an Ofsted inspection under the watchdog’s new school improvement programme. Teams of inspectors visited the two councils for five days in June to

The Equality and Human Rights Commission has published a guide to help local authorities better understand their human rights obligations when commissioning and procuring home care for older people in England. It follows the commission’s in-depth inquiry into the human rights of older people in home care, which highlighted several breaches, including physical and financial abuse, a disregard for privacy and dignity and failing to help people to eat. The guidance reminds council commissioners of their legal obligations in terms of human rights and also points out that compliance is practical and ensures accountability and efficiency. EHRC chief executive Mark Hammond said local authorities had told the commission they would welcome some practical guidance on their obligations under the Human Rights Act. ‘If the guidance is fully respected it will mean people can live

Eye on the Needles : the Isle of Wight is one of two local education authorities selected for an Ofsted inspection

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COMINGUP… Light fantastic: the National Audit Office is evaluating the government’s £530m rural broadband programme

CYBER COUNTRY The National Audit Office is examining the Department for Culture, Media and Sport’s £530m programme to subsidise investment in rural broadband. Ministers want the UK to have the best superfast broadband network in Europe by 2015, with 90% of commercial and residential premises in each area having access to superfast internet speeds and all having broadband speeds of at least 2 megabits per second. Auditors are considering the design of the programme and whether the rural targets are likely to be met.

ACADEMIC STUDY in their own homes confident that they are safe from inhuman or degrading treatment, their autonomy and independence is maintained as far as possible and their dignity and privacy is protected,’ he said.

Accounts Commission Around 14,000 public sector staff in Scotland received redundancy or early retirement payments between 2010 and 2012 at an initial cost of £561m, an Audit Scotland report has revealed. Examining early departure pay-offs across the public sector, the watchdog concluded that such arrangements could eventually lead to savings but it was not always possible to show value for money for taxpayers. It found that good practice was generally followed in Scotland but there were ‘striking differences’ in the design and implementation of schemes and the quality of the business cases used to determine payments. Accounts Commission chair John Baillie said board members and councillors needed to scrutinise and oversee schemes more effectively and pay particular attention to proposals for senior managers. Auditor general for Scotland Caroline Gardner added that they should tell the public more about the costs and expected savings. Meanwhile, Audit Scotland found that Edinburgh City Council still faced a ‘substantial’ challenge from its botched tram project as it attempted to implement budget cuts and restore public confidence. An examination for the Accounts Photos: iStock

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Auditors are preparing a report on the ﬁnancial health of Scotland’s colleges. A follow-up to a report

published in October 2012, it will assess the overall ﬁnancial position of the colleges in 2011/12 and how much learning activity they provided. The report will also assess the planned move towards working in regional clusters.

SURGICAL CASE In August, Monitor is expected to issue a progress report on its ﬁrst investigation into a possible breach of NHS purchasing rules. The regulator received a complaint from the private Thornbury Radiosurgery Centre, which is jointly run by BMI Healthcare and Medical Equipment Services. It claimed that NHS commissioning decisions had compromised patient care and choice. The centre provides

Gamma Knife Surgery, which uses beams of radiation to treat tumours and lesions in the brain.

ALL IN A SPIN The National Audit Office is to report on MyCSP, a part-mutual that now administers 1.5 million civil service pensions. The plan to turn the pension scheme into a mutual were announced in April 2011 and the shares were split between a private provider, the service’s employees and the Cabinet Office. MyCSP has a seven-year contract to administer civil service pensions, with potential for a three-year extension. The auditors will consider both how well the spinning-out was handled and MyCSP’s current effectiveness and efficiency.

Commission warned that the scheme to construct a tram line through the Scottish capital, which is already running late and will be only partly built, faced further cost increases. Baillie said ‘absolute priority’ had now to be given to ensuring savings were delivered.

Audit Commission Past chairs of the Local Government Association criticised plans to abolish the Audit Commission during a debate in the House of Lords. Speaking during the Second Reading of the Local Audit & Accountability Bill, Lord Beecham, who chaired the LGA between 1997 and 2004, said the idea that the LGA would be able to replace the commission’s improvement work was ‘illusory’. Beecham, a Labour peer, called the Bill, which will formally disband the Audit Commission, ‘bad’ and ‘unworthy’, warning that it would hand the large accountancy firms an ‘effective oligopoly’ of local audit. ‘There will be a requirement to re-tender [audit contracts] every five years, but it would be better if the requirement was to change auditors every five years to ensure that the relationship does not get too close,’ he said. Baroness Eaton, another former LGA chair, also criticised aspects of the Bill, saying she regretted the further centralisation of powers to the secretary of state. The Conservative peer said national procurement of local

Lord Beecham: the former LGA chair called the Local Audit & Accountability Bill ‘bad’ and ‘unworthy’ in a Lords debate

audit contracts should be allowed to continue alongside local procurement and would be more cost-effective. Abolition of the Audit Commission is one of 89 major Whitehall projects facing significant obstacles to implementation, according to a Cabinet Office review. The Major Projects Authority rated the abolition plans ‘amber’, meaning successful delivery was ‘feasible’, but ‘significant issues’ already existed, ‘requiring management attention’. Commenting on the amber warning, the Department for Communities and Local Government insisted that plans to abolish the Audit Commission were ‘on schedule’. It added that outsourcing of audit contracts had achieved a 40% saving on fees for local public bodies. JULY/AUGUST 2013

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C OV E R F E AT U RE

Heseltine Growth Review

GRANDEE

DESIGNS Words: Judy Hirst | Photography: Sam Kesteven

The man who once promised to ‘intervene before breakfast, lunch and dinner’ is back, and demanding more. Lord Heseltine talks to Public Finance about his plan to reboot the British economy HANG AROUND LONG enough, and everything comes back

into fashion. Maxi skirts, Abba and – now it seems – Big Government are all back on trend. Even quangos are having a moment. For proof, look no further than the rising stock of Michael (now Lord) Heseltine, the one-time Conservative poster-boy, who famously knew exactly where to locate the party’s erogenous zones. His 299-page report, No stone unturned, was commissioned by the government to explore new ways of promoting growth. Not only has it not – as predicted by the naysayers – been kicked into the long grass, but 81 of its 89 recommendations were endorsed by Chancellor George Osborne and 24

Business Secretary Vince Cable at the time of the Budget. Even the International Monetary Fund has said it should be implemented post-haste. At the time of writing, the Heseltine Review is about to have some flesh, in the form of funding, attached to it in the Spending Review. How so? How come a government wedded to the idea of a laissez-faire, small state – which enthusiastically abolished the Audit Commission, regional development agencies and much else associated with state interventionism – is bringing on board the man who once pledged to ‘intervene before breakfast, lunch and dinner’ in pursuit of his economic goals? Sitting in the west London HQ of his Haymarket

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C OV E R F E AT U RE

Heseltine Growth Review

‘IF YOU’VE GOT A SINK ESTATE WITH APPALLING PROBLEMS, AND ALL THESE DISPARATE AGENCIES WITH INDIVIDUAL FUNDING STREAMS AND DIFFERENT PEOPLE RUNNING THINGS, IT MEANS YOU’VE GOT NO ONE IN CHARGE, AND NOTHING’S GOING TO CHANGE’

It’s yes from us: George Osborne and Vince Cable have both endorsed 81 of Hesletine’s 89 recommendations

publishing empire, Lord Heseltine exudes the insouciant air of someone who’s been there and done it all, including of course swinging a parliamentary mace above his head; a piece of political theatre that earned him the permanent sobriquet of ‘Tarzan’. Now a well-preserved 80-year-old (still with a fine head of that trademark hair), he is deeply unfazed by the turn of events that has seen him hauled in to reverse the fortunes of UK Plc; something of a trend, judging by the number of ex-CEOs being prevailed on to rescue ailing companies. As a former deputy prime minister, environment secretary, defence secretary, president of the board of trade and first secretary of state, Heseltine is possibly the grandest of all Tory grandees – and, as such, wellqualified to offer an overarching perspective on the predicament the government is in. ‘The free market view has a degree of naïvity about it,’ he says, with that familiar glint in his steely blue eyes. ‘It’s far too simplistic.’ Our competitors do things very differently, he assures me. ‘Most have industrial strategies, and to a significant degree are interventionist. There’s no evidence I know of that they’re wrong and we’re right.’ Under normal circumstances, says Heseltine, his views on these matters would be easily dismissed. But these times are self- evidently not normal. ‘The length and the depth of the recession have made people more open to initiatives that would not have been taken so seriously in other circumstances.’ In other words,

they’re desperate. Despite the odd green shoot, George Osborne’s ‘march of the makers’ has yet to materialise and the Treasury’s Plan for growth is quietly gathering dust. Most economic pundits expect a long, hard haul back to prosperity. The Institute for Fiscal Studies and the Institute for Government predict that austerity policies are likely to continue all the way through to 2020, whoever is in office; and the IMF has told the government to go easy on the fiscal tightening, to help kick-start growth. No wonder ‘Plan H’ – as the chancellor has dubbed the Heseltine Review – is being promoted in Whitehall as a more palatable alternative to a diet of cuts and yet more cuts; a Plan B in all but name. In its official response to No stone unturned, the government approved a host of measures that, if implemented, would create a turbocharged form of localism in the cities and regions. The basic idea is that departmental budgets should be top-sliced to create a ‘single local growth fund’ – or ‘single pot’ – that Local Enterprise Partnerships and other bodies would bid for. The pot (£49bn over four years in Heseltine’s hugely ambitious scenario, plus another £9bn from European Union funding) is to be created by ‘brigading’ funding streams from across Whitehall, including skills, local infrastructure, housing, innovation, and business and employment support. All this largesse would be used to leverage in a much bigger total spend from the private sector; via ‘gearing’, says Heseltine. The principle behind it is that growth funding should be wrenched away from ‘functional monopolies’ (aka departmental silos) in Whitehall, and directed to the local communities and leaders best able to put it to work; in modern parlance, the politics of ‘place’. Heseltine would like the whole edifice to be overseen by (whisper it) a new quango, the National Growth Council, chaired by the prime minister; plus a panoply of mini quangos, tasked with implementing a far-reaching National Growth Strategy. If this all sounds as retro as shoulder-pads and avocado suites, it is. Many of the concepts reprised in Heseltine’s growth review were shaped in the crucible of the early 1980s inner-city disturbances; in particular through Heseltine’s experiences as ‘Minister for Merseyside’ at the time of the 1981 Toxteth riots. His views on the need for an activist state – and

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his refusal, unlike most of his Cabinet colleagues, to endorse the ‘managed decline’ of deprived areas – became hugely influential in regeneration policy for decades after. Urban Development Corporations, City Challenge, the Single Regeneration Budget, New Deal for Communities, the Regional Growth Fund and numerous other pump-priming projects owe their origins to these turbulent years. Heseltine, who is the headline speaker at this year’s CIPFA conference, harks back to this era when he expounds upon the philosophy behind his report. ‘Wherever I went, in Liverpool and elsewhere, I always asked one question: who is in charge? If you’ve got a sink estate with appalling problems, and all these disparate agencies, each with individual funding streams and different people running things, it means you’ve got no one in charge, and nothing’s going to change.’ Pooling the funding, putting someone dynamic and locally based in charge and, crucially, fostering public-private partnerships; this in its essentials is the Heseltinian formula. And it really works, he Photos: PA

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stresses: ‘In complex, sophisticated economies, there are many things the public and private sectors can work together on much more effectively than when they stand apart. It’s sterile to think otherwise,’ he says, adding, ‘I am a one-nation Tory, after all.’ Vestiges of the approach can still be found in the coalition’s LEPs, City Deals, Enterprise Zones and Community Budgets. But these efforts are just ‘piecemeal’, he argues, and the sums involved paltry in comparison with his grand designs. What’s required is a much more interventionist push from the centre to drive the major reconfigurations Heseltine has in mind; sort of command-and-control meets localism. This, remember, is the politician who created the Audit Commission, and deeply regrets its abolition. ‘I would have been perfectly happy to examine it to see if it was guilty of mission creep,’ he tells me. ‘But I would not have got rid of it. In fact, I would have extended its powers to examine central as well as local government.’ It was also, he says, a mistake to scrap the RDAs. Such talk is anathema to those in his party who want more not less deregulation, and see JULY/AUGUST 2013

Burning issues: Many of the concepts reprised in Heseltine’s growth review were shaped by his experiences as ‘Minister for Merseyside’, at the time of the 1981 Toxteth riots

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C OV E R F E AT U RE

Heseltine Growth Review

Oil on troubled waters: Heseltine says of the Audit Commission: ‘I would not have got rid of it. In fact, I would have extended its powers to examine central as well as local government’

supply-side reforms as the answer to stalled growth. But it’s a message, however counter-intuitive, that is increasingly getting a hearing. ‘Necessity is the mother of invention,’ says Andrew Carter, deputy chief executive at the Centre for Cities. ‘There’s now a grudging recognition that the economy won’t just recover of its own accord, and that a more interventionist approach is needed. It’s Big Government in all but name.’ And it’s not just Heseltine plugging the dirigiste line. Industrial policy (little heard of since the Bennite 1970s) is making a comeback, with work under way by an all-party group on rebalancing the economy, and industrial strategies pouring out of think-tanks and party offices. The London Finance Commission’s proposals, backed by mayor Boris Johnson, also reflect the new mood music, says Carter. ‘They’re about money, of course. But

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they’re as much about wresting local control. There’s an obvious synergy with Heseltine’s world view.’ Boris, Hezza – everyone wants a piece of the state-sponsored devolutionary action. But will any of it even happen – or work? The jury is out on just how transformative Heseltine’s urban policy ever really was. ‘There were some clear successes, in Docklands, Liverpool and elsewhere,’ says Jonathan Portes, director of the National Institute of Economic and Social Research. ‘But there was also plenty of window-dressing. Successive governments have talked about devolving economic power, but departments are very unwilling to let that happen.’ Long-term funding streams connected with, for example, the Work Programme (a functional monopoly if ever there was one) can’t just be dismantled, he says. The hand-to-hand combat between ministers, permanent secretaries and the ‘quad’ in the run-up to the Spending Review indicates the problem with persuading Whitehall fiefdoms to relinquish more than a token amount to the regions. Heseltine, of course, concurs. ‘There’s a deep suspicion behind closed doors in Whitehall. They don’t say it in public, but there’s a real lack of confidence in local ability.’ He puts a lot of the continuing problems in Liverpool and other cities down to the fact that he was never allowed to go far enough. ‘I always wanted to get City Challenge built into something much bigger, into the single pot. I just couldn’t get the support.’ But if that was the case then, how much harder will it be to firm up support for Plan H now? And how willing is the private sector to step up with the finance needed to boost the country’s most depressed regions? Not very, judging from the lack of interest in even the attractive terms offered by PF2, the rebranded Private Finance Initiative, and (outside of London) the generally sluggish state of investment. Doug McWilliams, chief executive of the Centre for Economics and Business Research, tells PF: ‘Plan H all feels a bit remote from the problems we face right now, like how to generate effective spending on infrastructure. It will be surprisingly difficult to do in a time of austerity, with the underlying economic outlook much worse than the Office for Budget Responsibility predicts.’ Photos: Sam Kesteven/PA

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But Heseltine is having none of that. ‘The recovery is on its way, and the recession was in any case never as deep as the official statistics stated,’ he says emphatically. As a firm supporter of Osborne’s fiscal consolidation strategy (that’s one stone he’s not about to upturn), and a self-made multimillionaire, he is upbeat about harnessing the private sector’s vast resources. ‘But I want us to speed it up. That’s why I want gearing, and place-based economics.’ He is dismissive of the jeremiads about how we’ve never had it so bad. ‘The 1980s were far, far worse. Companies were falling like flies. Remember in 1981 we had three million people out of work, and riots on the streets. That was a very rough time to be in politics, very dangerous. There’s no comparison today.’ The rise of the UK Independence Party, whose local election success has so seriously rattled many Conservatives, is also nothing to get excited about, he says. ‘It’s just people looking for a vehicle of protest, and being offered all sorts of delusionary alternatives. We’ve seen it all before.’ Keep your nerve and carry on, would appear to be his advice to David Cameron, as growing numbers in his party – including in the Cabinet – stampede for the EU exit door. But then as a lifelong Europhile and party moderniser, he would say that; especially about the Right-wingers who still blame him for walking out of the Cabinet over Westland, and the late Margaret Thatcher’s eventual downfall. He’s certainly not in favour of Cameron’s European Union referendum, or indeed any kind of referendum: for example, on mayors. ‘I’m a big fan of mayors. But I also believe in parliamentary democracy. I would have imposed them on local authorities, not put them to a referendum,’ he tells me, with a faint air of hauteur. This is standard Heseltine fare. The kind of iconoclastic, challenging stuff that made him such a darling of Tory conferences. Significantly, one of his proudest political moments was addressing the party faithful, in 1981, on the issue of race. It would have been easy, he says, to give a speech on council house sales, or something else that had massive party support. ‘But this was confronting a hugely sensitive and controversial area. The reception was quite extraordinary, tear-jerking. I’m very proud of that.’ So has he been missing it all? The cut and thrust,

the standing ovations? Or has tending the arboretum at his Oxfordshire country pile (he’s always been a ‘mad keen’ gardener), plus a few sinecures, been enough to satisfy him? ‘Well,’ he says musingly, ‘I’ve been rather reabsorbed by all this. Rather drawn back in.’ It was ‘dear old Liverpool’ that did it, he says. ‘David Cameron was up there on a tour, as leader of the Opposition. Someone must have said, you should ask that funny old fellow who was there in the 1980s to come.’ He did, of course, and subsequently got involved again in drafting urban policy. Then, at the suggestion of Steve Hilton, Cameron’s former policy guru, he went on, with the help of a team at the Department for Business, Innovation & Skills, to write No stone unturned. The six-month project was ‘the culmination of all those 30 years and, on the assumption that they do it, it’s where I’ve been trying to get to all this time.’ Yes, but not quite. He never did make it to prime minister, the pinnacle of the career plan that he allegedly plotted on the back of an envelope when he was at Oxford. That, at the end of the day, is his biggest regret. And as he admits, it might have been down in no small part to, for a politician, a fatal weakness. ‘The networking aspect, the small talk, working the tea rooms, I’m not good at it. That was a failure.’ And it meant he never did get the chance to push through ‘all those things I’ve been talking about ever since.’ Because, as Heseltine – one of the last of the big beasts – is the first to acknowledge, it really always is a question of asking: who’s in charge?

‘THERE’S A DEEP SUSPICION BEHIND CLOSED DOORS IN WHITEHALL. THEY DON’T SAY IT IN PUBLIC, BUT THERE’S A REAL LACK OF CONFIDENCE IN LOCAL ABILITY’

Lord Heseltine is speaking at the CIPFA conference being held in London on July 9–11 JULY/AUGUST 2013

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No turning back: Heseltine leaves Downing Street in 1986 after storming out of a Cabinet meeting and resigning from the government

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PF I N T E RV I E W

Jaki Salisbury

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DELIVERY GUARANTEED CIPFA’s new president, Jaki Salisbury, has built a ‘can-do’ reputation, and won the loyalty of her colleagues for her hands-on tackling of local government problems. The ‘treasurer who likes to say yes’ tells Public Finance how her career and beliefs have shaped her as she steps up to the plate Words: Mike Thatcher | Photography: Sam Kesteven

a challenge. Give her a problem, and she’ll sort it out. It’s what her reputation is built on, she says – so much so that ‘delivery guaranteed’ is prominent in her LinkedIn profile. Salisbury has certainly had a few problems to deal with during her career in local government. Acting in an interim capacity, she’s recently turned the finances around at two borough councils – Slough and Rushcliffe – having previously helped launch Central Bedfordshire unitary authority amid a huge political storm. ‘I’ve always delivered everything I said I would, whether it’s new offices, a new financial system or a balanced budget,’ she tells me as we meet at CIPFA’s central London headquarters. ‘If there’s a problem, throw me in there, and I’ll relish sorting it out. I like to get involved in things that are big and difficult, and to help people to see how it can be made to work.’ Her can-do attitude will do her no harm as she prepares to take up the CIPFA presidency. It’s a crucial time for the institute, with current chief executive Steve Freer JAKI SALISBURY ENJOYS

standing down in September after 13 years in charge and public services facing yet more cuts following June’s Spending Review. Salisbury will bring the same pragmatic approach to the presidency as she has to her finance and chief executive roles in local government. The nicknames she has acquired over the years give a strong indication of her likely operating style. As chief finance officer at the Vale of White Horse District Council, she was dubbed ‘Broad Brush Salisbury’ for her ability to provide councillors with summarised financial information and the ‘treasurer who likes to say yes’ for her proactive approach. Later, as finance director and then chief executive at Mid Beds District Council, she was known as ‘Just-in-time Jaki’. ‘She was always whirling from one thing to the next. She didn’t hang about at all,’ remembers Tricia Turner, who was leader of Mid Beds at the time. ‘Jaki is a hands-on lady. She could always offer me an alternative. Not every chief officer can do that. They are very focused JULY/AUGUST 2013 PublicFinance 31

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Jaki Salisbury

Curriculum Vitae 2009–2013 Director of consultancies, nonexecutive director of leisure company, interim finance roles

on the way forward that they believe is the only way, but Jaki was very good at finding creative solutions.’ Salisbury’s abilities were recognised early on, enabling a rapid rise up the local government hierarchy. Beginning her council career in a junior finance role, she was a deputy treasurer at 29, chief finance officer at 35 and chief executive at 40. She was also the first woman elected to serve on the national executive of the Society of District Council Treasurers. The greatest challenge of her career to date, she suggests, was when she was appointed interim chief executive in April 2008 to deliver a new unitary council – Central Bedfordshire. This was formed through the three-way merger of Mid Beds and South Beds district councils, and 60% of the county council (the rest of the county went to another unitary – Bedford Borough). The merger was strongly opposed by the county council, which had its own plans for a unitary. An ensuing judicial review produced entrenched camps and a heated political atmosphere. Once the result of the review was confirmed, Salisbury had to oversee the transfer and bring together 700 functions and services by a tight nine-month deadline, then appoint a new management team and make significant cost savings. Salisbury calls the unitary ‘my baby’ – and it clearly means a lot to her. During the 20 months she was in charge, she had to make some tough decisions, which did not always make her popular. So when the chief executive role was formally advertised, she decided not to put her name forward. ‘I realised it needed to be somebody fresh, who was not from the area, who had not been involved in the difficult and painful process. But it was like giving up my baby for adoption.’ Since leaving Central Beds in October 2009, she’s been focusing on interim finance

2008–2009 Interim chief executive, Central Bedfordshire Council 2001–2009 Chief executive, Mid Beds District Council

1997–2001 Finance director, Mid Beds District Council

1995–1997 Chief finance officer, Vale of White Horse District Council

1979–1995 Various finance roles at Gedling Borough Council and Broxtowe Borough Council New home: Salisbury takes up her new role as CIPFA president at the Robert Street office (above) ahead of the annual conference on July 9–11

roles, a number of directorships and, now, the impending CIPFA presidency. It has also been an opportunity for her to spend more time with her husband, daughter and the two Staffordshire Bull Terriers they took on from a rescue centre last year. She will officially become president at the institute’s annual general meeting ahead of its annual conference, which takes place in London on July 9–11. Salisbury will open conference proceedings and play a prominent role in events over the three days. But Salisbury ’s immediate priority will be the chief executive position. Salisbury has been a member of the appointment panel selecting Steve Freer’s successor, and an announcement is likely to be made at the conference. The new chief exec will be set tough targets for membership growth, and will be expected to be a vocal presence in support of members. ‘We are a membership body,’ Salisbury says. ‘It is about people. CIPFA has to be about member support and growth, in both

‘CIPFA SHOULD HAVE A LOUDER VOICE IN TERMS OF INFLUENCING POLICY – WE HAVE TO STAND UP AND BE COUNTED’

‘My baby’: Salisbury says her greatest career challenge to date was creating the unitary council of Central Bedfordshire (above)

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the UK and internationally to continue to be a vibrant, relevant and useful organisation.’ She continues: ‘CIPFA should have a louder voice in terms of influencing policy and ensuring that implications of policy changes are understood. Members want to hear CIPFA on Radio 4 – or even better, on Radio 2 and TV. We have to stand up and be counted.’ T i m D a y, w h o w a s previously on the CIPFA Council with Salisbury, says she will bring great enthusiasm to the role of president. ‘She will be very good at engaging with the membership and relationship-building – particularly with the next chief executive.’ The new president understands the sacrifices members have to make to become qualified. Her finance career began via an ONC in Business Studies and the Association of Accounting Technician’s qualification before taking her CIPFA exams – all done part-time while she held down substantive posts. She believes CIPFA should make it easier to study for its qualification,

funds to me.’ She adds that the ‘customer is key’, and both the public and private sectors have to remember who they are providing services for. Salisbury was born in Nottingham, but spent her early childhood years first in Australia and then in the US, where poor customer care would not be tolerated. It was quite a shock when she returned to Nottingham, aged 12. ‘I was always horrified when I went into women’s clothes shops and found the sales girls chatting on the tills. If as a business, as an organisation, you drive things around the customer, you will succeed.’ Salisbury ’s straight-talking can sometimes be disconcerting, but Tricia Turner says she has the ability to get on with everybody and to bring people with her. She doesn’t do ‘pomp and ceremony’ – instead, she just rolls her sleeves up and gets on with the job. Although Salisbury is an accountant, she admits to being a ‘people person rather than a numbers person’. The best ideas, she says, come from those working closest to the customer, and employees should always be encouraged to make suggestions for improving services. ‘Jaki is very much a team player,’ says Turner. ‘In her time as chief exec of the old Mid Beds district council, she engendered huge trust and loyalty among the staff. She has enormous energy and resilience, and is totally loyal to the organisation she is working with or for.’ And, Turner suggests, Salisbury has another quality that will stand her in good stead: ‘She was the one person, quite frankly, who could make sense of local government finance. My God, it’s not easy.’

‘GRADUATES WANT TO WORK IN THE PUBLIC SECTOR – THEY WANT TO DO SOMETHING THAT HAS VALUE OTHER THAN CHASING MONEY’

make better use of high-profile members and encourage more members to volunteer. Communications with schools and universities should also be improved as the appeal of financial careers in the private sector diminishes. ‘A lot of graduates do actually want to work in the public sector. They want to do something that has a value other than chasing money, and so we need to harness that,’ she says. Salisbury is very passionate herself about public services, and emphasises that employees in local government and other parts of the public sector are ‘trustees’ of public money. They should look after it carefully and never waste time or resources. ‘It is about taking ownership and accountability for public money. It isn’t our money; it’s entrusted to us. If people go off sick without good reason, or don’t work as hard as they could or don’t engage their brains fully, that’s a misuse of public

Jaki Salisbury will be opening the CIPFA Conference on July 10 JULY/AUGUST 2013 PublicFinance 33

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FE ATURE

Entrepreneurial state

NOTHING Those who take the risks reap the rewards. Or do they? The truth is that from Silicon Valley to Singapore, innovation relies heavily on state funding. It’s time for the private sector to give something back

Words: Mariana Mazzucato POLICY MAKERS HAVE been asking themselves a burning question for a long time – well before the recent global economic crisis. That question is: where are the European Googles – the innovators, the risk takers? The answer we have heard to this question is that the US economic model is more ‘entrepreneurial’ than that in many parts of the globe. This is supposedly due to the prevalence of economic actors such as ‘venture capitalists’, who provide high-risk funding to genius ‘garage tinkerers’ in their endless pursuit of innovation. We are even told that Americans somehow have a greater entrepreneurial spirit, which makes them more tolerant of the occasional failures that go hand in hand with the occasional successes – like the internet – that result from an endless experimentation process. In general, there seems to be a consensus that the US model is more successful because it is more marketdriven. The heavy hand of the state in Europe has made it slower, less efﬁcient, less innovative – putting its growth, even before the crisis, under threat. And inside the US, the current battle in Congress over 34

how large the state should be often resorts to claims that a larger state would wipe out the innovative drive of the economy. Of course, economists understand that the market sometimes fails – with ‘big-time’ failures most recently. But in the end the state is still viewed, even by progressive economists, as a backseat player. Important for ‘ﬁxing’ market failures but not for creating or shaping markets actively; guiding the capitalist engine. But what if the image we are constantly fed – of a dynamic business sector contrasted with a necessary but sluggish bureaucratic, often ‘meddling’, state – is completely wrong? What if the revolutionary, most radical, changes in

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Apple of their eye: from the internet to nanotech, most of the fundamental technological advances developed in California’s Silicon Valley were funded by the US government

VENTURED capitalism came not from the invisible hand of the market but the very visible hand of the state? Indeed, the real story behind Silicon Valley is not the story of the state getting out of the way so that risktaking venture capitalists – and garage tinkerers – could do their thing. From the internet to nanotech, most of the fundamental advances – in both basic research but also downstream commercialisation – were funded by government, with businesses moving into the game only once the returns were in clear sight. Indeed, all the radical technologies behind the iPhone were funded by government: the internet, GPS, touchscreen display, and even the new voice-activated Siri personal assistant. Photo: Alamy

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These investments were not just about the government providing the ‘basics’ – like funding upstream research. The state funded both the basic and applied research and, in some cases, went as far downstream as to provide early stage risk finance to companies themselves that were deemed too risky for private finance. Apple initially received $500,000 from the Small Business Investment Corporation, a public financing arm of the government. Likewise, Compaq and Intel received early stage grants not from venture capital but via public capital through the Small Business Innovation Research Program. As venture capital has become increasingly short-termist, SBIR loans and grants have had to increase their role in early stage seed finance. While many of the examples sound as if they are related to the military, they are actually everywhere, including in the US’s Department of Health and the Department of Energy. Indeed, it turns out that 75% of the most innovative drugs owe their funding not to Big Pharma or to venture capital but to that of the National Institutes of Health. The NIH has over the past decade invested $600bn in the biotech-pharma knowledge base, $32bn in 2012 alone. Although venture capital entered the biotech industry in the late 1980s and early 1990s, all the heavy investments in this sector occurred in the 1950s, 1960s and 1970s. Venture capitalists entered 20 years after the state funded the most high-risk and capital-intensive parts of the industry. And their desire to reap back returns within 3-5 years has also done quite a bit of damage to the industry. Today it is filled with product-less companies that produce little for the economy beyond the returns earned by private equity in the exit stage. We are seeing the same pattern being repeated in clean technology. In countries including the US, China, Singapore, Germany, Finland, and Denmark, the state funds the difficult areas that are characterised by highcapital intensity and technological and market uncertainty. Business is waiting for future returns to become more certain. These examples are important for three reasons. JULY/AUGUST 2013

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FE ATURE

Entrepreneurial state

ARE GERMANY AND DENMARK AMONG THE STRONGER COUNTRIES IN EUROPE BECAUSE THEY HAVE ‘TIGHTENED THEIR BELTS’ OR BECAUSE THEY HAVE SPENT MORE THAN MOST ON R&D?

First, they tell a very different story about the drivers of capitalism in areas like Silicon Valley – and hence also offer very different recipes for countries that are failing. Is Greece having problems because its state is too large, or because its state is not doing enough? Are Germany and Denmark among the stronger countries in Europe because they have ‘tightened their belts’ or because their governments have spent more than most EU governments on areas such as R&D, and have the type of ‘patient’, long-term committed public ﬁnance that China also has. Is Europe’s problem the lack of risk capital, or the lack of a wave of state funding for that risk capital to surf on? Evidence points to the latter. And no matter how much venture capital and private equity we try to muster up, it is the wave that is missing. Second, they teach us why so many policies aimed at unleashing entrepreneurship are ineffective. Here it is interesting to go to economist John Maynard Keynes, who actually did not talk about innovation. He talked about government and was an expert on what drives private investment. He used the phrase ‘animal spirits’ to talk about the volatility of investment, driven more by gut instincts and herd behaviour than by rationality. And he used this to justify why you need government investment to stabilise growth. However, in a private letter to President Roosevelt in the 1930s, Keynes also talked about businesses as ‘domesticated animals’. And indeed, this distinction, which he did not really delve into, is vital. Are we talking about businesses as lions in cages, who simply need barriers to be taken away for them to roar; or are we talking about pussy cats who need to be groomed into lions? So much of policy today assumes the former. Different types of tax cuts – whether they are capital gains tax cuts, or taxes aimed at reducing the cost of R&D – assume that business is willing and able to spend. In fact, the stories above show us that they are only willing after the state leads the way and takes the risk. Did Pﬁzer recently move out of Kent in the UK to Boston in the US due to the lower taxes and regulation in Boston? Or due to the $31bn a year that taxpayers in 36

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the US fund through the National Institutes of Health? Many businesses talk the talk about tax but walk to where the government spending is. Yet the two contradict each other since lower taxes are de-funding the public purse. This brings me to the third point and the biggest problem. By not admitting to the role of the state as lead risk taker and entrepreneur, what we are increasingly witnessing is a dysfunctional capitalism – where the risk for innovation is increasingly socialised yet the profits are privatised. And this is putting the innovation machine at risk. If we acknowledge that the state does not only fix markets but creates them through active risk-taking, we need to have a more direct mechanism that brings something back into a public ‘innovation fund’ that can be used to fund the next round. Had only 1% of the direct financial profits from the internet come back to the state to compensate for its seed funding, there would be much more today to spend on Green-tech, which is being starved – and only gently ‘nudged’ rather than pushed as previous revolutions were. While many argue that this return-generating mechanism is the tax system itself, we live in an era in which major global corporations, whose products descend directly or indirectly from state-funded research, use legal loopholes to pay hardly any tax. In the end, it is about not hyping up myths about innovation ‘eco-systems’ but admitting who does what in them – and allowing the rewards to be as social as the risks taken. Otherwise, growth might be ‘smart’, but surely not ‘inclusive’. This will hurt not only future innovation (starving the state of funds, despite it being one of the lead innovators) but also the wellbeing of future generations. Not a good result.

Mariana Mazzucato is an economist and professor of science and technology policy at the University of Sussex. Her new book The Entrepreneurial State: debunking private vs public sector myths was published on June 10. She tweets on @MazzucatoM (www. marianamazzucato.com) Photo: Reuter

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FE ATURE

Zero-hour contracts

DOING THE

ZERO SUMS Words: Vidhya Alakeson and Matthew Pennycook

Pressure on public sector budgetss has led to a rise in zero-hours contracts, particularly in the caree sector. The biggest losers are vulnerable service-users and staff ff on poor pay and insecure hours. It all adds up to the next big care scandal

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publicﬁnance.co.uk/features

year, the government has repeatedly raised concerns about the quality of care in hospitals, care homes and people’s own homes. But is it any wonder that such concerns exist given the dynamics of publicly funded social care provision in this country? Confronted with rising demographic pressures and reductions in funding, many local authorities have used their leverage as the dominant market players to force down prices and commission care more flexibly. This, in turn, has compelled providers to seek ways of maximising the flexibility of their workforce and reducing spending on wages. The result for care workers, particularly those in the private sector, is a working day divided into 15-minute care slots with pay only for contact time with clients. Enhanced payments for weekend and evening visits and travel times are increasingly a thing of the past. Facilitating these developments has been the growth of zero-hours contracts within the sector. Now 56% of domiciliary care workers are employed on such a contract, with as many as eight in ten of those working for private providers. Under a zero-hours contract, an employer is not required to offer the employee a defined number of working hours. The employee is neither guaranteed a set number of working hours nor obliged to take any offered. Working hours and pay vary on a daily or weekly basis for people on these contracts. While social care might be at the sharp end of the use of such contracts in the public sector, it is not unique – these OVER THE PAST

Photos: Credit

PFjuly13.038_040.indd 2

contracts are on the rise in a range of economic sectors including retail, hospitality and higher education. In fact, the growth has been so extensive it has raised concerns in the government. In June, Business Secretary Vince Cable announced a review of the use of the contracts to ensure they are being used fairly. It is difficult to get an accurate picture of how many people are on these contracts because a significant proportion of employees on them are not aware of the fact and would not recognise the term if asked. Nevertheless, the Office for National Statistics’ Labour force survey shows that 208,000 people reported being employed on zero-hours contracts in the past three months of 2012 compared with just over 134,000 in 2006. Among firms, the Workplace employment relations survey shows that these contracts are now used by 8% of employers across a wide range of sectors. Employees on zero-hour contracts are more likely to be aged 16 to 24, to have GCSEs as their highest level of qualifications, to work in firms with fewer than 50 employees and to be women. Resolution Foundation estimates from the Labour force survey indicate that 20% work in the health and social care sector, 19% in hospitality, 12% in administration, 11% in retail and 8% in arts, entertainment and leisure. The vast majority are in the private sector but a proportion of these firms will be providing contracts for the public sector. Employers use zero-hours contracts for three main reasons. The first is to maximise the flexibility of their JULY/AUGUST 2013

PublicFinance 39

20/6/13 19:32:18

FE ATURE

Zero-hours contracts

No time to care: many workers now have their day divided into 15-minute care slots, with pay only for contact time with clients

workforce to more easily adjust to variations in demand. Secondly, they use them to manage risk, allowing them to reduce the hours of their workers drastically if needed. Third, they can be used to reduce the ongoing costs of recruitment and training staff and avoid particular employment obligations associated with standard contracts. In reality, many zero-hours workers would be found to be employees if their case ever went to tribunal but employers can shelter behind the limited likelihood that this will happen. This, in essence, facilitates the transfer of risk from the employer to their employees. In the public sector, the growth of zero-hours contracts appears to be a response both to funding uncertainties and changes in commissioning. In further and higher education, for example, less guaranteed funding from government means that a growing number of lecturers are being shifted on to zero-hours contracts. This creates flexibility for the institution to change staffing if there is not adequate demand for a particular module from one term to the next or if changes in government funding mean that a course attracts less funding than it previously did. The shift away from block purchasing in the NHS and social care is also driving the use of zero-hours contracts. As providers have no guaranteed income, greater competition and slimmer margins than before, the contracts allow them to respond flexibly to an altered procurement framework without the risk of carrying spare capacity. In both the public and private sectors, these contracts are not new. Bank staff have long been used in the NHS and supply teachers have similarly long been present in education. What appears to be different is the fact that in certain sectors, zero-hours contracts are becoming the only employment option on offer. In this environment, there is little choice for employees but to sign the contract despite all the uncertainty that entails. Most worryingly, there is evidence that these contracts are used as management tools, with employees ‘zeroed-down’ if they raise issues about their statutory rights or do not take the hours their employer wishes them to. Working in this kind of environment undoubtedly affects the quality of service provided, not because staff employed on zero-hours

56%

OF DOMICILIARY CARE WORKERS ARE EMPLOYED ON ZERO-HOURS CONTRACTS’ contracts are less professional than those on standard contracts, but because working arrangements of this kind lower staff morale, corrode team spirit and increase staff turnover. Of those on zero-hours contracts, 35% have been with their current employer for less than a year compared with 15% of those not on such contracts. High turnover can only mean less training and skills development and poorer quality services. From the perspective of individual workers, the contracts have serious drawbacks for all but the minority who prize flexibility over security. Staff on them are likely to work fewer hours than they would like and earn less than equivalent staff. The Labour force survey suggests that those employed on zerohours contracts receive lower gross weekly pay (an average of £236 per week) than those who are not (an average of £482 per week). This correlation is supported by the WERS, which suggests that companies using these contracts have a higher proportion of staff paid between the National Minimum Wage and the low pay threshold of £7.50 per hour. Low pay coupled with the insecurity of changing hours can make it difficult for people to meet day-today costs such as rent and bills. Planning things like childcare can become impossible. Furthermore, fluctuating earnings make it tricky to know how much you are entitled to in tax credits. The eradication of earnings rules under Universal Credit will make this somewhat easier, although Universal Credit payments will still exacerbate the basic problem of variable earnings. In higher education, a handful of institutions such as Manchester University and City University have announced that they will no longer use zero-hours contracts. This suggests that the use of this type of contract is not essential and that there are other choices that organisations can make. But for that choice to be possible, it will require public sector commissioners and funders to be more creative about how they foster competition on value for money rather than simply on price. The transition from publicly provided services to publicly managed markets is incomplete and at present, the price is paid by those working on the basis of an almost permanent uncertainty – and by the public, who are receiving poorer quality services as a result.

Vidhya Alakeson and Matthew Pennycook are respectively deputy chief executive and senior researcher & policy analyst at the Resolution Foundation

PublicFinance JULY/AUGUST 2013

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Smart solutions, supporting change

publications and guidance In a continually changing public sector environment it is vital to be aware of the latest developments. CIPFA’s range of guidance and best practice helps you help you to keep up to date and to deliver excellence: Social Enterprise Business Planning and Assessment The Commissioning Joint Committee Guide to Service Sharing An Introductory Guide to Local Government Finance (2013 Edition) – (also in e-book format) Code of Practice on Local Authority Accounting in the United Kingdom 2013/14 Find out more at www.cipfa.org/publications We use our insight and expertise to help you deliver change.

To discover our full range of smart solutions visit www.cipfa.org/smartsolutions or call our Business Development Team on 020 7543 5891.

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18/06/2013 13:29

NEED TO KNOW

CIPFA Events CIPFA hosts events around the UK for members and non-members alike. These events range from small workshops for local CIPFA members through to large conferences, and are directed towards professionals across most disciplines in the public sector.

the extent of ﬁnancial aid available to public bodies. www.cipfa.org/events

September 13

CIPFA Northern Ireland: improving service during brutal expenditure cuts

CIPFA REGIONS Regional events developed by CIPFA volunteers allow members and students to share best practice, network and explore how strategic issues apply locally. Many are free or at a nominal cost. For more info on the regions visit www.cipfa. org/regions

July 5

Belfast

How can public bodies use the exonomic crisis to their advantage and improve public services in a period of reduced spending? Victor Brownlees, CIPFA member and former council chief executive, will share his experience of running a council through similar circumstances. www.cipfa.org/events

September 18

Birmingham

CIPFA in the Midlands ‘Question Time’ style debate

For all CIPFA students in the Midlands. There will be networking and notable speakers.

This is the fourth in the 2013 series of the ever-popular ‘Question Time’ style debates. The topic and panel will be announced nearer to the time. Please e-mail cimevents@ cipfa.org if you have any queries.

www.cipfa.org/events

Birmingham

CIPFA in the Midlands student society AGM

role is pivotal in the current economic climate and will continue to be for the next decade. Accountants cannot afford to hide among the numbers and need to get the most out of the changes on the horizon. The summer school will cover procurement, commissioning, assurance, issues around localism, and what the future might look like. www.cipfa.org/events

October 2

Warwick

CIPFA in the Midlands CATS seminar 1 Register your interest for this seminar, part of the 2013 CIPFA Midlands Audit Training Seminar (CATS) series, at Warwick Conferences. The CATS committee arranges a highly successful seminar programme each autumn. www.cipfa.org/events

October 18–19

CIPFA South East summer school: adapt or die... time for ﬁnance professionals to step up to the plate

A technical update to brief you on

The modern ﬁnance professional

www.cipfa.org/events

CIPFA’s ﬂagship event is being held in London. It will include high-proﬁle speakers such as Lord Heseltine, journalists Stephanie Flanders and John Pienaar and writer Owen Jones, practical workshops, a thriving exhibition and networking.

July 18

CONFERENCES

CIPFA holds conferences across a range of areas in the field of public finance. The events include technical guidance and debate provided by leading experts and commentators. Search under ‘conferences’ at www.cipfa. org/events for our full listings

July 9–11

London

CIPFA annual conference: beyond austerity - designing the future state For the ﬁrst time in many years

September 20

Wellingborough

www.cipfaannualconference. org.uk Juliette.bond@redactive.co.uk

July 17

London

HRA self-ﬁnancing: one year on This conference will, for the third consecutive year, act as a platform for treasury and housing managers to debate, share, learn, and listen about how self-ﬁnancing can create and sustain real service improvements through working together. www.cipfa.org/events chantele.johnson@cipfa.org

Birmingham

Local government accounting conference This seminar will highlight issues arising from developments in local authority accounting and ﬁnancial reporting within the public sector. Speakers include Karen Sanderson from the Treasury; Lynn Pamment, chair of CIPFA LASAAC Local Authority Code board; and Paul Dransﬁeld of Birmingham Council. www.cipfa.org/events rikki.ellsmore@cipfa.org

September 11 September 18

London

Social care and health conference Finance is the cornerstone of successful integration. Up-front finance can provide the initial incentive to get schemes off the ground, particularly in times of austerity. This event will help you identify best practice, providing examples of successful projects and considering how financial benefits and outcomes can be measured. www.cipfa.org/events rikki.ellsmore@cipfa.org

September 11

Birmingham

Procurement and contract audit conference Get up to date with best practice, improving the efﬁciency of your procurement processes.

Warwick

CIPFA regions conference 2013: 2020 Vision

Regional policy technical update: accessing and optimising state aid for public service delivery

South East

September 17

dean.henry@cipfa.org www.cipfa.org/events

Hear sessions on twenty-ﬁrst century volunteering and CIPFA’s new ﬁnance apprenticeship scheme plus strategic Institute issues

July 17

leading speakers in the ﬁeld. www.cipfa.org/events rikki.ellsmore@cipfa.org

September 25

Belfast

CIPFA Northern Ireland annual conference An analysis of what needs to be done for the Northern Ireland public sector reforms to succeed. This event will look at current issues facing professionals in the public sector. www.cipfa.org/events kate.mckay@cipfa.org Coming soon Details of these events are not yet available on the CIPFA website. For more information contact our Events Team on 020 7543 5892, or email cipfabookings@cipfa.org

September 26

London

Insurance network summit Liverpool London

Central government conference These two conferences cover the Finance Transformation Programme – what it means to public ﬁnance professionals in central government – and provide an opportunity to hear from

This summit includes speeches from leading insurance practitioners in the public and private sectors.

October 15

London

Better governance forum annual summit A summit for anyone interested in good governance, including audit, risk and counter fraud.

42 PublicFinance PublicFinanceJUNE JULY/AUGUST 2013 42 2011

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NEED TO KNOW

On account ■ Manj Kalar

On the cutting edge As the June Spending Review extends austerity cuts across government, ‘smart skills’ will be essential for Whitehall finance staff to address the challenges AS WE BEGIN to digest the full impact of Chancellor George Osborne’s June 26 Spending Review, one thing is clear – we really are ‘all in it together’. Further cuts will be required across central government and local government for 2015/16, the year covered by the review. Spending Review 2010, which covered the four years from 2011/12 to 2014/15, placed relatively greater upfront cuts on local government bodies, so many of these have been implemented now. Central government departments have made some cuts but not of the same magnitude. This will now have to change. It is said that ‘change is a constant’. Perhaps in this era of austerity, it should be rephrased ‘cuts are a constant’. Tight fiscal discipline will be required for some time to come. Difficult choices lie ahead concerning the fundamental raison d’être of public services and the nature, scope and mode of their delivery. In this environment, the finance professional is critical to ensuring decisions are soundly based. And to this end, increasing the professionalisation of the civil service has been a consistent theme. The Cabinet Office set the agenda in

its Civil service reform plan, published in June 2012. This was followed by Meeting the challenges of change: a capabilities plan for the civil service. The core focus is to extend professionalism in the civil service to beyond the 24 professions identified. Finance is but one of these. The challenge now is to ensure that finance professionals are at the heart of the coming cuts decisions. This might seem a ‘no-brainer’ – something that council finance professionals will take for granted, but peers in central government are often seen as the poor relations compared with those from other professions. So what should we in the central government finance profession do to change this? First, we need to ensure that we remain relevant and really meet the organisation’s needs. Secondly, we need to keep our skills up to date – taking up any offers of Continuing Professional Development. Thirdly, and arguably most importantly, we need to help lead the change agenda using our expert or ‘smart’ skills. Smart is the term increasingly being used for peopleorientated or soft skills; skills that finance professionals are too often accused of lacking. Using the phrase ‘soft skills’ masks both the difficulties of acquiring them and their importance to career development and fulfilment. ‘Smart skills’ is more apt. How we develop and use our professional skills to support public sector leaders depends on how well we can: influence their agenda; communicate financial issues in a way that can be Pushing the envelope: George Osborne’s cuts are going deeper and further understood by colleagues

Photo: PA

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from other disciplines; and really engage with the organisation – to help achieve the public’s expectations with ever reducing budgets. One of the greatest difficulties with the Spending Review totals that have now been agreed will be finding the next areas to be cut. Over the years the lowhanging fruit have gone, so further change will require something radical. Some of this is reflected in the Civil service reform plan, for instance, the decision to become ‘digital by default’, in recognition of the fact that 80% of UK adults are now online but only 50% of government services. So while there is scope, such change will be neither easy nor simple, as Public Accounts Committee chair Margaret Hodge has pointed out. She called into question the planned savings assumed to arise from the Universal Credit being provided online, pointing out that less than 20% of the ‘customer’ base had internet access. Other potential changes include sharing professional resources across boundaries. Local government already has a track record here, with initiatives such as the three London boroughs sharing generic services and chief executives – Hammersmith & Fulham, Kensington & Chelsea and Westminster City Council. Central government has started sharing functions such as internal audit and is looking to increase this over time – and there is much to learn from increasing joint working across disciplines with the introduction of joint commissioning boards. However, in the longer term, there will undoubtedly be tough decisions about the public services ‘offer’. In the meantime, finance professionals must ensure they equip themselves with the hard and smart skills to stay one step ahead of all the other professions. Evolution will be the key to survival.

Manj Kalar is CIPFA’s technical manager for central government and ﬁnancial management. CIPFA is helping those working in central government by running two free conferences: in Liverpool on September 11 and in London on September 18 JULY/AUGUST 2013 PublicFinance 43

20/6/13 19:51:31

NEED TO KNOW

Management development How to move your career up a level Although times are hard in the public sector, finance staff don’t have to abandon their career aspirations. There are still jobs out there and there is still room on the next rung of the ladder. Chris Brown explains how to cross to the next level In these times of austerity, there is considerable pressure on public services. This takes many forms, including the constant push for further efficiency savings; public discontent with the services themselves; and the clamour for terms and conditions of public sector staff to be moved more into line with those of the private sector. In addition, back-office services are less favourably regarded than frontline services, and are often seen as the primary target for efficiencies. Finance staff seem to suffer particularly in these times, as they are usually relied on to make new arrangements work. Staff tend to respond to uncertainty and change by lowering their career expectations. They think they should feel ‘lucky to have a job’ and are influenced by popular opinion that ‘there just aren’t any jobs out there’. Well, the good news is that there are jobs out there. Organisations have needs even in austere times. The needs might change, but someone has to ensure they are met – and that someone could be you. However, like most other things in life, the 80:20 rule applies – that is, 80% of the spoils in the jobs market will go to the 20% of employees with the best career management strategies. The following ten tips should give you a decided edge over the competition.

80% of the spoils in the jobs market will go to the 20% of employees with the best career management strategies

TAKE TIME TO REFLECT

Careers management is about trying to match yourself – ie, your skills, interests, knowledge and preferences – to a job. Make a list of everything you have learned in your life. Go down the list and identify around ten skills that you are both very good at and love to apply – your ‘motivated skills’. Then list the criteria for your ideal job and the constraints that limit your choice of job, such as location or work patterns. 44

PublicFinance JULY/AUGUST 2013

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DEVELOP YOUR PERSONAL BRAND

Draw up a ‘summary message’ about you by referring to your top motivated skills and your top criteria for a future employer. For example, you could say: ‘I am looking to use my skills in financial management, staff development and lean methodologies in an organisation that is serious about customer service, values its staff, and is striving to be the best in its field.’ Then use the essence of this message (though

not necessarily word for word) in all your job search activities. And always behave consistently with this message.

EXAMINE YOUR MINDSET

Now take a good look at your job hunting attitudes. Examine your mindset through honest, objective eyes. Do you see even a trace of apathy? If so, change it to commitment. Determine, right now, to make a concerted effort to find a job that will ‘tick all of your boxes’. Illustration: Natalie Wood

20/6/13 18:36:07

1. Develop your ‘personal brand’ 2. Prepare some success stories

DON’T

3. Show your skills match the job

UNDERSTAND HOW ORGANISATIONS LIKE TO RECRUIT

People who want to change jobs often adopt a strategy of submitting numerous job applications. This scattergun approach can be successful but it fails to recognise that employers ideally like to recruit ‘known quantities’. So try to become known to potential recruiters well in advance of a vacancy being advertised. If not the recruiter, then find someone else who the recruiter respects and who is willing to recommend you.

SHOWCASE YOUR TALENTS

PROVE HOW YOU MATCH THE JOB

Consider something at work that has gone well and turn it into a short story that you can relate at appropriate times. Give the story an introduction (what the problem was), a main body (what you did), and a conclusion (what the impact of your actions was). Then do more of these until you have a ‘collection’ of such stories that you can select from when required.

List the needs that you believe the organisation is seeking to fulfil through this particular role. Then consider for each of these what evidence you have that you meet those needs. This will enable you to come across as someone who really understands the recruiters and what they are looking for.

Consider things at work that have gone well and turn them into short stories you can relate at appropriate times

NETWORK, NETWORK, NETWORK

Place yourself in situations where you expand the number of people who know you and view you positively. The career development author John Lees likens this to building a ‘chain of helpfulness’. The starting point should always be what you can put into the relationship, not what you can take out of it. Start off with people

1. Use social media over personal contact 2. Expect to stay motivated all the time 3. Forget to network

you know very well and then seek introductions to expand the number of people you know.

USE SOCIAL MEDIA WISELY

TRY JOBS ON FOR SIZE

Always aim to network face to face. Social media can be used to get new contacts, but only as a stepping stone to personal contact. Always remember to project an image on social media that is consistent with your personal brand.

Most people wait until they are in a new job before finding that they don’t like it. If you are interested in a particular field of work, an organisation, or a job, do your research in advance. Get an introduction to someone who is actually doing that job or who works at that organisation. Ask for a small amount of their time to speak to them about what is good and bad, and what the future might hold. Wherever possible, go to visit the person at their work. That way you can get a feel for what it is really like to work at that place or in that field of work.

KEEP YOUR ENERGY LEVELS HIGH

Anticipate a reduction in your enthusiasm over time. Consider how you can build in enjoyable activities each week to re-energise yourself. Consider what moral support you can enlist, maybe working with other people interested in changing jobs to keep yourselves motivated. Always choose positive people who will continue to encourage you. Chris Brown is managing director of NHS Accountants Coach, a CIPFA member, and a Clinical Commissioning Group lay member. He is also a former NHS director of ﬁnance and deputy chief executive. One of his coaching programmes is ‘Taking your Career to the Next Level’ (www.nhsaccountantscoach.co.uk) JULY/AUGUST 2013

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21/6/13 12:27:47

Smart solutions, supporting change

recruitment services CIPFA’s knowledge and experience drives the development of policy and practice in public ﬁnancial management worldwide. CIPFA Recruitment Services is able to leverage this unique strength to bring you the right people for the job. We place the best people in interim and permanent roles across the full range of ﬁnance, HR and executive positions in the public sector. Find out more at www.cipfa.org/recruitmentservices We use our insight and expertise to help you deliver change.

To discover our full range of smart solutions visit www.cipfa.org/smartsolutions or call our Business Development Team on 020 7543 5891.

PFJul13.046.indd 14

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NEED TO KNOW

Smart thinking? ▪

John Thornton

What’s not to like? Facebook, Twitter and other social media provide powerful communication tools – but they need to be used intelligently and with a clear corporate purpose AT A VERY large technology conference I

went to recently, there were big screens all around the exhibition and public areas displaying tweets about the event. You know the sort of thing: ‘Really enjoyed the last session’, ‘Great conference’ and ‘Looking forward to the next session’. Nothing of substance and no real reference to any specific points made during what had been some really interesting sessions. Then, by chance, I stumbled on a group of people in a back room who were busy tweeting most of the messages displayed, while the real conference delegates drank coffee and chatted. The tweets successfully created an atmosphere both at the conference and presumably in the wider Twittersphere of lots of activity, energy and interest. I suspect this type of ‘Twitter support’ is a feature in many major conferences, particularly as most now

encourage you to ‘get your phone out’ rather than ‘switch it off’. It did not hurt anybody and it probably did not deceive very many. It did however show the importance that many organisations – particularly their communications teams – now place on the use of social media. I think social media does have an important role but I have my own concerns about the information that some people share. There was a time, for example, when people who were going on holiday set up remotecontrolled lights to give the impression that they were still at home and told as few people as possible. Now they post details of their holidays on Facebook, saying where they are going and how long they will be away. As a result, Facebook now provides a really useful source of information for not only burglars but also for social

I do know people who are tweeting, blogging and liking all day long. But I fear we often overestimate the number of people actually using social media on a daily basis Illustration: Angus Greig

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engineers who seek to steal identities and infiltrate organisations. Also, perhaps it is an age thing, but I still feel uncomfortable about meeting someone for a drink who then finds the need to tweet about it. Plus, in the work environment, monitoring social media can put considerable additional pressures on those who are already struggling to keep up with e-mails, texts and telephone calls. I do know people who are tweeting, blogging and liking all day long – but I fear we often overestimate the number of people actually using social media on a daily basis. In some recent meetings, I have done a straw poll of who is using social media for work purposes. The result is usually less than one in ten of those present and often they focus on either Twitter or LinkedIn, seldom on multiple channels. Social media now provides very powerful tools to communicate with and engage whole communities of people. But I am concerned when organisations say ‘We must do more social media stuff’ without being clear about why. Social media are like any other tools. You should start with clear objectives, such as: ‘We need to improve staff morale by sharing more information about what is happening and why’ or ‘We need to improve the efficiency of our adult care services by increasing collaboration between different providers’. You then decide how best to use the available tools, including social media, to achieve these improvements. Otherwise, it is a bit like starting with a hammer and saying how can I use this more? The result is that you will probably end up using it in situations where a screwdriver or a saw might be more appropriate. Social media adds a range of very powerful tools to the management armoury; we all need to use them intelligently.

John Thornton is director of e-ssential Resources and an independent adviser on business transformation, ﬁnancial management and innovation John.Thornton@e-ssentialresources.co.uk

JULY/AUGUST 2013 PublicFinance 47

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NEED TO KNOW

Statistics

Numbers game PF’s monthly roundup of statistics covering the public finances, economic growth, unemployment and more

22,000 48

PublicFinance JULY/AUGUST 2013

PFjuly13.048_049.indd 1

1,139.3 1,141.8

1,156.8 1,157.9

1,156.3

£ bn

,119.3 1,118.1 18.1 1,111.9 1,119.3

65 Jun 2012

Jul 2012

Aug 2012

Sep 2012

Oct 2012

Nov 2012

Dec 2012

Feb 2013

Jan 2013

Mar 2013

Apr 2013

*excludes the cost of financial interventions to bail out the banks

May 2013

Source: ONS

STATE OF THE PUBLIC FINANCES 2012/13: NET BORROWING* (£bn)

15.8 14.1

15.0

14.6

12.8

11.8

8.8

£ bn

8.1 5.3 July 2012 June 2012

–0.6

4.9

Jan 2013 Aug 2012

Sep 2012

Oct 2012

Nov 2012

Dec 2012

*excludes the cost of financial interventions to bail out the banks

Feb 2013

Mar 2013

Apr 2013

–9.1

May 2013

Source: ONS

RELIANCE ON PUBLIC SECTOR EMPLOYMENT (Q1, 2013) North East

22.7

North West

20.3

Yorkshire and Humber East Mids % of workforce

FALL IN PUBLIC SECTOR EMPLOYMENT, Q1 2013

1,189.2 1,181.1 1,180.0 1,189

1,181.4

% of GDP

Public sector employment fell again in the first quarter of 2013 – by 22,000 – although this was more than matched by the 46,000 increase in the number of people employed in the private sector. This pattern – of two private sector jobs being created for every one lost in the public sector – has been continuing for some time as the government tries to rebalance the economy. Between March 2012 and March 2013, private sector employment grew by 708,000 compared with a 308,000 fall in public sector employment. However, these figures are affected by the reclassification of further education and sixthform colleges from the public to the private sector. Excluding the reclassification, public sector employment is shown to have fallen by 112,000 over the year to March, while private sector employment has grown by 544,000. Public sector employment now stands at 5,697,000, with local government having taken the biggest hit. Employment in local authorities fell by 26,000 over the quarter to reach 2,497,000. In contrast, central government employment (including the NHS, armed forces, free schools and academies) increased by 13,000 to stand at 2,734,000. This was partly explained by the increasing number of schools becoming academies. Within central government, the civil service headcount showed a fall of 2,000 (3,000 in terms of full-time equivalent posts). The civil service now has a headcount of 449,000 – or 414,000 FTEs – and is at its lowest level since 1999. Regional disparities also remain. More than a quarter (28.1%) of Northern Ireland’s workforce is employed in the public sector, while the proportion is much lower in London (16.6%), the Southeast (16.7%) and the East of England (16.7%) Wales (25.6%) and Scotland (23.2%) have a similar reliance on the public sector, which will make economic recovery harder as the chancellor continues to cut government spending.

STATE OF THE PUBLIC FINANCES 2012/13: NET DEBT*

20.7

17.9

West Mids

19.5

East England 16.7 London

16.6

Southeast

16.7

Southwest

19.0

Wales

25.6

Scotland

23.2

Northern Ireland 15

28.1 20

30 Source: ONS

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Feb – April 2012

Nov 2012 – Jan 2013

Aug – Oct 2012

May – July 2012

2,511

2,516

2,510

2,592

2,599

UK UNEMPLOYMENT (000s)

Feb – April 2013

The number of people unemployed fell by 5,000 to stand at 2,511,000 in the three months to April 2013. Unemployment has also fallen by 88,000 over the year. UK PUBLIC AND PRIVATE SECTOR EMPLOYMENT Private sector

Source: ONS

UK PUBLIC SECTOR EMPLOYMENT* (000s)

Public sector 6,200

Total 100% 6,100

29.8m

5.7m

6,000

19.1%

5,900 5,800

24.1m 80.9%

5,700 5,600 Mar 11

*Total to March 2013 Source: ONS

Jun 11

Sep 11

Dec 11

Mar 12

Jun 12

Sep 12

Dec 12

Mar 13

*English further education colleges and sixth form college corporations were reclassiﬁed from the public to the private sector from the June 2012 ﬁgures onwards Source: ONS INFLATION 2012/2013 Consumer Prices Index (%)

2.7%

3.2

3.2 2.8 2.4

2.9 2.6

2.6 2.7

2.5

2.7

3.3

3.1

3.0 2.7

Retail Prices Index (%)

2.7

3.3

3.2 2.8

2.9

2.8

3.1 2.7

2.4

2.2

CPI inﬂation, May 2013

Jun 12 Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13 Apr 13 May 13 Source: ONS

JULY/AUGUST 2013

PFjuly13.048_049.indd 2

PublicFinance 49

21/6/13 12:25:44

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