Publicfinancedecember2013

PublicFinance

The business monthly of the public sector

publicfinance.co.uk

Issue 12 December 2013

DECEMBER 2013

Peter Riddell On ministers, mandarins and where the buck stops

Generation debt Picking up the tab for the baby-boomers

‘Tis the season Try your hand at the PF Christmas quiz

Tony Travers on the chancellor’s vice-like grip on the finances PFdec13.001_cover.indd 1

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PublicFinance

CONTENTS

December 2013

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Features 32 COVER STORY Turn of the screw Crushing austerity is here to stay for at least a decade, whoever occupies 10 Downing Street. What will this mean for spending, tax and services, asks Tony Travers

28 What lies beneath Future generations face picking up the tab for hidden public sector debt. Paul Klumpes and Malcolm Prowle on the looming iceberg of off-balance-sheet costs

23 Spotlight on local regeneration How can we revive the high street and regenerate the UK’s town centres? Mike Thatcher reports from the Public Finance/Deloitte round table debate

10 Christmas quiz Test your knowledge of the news in the annual Public Finance Christmas quiz for the chance to win £150 in Marks & Spencer vouchers

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‘THE PRESSURE ON PUBLIC SERVICES FOR THE NEXT DECADE WILL BE WITHOUT PARALLEL IN MODERN BRITAIN’

10 Regulars 6 Leader Autumn Statement angst 7 Second thoughts Peter Riddell on what the botched introduction of Universal Credit reveals about accountability 8 News Council fears on municipal bonds agency plans; outsourcing chief warns on risk of contracting bans

Need to Know

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18 Watchdog Watch Business rates, council charges and maternity care under the microscope

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20 Voice of the Nations Scotland’s public bodies told to be ready for tougher governance

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22 Restless Nation Iain Macwhirter on Grangemouth, Govan and the ties between nations

Opinion Vidyha Alakeson on personal budgets in the NHS and Stephen Devlin on the reignited energy debate

On Account A loophole used by councils to raid housing revenue cash has been closed

Smart Thinking?

John Thornton sees the railway future in Shanghai – but £42bn for HS2?

Management Development Motivate your staff for the coming year

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Numbers Game Cipfa Events

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ALSO inside this month’s issue Subscribe today for the latest expert comment on public policy and finance

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Readers’ letters

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CONTACTS

Leader Permanent revolution

I

t was in the 2012 Autumn Statement that George Osborne announced plans to extend austerity measures until 2018. More recently, the chancellor has talked of a ‘10-year project’ to get the country’s finances under control.

So it is with some trepidation that the public sector awaits the outcome of the 2013 Autumn Statement, due on December 5.

As Tony Travers points out in this month’s cover feature (pages 32-36), the chancellor’s vice-like grip on the finances looks set to stay in place until the early 2020s. This is despite the generally more positive economic news.

According to the Bank of England’s Monetary Policy Committee, the UK is experiencing a ‘sustained recovery’. Growth is up, while unemployment and inflation are down.

The Office for Budget Responsibility will reflect the better mood when it publishes its latest forecasts at the same time as the statement. But this won’t divert Osborne from his stated course.

He has promised to move into surplus by the end of the next parliament, and declared there will be no ‘quick fixes’. Meanwhile, the prime minister talks of doing more with less ‘not just now, but permanently’.

David Cameron’s intervention, in his Lord Mayor’s Banquet speech, suggested a marked change in philosophy. The man who once said he ‘didn’t come into politics to make cuts’ is now advocating a permanent revolution in public spending.

As Travers notes, the consequences could be an extension of real-terms cuts to currently protected areas, an expansion of pooled budgets, more charging, reduced subsidies for the arts and railways, and further increases in the retirement age.

It’s not a hugely appealing prospect. The alternative, of course, is an increase in taxes, but that would be a huge risk for any politician to take in the run-up to the next general election.

The grim truth is that, post-2015, the current deep cuts to public spending are likely to look like a mere dress rehearsal, with inevitable consequences for the country’s social fabric.

But before we endure 10 more years of pain, shouldn’t there be an open discussion with the electorate about appropriate levels of taxation and public services?

Perhaps it’s too much to ask our politicians to add this to their list of New Year resolutions.

The next issue of Public Finance will be published at the end of January 2014.

We wish all our readers a Happy Christmas and a peaceful New Year

■ Mike Thatcher EDITOR letterstoeditor@publicfinance.co.uk

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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 Richard Johnstone 020 7324 2796 richard.johnstone@publicfinance.co.uk Reporter Judith Ugwumadu 020 7324 2794 judith@publicfinance.co.uk Contributors Paul Nettleton, Keith Aitken Art editor Gene Cornelius 020 7324 6227 gene.cornelius@redactive.co.uk Editorial assistant Tania Forrester 020 7324 2793 tania.forrester@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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PublicFinance DECEMBER SEPTEMBER2013 2011

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Second thoughts pfOpinion

■ Peter Riddell

A universal truth The debacle over the introduction of Universal Credit highlights widely acknowledged concerns about accountability between ministers and civil servants The trickiest issue at the top of Whitehall is the balance of accountability and responsibility between secretaries of state and their permanent secretaries. That tension has been highlighted by the row over the Public Accounts Committee’s recent damning report on the problems introducing Universal Credit. The report stopped short of naming Robert Devereux, the permanent secretary at Work and Pensions, but allies of Iain Duncan Smith, the Secretary of State, have briefed the press, and the committee, against him. The resulting mess has seriously damaged morale and left open questions of accountability.

No one disputes that civil servants have made serious mistakes. The PAC said management of Universal Credit had been extraordinarily poor and the accounting officer (namely Devereux) and his team should have been ‘more alert to identifying and acting on early warning signs that things were going wrong’. But officials are not solely to

blame. Universal Credit is the personal mission of Duncan Smith – and he has been determined to press ahead.

The trouble is that current accountability mechanisms are no longer sufficient to deal with such situations. Senior ministers are no longer willing just to stand up in parliament, explain why a problem has occurred and what is being done to remedy it. They want to make civil servants more responsible for failures of performance while also having a greater say in their appointment.

On the other hand, the traditional accountability of permanent secretaries/ accounting officers to the PAC for the spending of public money is no longer enough when it is hard to distinguish the respective influence of politicians and officials. The PAC mainly questions senior officials, and not ministers, on specific projects, so it is the latter who are in the line of fire in face of this increasingly combative committee. This reinforces an artificial division of accountability.

The Institute for Government has been considering these issues over the past 15 months, ahead of a final report before Christmas. Our central argument is that there can never be a firm and

UNIVERSAL CREDIT IS THE PERSONAL MISSION OF DUNCAN SMITH – AND HE HAS BEEN DETERMINED TO PRESS AHEAD Photo: PA

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watertight distinction between the roles and responsibilities of secretaries of state and permanent secretaries unless you go down the route of formally shared accountability or the contractual relationship between a minister and department. This is the case in New Zealand where the state services commissioner acts as a constitutional buffer between politicians and officials.

Other means of distancing and differentiating, such as the increased use of ministerial directions (when a permanent secretary has doubts over the financial viability of a project), are seldom used – none has been sought since 2010 – since they would expose divisions within a department and weaken relationships at the top.

The way forward lies in greater clarity, alongside a greater ministerial say in permanent secretary appointments and bringing in more expert advisers. More formal statements could be made about respective roles and responsibilities, as was tried out in the Home Office in 2006-07.

Performance management needs to be strengthened, not least by the provision of better quality information, but also by making permanent secretary objectives more explicit and realistic – and publishing them before more than twothirds of the financial year has passed.

The current position is unsatisfactory for all concerned – for ministers who feel frustrated with senior officials in whom they have lost confidence and for civil servants who face criticism, often by name, in the press with no right of redress. Beware naïve and unworkable solutions. But reform is possible and mutual understanding and respect would go a long way.

Peter Riddell is director of the Institute for Government. Accountability at the Top by Akash Paun will be published shortly by the IfG DECEMBER 2013

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News Local government borrowing

Bonds agency could be ‘strangled at birth’

BY RICHARD JOHNSTONE

Plans to set up a local government bonds agency could be ‘strangled at birth’, councils involved in the project have told Public Finance.

An agreement to push ahead with the creation of the bonds agency was confirmed by the Local Government Association on November 21. Eighteen authorities – including Birmingham City Council, Lancashire County Council and the London Borough of Sutton – signed up as part of the first round.

Announcing the scheme, LGA chair Sir Merrick Cockell said he expected councils to be able to ‘substantially reduce’ their borrowing costs through the creation of the agency, which would issue collective municipal bonds and then loan the money raised on to authorities. A council borrowing £100m

for 20 years could save as much as £4.7m compared to the existing Public Works Loan Board rates, he indicated.

George Graham, deputy county treasurer at Lancashire County Council, told PF the saving would come through borrowing from the financial markets at a lower interest rate than charged by the PWLB. For most councils, the PWLB interest rate is set at 0.8 percentage points above the level charged on government gilts.

Since coming to power, government changes to this rate had created ‘considerable uncertainty’ for local authorities, Graham said. Among the changes was an increase in the borrowing rate to 1 percentage point over gilts at the 2010 Spending Review, followed by a reduction to 0.8 percentage points at the 2012 Budget if

Rose to the occasion: Lancashire County Council has signed up to the scheme to borrow in the financial markets

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councils provided information to the Treasury about their borrowing plans.

‘We could previously expect PWLB rates to be in a fixed relationship with the gilt curve forever, but that certainty has gone,’ Graham said. ‘That ability for government to change things in a way that they hadn’t previously chosen to do continues to be there and causes uncertainty for councils.’

However, this means the Treasury, which has not approved the creation of the agency, could undermine the scheme by lowering the margin over gilts to levels that bonds could not match, Graham said.

Whitehall feared that interest paid on any bond issue would represent a loss of cash from the public sector. ‘They could take action with the PWLB rates that would strangle this at birth, that’s one of the risks. Ultimately it’s a policy decision – do you want local authorities to act fiscally responsibly … or do you want a command-and-control type framework.’

Martin Easton, head of capital and treasury at Birmingham City Council, told PF that PWLB rate changes since 2010 meant ‘the cost of borrowing to local taxpayers is more than it ought to be’. He highlighted the case of Transport for London, which had been able to borrow from the bond market at rates cheaper than the PWLB. Easton agreed it was possible that the Treasury could threaten the scheme, but hoped it would not encounter any problems. ‘It is an issue because the Treasury or the government could decide to undercut a bond agency any time they chose. In a sense, that underlines the vulnerability of local authorities to PWLB rules. I think it’s good in principle for local authorities to have access to more than one dominant supplier of borrowing in the market.’

Cockell told PF that the LGA had ‘positive and co-operative’ discussions with the Treasury.

‘They have been clear that the sector has the power to do this, and that organisations like TfL are doing this, so nobody’s contesting that,’ he said. ‘They have to make sure we will be doing this

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pfObituary ■ Anne Lawton (1955-2013)

A champion of accuracy and clarity in the chief sub’s chair in the right way to conform to the highest financial expectations. Those are legitimate concerns.’

A Treasury spokeswoman said: ‘We have said all along that if people want to do that [create a local bonds agency], that’s their choice. We think the PWLB is the cheapest and best form of borrowing for local authorities.’

Mandy Bretherton, CIPFA’s technical manager for local government finance, welcomed the development of the bond agency.

‘If the agency is able to provide new funding for councils who need it, at lower cost than they currently face, it would give them more options to sensibly manage the resources they have available to them,’ she said. ‘It is a good example of the sector coming together to resolve an issue that has challenged local authorities for a long time.’

Public Finance’s chief sub-editor for the last 15 years, Anne Lawton, passed away on November 9 following a short illness.

An integral and much-loved member of the editorial team, she will be sorely missed by all the people who worked with her and the many contributors who trusted her with their words.

As chief sub, Anne ensured that the content in PF was accurate and well-written.

She provided the headlines, standfirsts and photo captions.

Anne joined the staff when the magazine was weekly and helped see through its move

to a monthly frequency. Her technical know-how was vital as we increased our online output.

She was a committed and talented journalist who always applied the highest standards to her work. A stickler for accuracy and clarity, reporters and subs (and editors) learned a huge amount from her.

Anne was a strong and independent character who loved nothing more than office discussion and debate. She had a frank and frequently outrageous sense of humour, and kept us laughing right to the end.

Her funeral took place on

Private contractors

Taxpayers ‘would pay’ for ban on outsourcing firms

BY RICHARD JOHNSTONE

Proposals to bar some outsourcing firms from bidding for government contracts would end up costing taxpayers more, a senior industry figure has warned.

After a probe into overcharging by outsourcing companies G4S and Serco in electronic tagging contracts earlier this year, the coalition has been urged to stop badly performing firms from bidding for Whitehall outsourcing deals.

The National Audit Office called for ‘the threat of financial penalties and being barred from future competitions if things are found to be wrong’ to be faced by firms. In addition, Justice Secretary Chris Grayling has said if Serco were found to have engaged in systemic malpractice it would not win public contracts in the future.

But speaking to Public Finance, Martyn Hart, chair of the National Outsourcing Association, which Photo: Alamy/Rex

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Pricey tags: Calls for a ban on G4S and Serco came after they overcharged on electronic tagging contracts

represents firms in the sector, insisted such a move would increase costs.

‘At the end of the day, the customer would pay for it,’ he said. ‘If the supplier thinks there’s a risk that they may have such measures placed on them – maybe for what they see as not their fault – they’re going to price in that risk to take account of it.’

If this led to some larger contractors losing tender competitions to smaller firms, the risk of service failure could also increase, he added.

‘The big companies that understand the risk and load their prices to take that risk probably won’t win some business, and smaller companies will. But they’re

November 21 and was attended by a large number of her current and former PF colleagues.

Mike Thatcher PF Editor

the ones that risk [of failure] is going to happen to.’

Instead of such ‘draconian’ penalties, the government needed to do more to ensure the performance of outsourcing firms was properly measured by civil servants, he said.

‘You have to make sure you have the governance right – to make sure you’re getting what you want, and when things happen like you’re measuring the wrong thing, then you can do something about it and you’re not stuck.’

‘What government should do is actually train their people so they have a decent chance to do this properly. That is what is needed.’

However, trade union Unison backed the call for some firms to be struck off.

General secretary Dave Prentis said that G4S and Serco were the ‘tip of the iceberg’ as many contractors were failing and wasting millions of pounds of taxpayers’ money.

‘If it is proved that a private company has acted fraudulently, failed to deliver for and cheated taxpayers, they should be barred from bidding for contracts in the future,’ he told PF. ‘Using private contracts can add additional costs such as financing, corporation tax and contract management costs, in addition to the profit that the private sector expects to make. The bottom line with these contracts is that the supplier needs to make profit and this benefits the shareholder, not the taxpayer.’

DECEMBER 2013

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Christmas

Quiz That was the year that was!

Who was the only Cabinet minister to lose their job in this year’s government reshuffle?

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A) Chris Huhne B) Ken Clarke C) Andrew Mitchell D) Michael Moore

It was the year that the debate on HS2 built up steam, the bedroom tax was introduced and there was talk of a looming house price bubble. Test your knowledge of the news headlines with the annual Public Finance Christmas quiz for your chance to win £150 in Marks & Spencer vouchers

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And how many UKIP councillors were elected?

A) 1 B) 147 C) 1,066 D) 1,966

that the Monetary Policy Committee was unlikely to raise interest rates until what happened?

A) Unemployment falls to 7% B) Annual government borrowing falls below £50bn C) Economic growth surpasses 3% D) Pigs fly

According to Nick Clegg, which sporting star urged In a speech to the Conservative Party the leaders of the three conference, by what main political parties to ‘get Who was along’? year did George Osborne described pledge to run a budget as a ‘model of A) Alastair Cook surplus if the Conservatives B) Chris Froome lean government’ by win the election?

George Osborne in his C) Andy Murray Spending Review A) 2015 D) Lewis Hamilton statement?

B) 2017 On which of these A) Eric Pickles C) 2020 policies did the B) Michael Gove D) 2100 government not lose C) Danny Alexander How many councils a judicial review this year? D) Theresa May did Labour gain A) NHS reorganisation in south control of in this London Which of these year’s local government taxes could be B) The Community Action back to elections? devolved to Wales work programme as part of reforms to the A) 0 C) Free schools Welsh Assembly’s powers?

B) 1 D) High Speed 2

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C) 2 D) 3

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A) Income tax

Which TV reality B) Corporation tax star was appointed C) Value Added tax as the government’s D) Window tax small business ambassador?

A) Mary Portas Who did Alex Salmond accuse of B) Nick Hewer ducking a debate on C) Karren Brady Scottish independence?

D) Deborah Meaden

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Bank of England governor Mark Carney announced

A) David Cameron B) Alistair Darling C) Gordon Brown D) Sean Connery

Photos: Shutterstock/PA/Alamy/Getty

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publicfinance.co.uk/Christmas Quiz

Government plans to create a Single Local Growth Fund will localise how much Whitehall spending to Local Enterprise Partnerships from 2015?

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What is the value of the programme?

A) £130m B) £100bn C) £130bn D) £200bn

C) Work and Pensions Secretary Iain Duncan Smith D) Work and Pensions committee chair Anne Begg

The government was this year accused of ‘flogging A) £400m Rob Whiteman took over as CIPFA chief off a national institution on B) £2bn the cheap’ with the executive in C) £49bn B) NHS September. In an interview privatisation of what asset? C) Social housing D) £720bn with Public Finance, what A) Royal Mint D) The BBC was revealed as his musical B) Royal Mail Who criticised the talent? under-fire Care A host of C) Royal Bank of Scotland multinational Quality Commission’s A) DJ’ing D) Scotland companies inspection regime this year B) Trumpet playing appeared before the Public as not ‘looking at the right C) Opera singing Accounts Committee to things’ and lacking clinical D) Rapping defend their tax practices. expertise?

Which of these firms were A) Shadow health secretary Andy The government not interrogated by MPs? announced plans to Burnham place a cap on an B) Mid Staffordshire inquiry chair A) Google individual’s adult social Robert Francis B) Starbucks care costs. When will it be C) CQC chair David Prior C) Amazon introduced?

D) Health Secretary Jeremy Hunt D) Apple

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The government faced criticism that its flagship mortgage guarantee scheme Help to Buy would inflate a house price bubble.

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A) 2014/15 B) 2015/16 C) 2016/17 D) 2017/18

The government’s flagship Universal Credit reform to the benefits system came under fire. Who said they had ‘lost faith in the ability of civil servants to be able to manage this programme’ during its implementation?

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A) Public Accounts Committee chair Margaret Hodge B) Auditor General Amyas Morse

Which of these Which US city filed groups is exempt for bankruptcy this from the year? government’s controversial A) Detroit ‘bedroom tax’?

B) Dallas

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A) Foster carers B) Disabled people C) Troubled families D) Cat owners

Immigrants are to be charged a levy to pay for which service, under government plans?

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A) Recycling

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C) St Louis D) Albuquerque

Email answers to editorial@publicfinance.co.uk or via the PF website by January 10 2014. Answers and the winner will be published in the next issue of Public Finance.

DECEMBER 2013

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■ This time it’s not personal, by Vidhya Alakeson ■ Raising the power politics stakes, by Stephen Devlin

Opinion ■ Vidhya Alakeson

This time it’s not personal ‘Personalisation’ has been around as a buzzword for a long time. But the consensus over whether this means ‘personal budgets’ is breaking down in health and social care Close to 10 years ago, the term ‘personalisation’ was coined in a Demos pamphlet about public services reform.

The concept quickly became synonymous with ‘personal budgets’, the funding allocation that gives control to individuals. Personal budgets were first applied in adult social care and have since spread to children’s services, wider disability services and, most recently, the NHS. Now the cross-party consensus that has driven their implementation has begun to fracture. On left and right, sceptics are suggesting that we can personalise public services without personal budgets. This is a dangerous illusion. Without personal budgets to give real power to individuals, their

Caution signal: Andy Burnham says personalisation is the future but personal budgets fragment the system

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priorities and preferences are all too often ignored.

In a recent speech to the Society of Local Authority Chief Executives, shadow health secretary Andy Burnham said that while personalisation was the future in health and social care, that did not necessarily mean personal budgets, as they would fragment the system. His parliamentary private secretary, Debbie Abrahams, has also expressed support for personalised healthcare, while rejecting personal health budgets.

The Conservative chairman of the health select committee, Stephen Dorrell, has joined these two Labour figures. He argued at a recent Policy Exchange discussion that people’s views should drive change in the NHS but rejected personal health budgets, saying they did not offer extra choice or value.

These comments seem to be rooted in a conviction that bureaucracies can know and respond to individual priorities and are supple enough to adapt to individual feedback.

The evidence is strongly to the contrary. Care agencies commissioned by both the NHS and social care are unable to make their schedules flexible enough to get each person up and dressed at the time they require, forcing many people to drop out of employment.

For example: ● With his personal health budget, Tom can hire and timetable his own team to ensure that he keeps his job in Manchester United’s disability liaison office, even with significant health problems. ● Every NHS trust continues to offer psychological therapies in blocks of 12 weeks, no more, no less, and there is no option to choose your therapist, although evidence from the National Institute for Health and Care Excellence highlights the importance of that relationship. With a personal health budget, Yve was able to go back to a therapist she had worked with before and negotiate a discount to have more sessions for the same price. ● When Malcolm was diagnosed with frontal lobe dementia, NHS commissioners would only allow him to return home if he attended the day service they commissioned each day.

There, he became more aggressive, needing four people to manage him and increased medication. Rent on a flat near his home, a Sky Plus box and his own care team have kept him happier, safer and significantly cut his medication.

Of course, there are many aspects of NHS care where a personal health budget would not be suitable and where other types of choice and means of soliciting the views of individuals are more appropriate. Elective surgery, Photos: PA/Alamy

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Care agencies are unable to make their schedules flexible enough to get each person up and dressed at the time they require, forcing many people to drop out of employment emergency and inpatient care and GP services are all areas where personal health budgets have been ruled out. But the majority of NHS spending now goes on the care of people with long-term conditions. For large numbers of these people, the level of care and support received from the NHS affects not just their health but their ability to live well.

A personal health budget allows a publicly funded health care system to respond to very specific needs by devolving power to people to shape and integrate their care in line with their priorities and those of their family.

The national personal health budget evaluation, a study of pilot schemes commissioned by the Department of Health, shows that giving individuals choice and control not only improves their quality of life and wellbeing, but also reduces their use of hospital care by £1,300

per person per year. But the evaluation is clear that how personal health budgets are implemented matters enormously.

Poor implementation in adult social care underpins some of the wider dissatisfaction with personalisation that has seen some of its original proponents back away. Stretching targets for the take-up of personal budgets under the previous government led to a rush to offer budgets, a significant number of which did not give individuals any greater choice. People had budgets in name only. Add to this a 40% reduction in local authority spending since 2010 and personalisation has become tainted by cuts and tightening of eligibility.

No similar targets have been set in the NHS, which creates its own challenge.

Expecting an NHS dominated by a medical culture and powerful provider organisations to devolve power to

individuals through encouragement alone is unlikely to result in change. The care services minister, Norman Lamb, recently sought to force the NHS’s hand by strengthening the right to ask for a personal budget in continuing health care. But something more will be needed. A requirement for each clinical commissioning group to spend even a small proportion of its budget for longterm conditions through personal health budgets would be enough to kickstart a change without falling into the trap of counting budgets.

The NHS is rightly revered but remains institutional in nature, whilst today’s challenges require an individualised response. Personal health budgets make it personal.

Vidhya Alakeson is deputy chief executive at the Resolution Foundation DECEMBER 2013

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Opinion ■ Stephen Devlin

Feeling the heat: the UK’s future environmental prosperity is hanging in the balance – we have to start conserving and decarbonising our energy supplies

Raising the power politics stakes Ed Miliband has reignited the energy debate with a simple idea. But a price freeze doesn’t tackle fundamental issues about energy efficiency and environmental goals AT THIS YEAR’S Labour Party Conference, Ed Miliband reignited a debate on energy policy. The subsequent political grandstanding and public interrogation of the energy companies is a drama that is continuing to engage the public through every theatrical twist and rhetorical turn.

After all, energy policy is an emotive subject. We are alarmed that some people may be unable to heat their homes this winter and will suffer, perhaps even die, as a consequence; many suspect injustice is being perpetrated by anti-competitive energy companies; and, to top it off, our future environmental prosperity hangs in the balance – we have to start conserving and decarbonising energy.

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Clearly, these intertwined objectives are all vitally important. But an incredibly opaque yet compelling debate has emerged in which issues of poverty, corporate malpractice and environmental stewardship are competing for the hearts and minds of the public and the attention of politicians. Throughout the confusion, one issue has eclipsed the others: the cost of energy to consumers. However, a quick comparison of domestic energy prices per unit across European countries reveals that UK prices are, if anything, rather low. The critical problem is that the UK’s building stock is exceptionally energy-inefficient and wastes a lot of

energy. In other words, prices may be low, but our bills are higher than they could be – bad news for household budgets, businesses and public services.

It’s also bad news for the environment.

So what to do about it? The responses of our political parties have been notably divergent. Labour sticks resolutely to the policy proposal that sparked the uproar: to impose a price freeze on energy companies for 20 months from the 2015 general election. This was a useful kickstarter for the debate but doesn’t really tackle any fundamental problems. While the policy is understandably popular, to have any meaningful impact it would

It is no surprise that energy bosses declared unanimous support for a move to general taxation funding at the select committee hearing. They expect it to increase demand for their product Photo: Getty/Alamy

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