Social Market Foundation | Conference newsletter 2011 | Page 1
Newsletter Party conference special In this edition Welcome
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Director’s note
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This special edition contains details of our extensive series of fringe events at the Liberal Democrat, Labour and Conservative party conferences.
Liberal Democrat Conference 3
The three main political parties meet at their conferences amid significant political and
Labour Conference
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Conservative Conference
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economic challenges. SMF Director Ian Mulheirn sets the scene for this year’s conference season on page 2 with an overview of what policy topics and tensions will dominate each party’s conference.
7 Planning: Developed until proven guilty? Nigel Keohane
Once again the Social Market Foundation will be making an important contribution to
Investing in Plan C: Ian Mulheirn
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the debate at the three conferences. Our 34 fringe events will welcome ministers and senior MPs, senior journalists, and leading industry figures to discuss topics ranging from
Latest publication and upcoming events
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crime and welfare to higher education and childcare. We are particularly excited to be bringing our successful keynote event with Danny Alexander and Oliver Letwin back for a second year running at both the Liberal Democrat and Conservative party conferences. Full listings, of each of our events are contained on pages 3,4,5 and 6.
Follow the SMF online http://smf2011fringe. wordpress.com Follow our live conference blog for news, views and more @SMFthinktank #smf2011fringe Follow us on Twitter and use our #smf2011fringe hashtag to join in the conversation www.smf.co.uk Visit our website for fringe listings and news releases
This year the SMF will be enhancing our coverage of conference debates and discussions both through live tweeting and live blogging. Our new conference blog smf2011fringe.wordpress.com is now live and will be updated with news and views from our research and communications staff throughout the conferences. We will post updates from a range of our own fringe events, as well as instant response and reaction to the conference policy debate as it happens. This will be complemented by our Twitter feed. Join in the conversation by following @SMFthinktank and using our #SMF2011fringe hashtag. Also in this newsletter: •
Deputy Director Nigel Keohane outlines why the Government should get off the fence on the planning debate on page 7
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Director Ian Mulheirn suggests a radical new idea for funding public services and infrastructure on page 9
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The latest SMF publication Will the Work Programme Work? is summarised on page 10
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Details of our next Chalk + Talk event is on page 10
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Social Market Foundation | Conference newsletter 2011 | Page 2
Director’s Note With conference season upon us, the three parties will be gathering amid some of the most daunting challenges facing policymakers for decades. Deepening sovereign debt crises in the Eurozone and bleak growth prospects at home mean that the Coalition Government’s approach to the economy is under scrutiny like never before. For its part, Labour is under pressure to demonstrate that it has a credible and convincing alternative approach to the big problems and risks that the country faces. But while the economy, and how the Government manages it, will determine the legacy of Cameron and Clegg’s marriage of convenience, the party conference season will be dominated by relationship concerns of another kind: the quarrels and tensions within each of the parties as they grapple with the realities of compromise, concession and coalition politics.
Ian Mulheirn Director, SMF
“Every party is its own coalition, and this conference season will test relationships within each of them. But it won’t be in the carefully choreographed conference hall that you’ll see the debate, but on the fringe.”
Take the Liberal Democrats, gathering in a week’s time in Birmingham. Less than two years on from their ill-fated pledge to oppose any rise in tuition fees, the party’s leadership are working hard to keep faith with their ‘other half’ - an activist base that tends to see the world through less economically liberal eyes. Look out for devolution frictions between the party elite, who sympathise with the idea of public services being reformed through market devolution, with power passed to citizens as consumers; and the party faithful who seek democratic devolution with power handed to local authorities, long a Lib Dem power-base. All of that has the makings of a gripping soap opera in Birmingham. Turning to the Labour party, meeting at the end of September in Liverpool, one might expect theirs to be more of a harmonious love-in, free as they are from the pressures of Government and the stress of coalition. Many in the party were buoyed by the headway made by their new leader in responses to the phone hacking scandal and August riots. But the questions at conference will be about Team Miliband’s policy offering. With early findings from the party's policy review set to emerge in Liverpool, can the leadership satisfy the public and its activists with policy substance, without giving the governing parties something to take aim at so long before a 2015 election? Finally, the Conservatives meet next month in Manchester. Money troubles can test even the most solid of relationships, and the UK’s poor economic growth is highlighting an age-old tension for the party: how to boost economic growth while preserving the countryside of the Conservative heartlands. Many in the party are fractious, but the leadership knows that economic growth is the priority. Now looking divorce with its Scottish counterpart firmly in the eye, how will the party’s leadership placate its grass-roots over proposed planning reforms, Child Benefit cuts and, of course, the totemic marriage tax break? Every party is its own coalition, and this conference season will test relationships within each of them. But it won’t be in the carefully choreographed conference hall that you’ll see the debate, but on the fringe. Our 34 events – on topics from banking reform to childcare – will include an impressive array of speakers including ministers and shadow ministers; top journalists and commentators; and leading figures from the worlds of business, finance and the charity sector. Take a look at our listings on the next four pages or online, and come and join us for some lively and thought-provoking debate.
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Social Market Foundation | Conference newsletter 2011 | Page 3
Liberal Democrat Party Conference: 18-21 September 2011 SUNDAY 18 SEPTEMBER
SUNDAY 18 SEPTEMBER
MONDAY 19 SEPTEMBER
MONDAY 19 SEPTEMBER
18.15-19.30
20.00-21.15
13.00-14.00
18.15-19.30
Keeping the home fires burning: who’s to blame for spiralling energy bills – companies, consumers or government? Soprano, Hyatt Regency
Pensions auto-enrolment: nudging to higher or lower savings? Fortissimo, Hyatt Regency
Success by degrees? Social mobility and higher education Chamberlain Suite, Council House
Routes to success: improving skills to encourage social mobility Executive Room 8, ICC
SPEAKERS: Rt Hon Chris Huhne MP, Secretary of State for Energy and Climate Change (tbc); Richard Lloyd, Which?; Christine McGourty, Energy UK; Matthew Sinclair, The TaxPayers’ Alliance
SPEAKERS: Steve Webb MP, Pensions Minister; David Nish, Standard Life; Dr Ros Altman, Saga; Dr Adam Marshall, British Chambers of Commerce
SPEAKERS: Baroness Sharp; Professor Julia King, Aston University; Professor Nick Barr, London School of Economics; Phil Collins, The Times CHAIR: Ian Mulheirn SMF
CHAIR: Ian Mulheirn, SMF
CHAIR: John Springford, SMF
SPEAKERS: Simon Hughes MP, Access to University Tsar (tbc); Heather McGregor, Taylor Bennett Foundation; Adam Hopley, a recent graduate from the Career Academies programme; Paul Johnson, Institute for Fiscal Studies; Tom Clark, The Guardian CHAIR: Mary Ann Sieghart, SMF
MONDAY 19 SEPTEMBER
TUESDAY 20 SEPTEMBER
TUESDAY 20 SEPTEMBER
TUESDAY 20 SEPTEMBER
20.00-21.15
07.45-09.00
13.00-14.00
18.15-19.30
No NEET solution?
Whose crime is it anyway?
Room 105, Jurys Inn
Room 104, Jurys Inn
Smart on crime, tough on the causes of crime
Growing Pains? Where next for jobs and the economy?
SPEAKERS: Rt Hon Sir Alan Beith, Chair of the Justice Select Committee; Tom Brake MP, CoChair Parliamentary Party Committee on Home Affairs, Justice and Equalities; Paul McDowell, Nacro
Chamberlain Suite, Council House
Executive Room 8, ICC
SPEAKERS: Stephen Lloyd MP, Work and Pensions Select Committee; Graham Hoyle OBE, Association of Employment and Learning Providers ; Katja Hall, CBI; Rafael Behr, New Statesman
SPEAKERS: Rt Hon Danny Alexander MP, Chief Secretary to the Treasury; Rt Hon Oliver Letwin MP, Cabinet Minister; Brendan Barber, TUC; Ian Mulheirn, SMF
CHAIR: John Springford, SMF
SPEAKERS: Lord Thomas of Gresford, (tbc); A representative from the Community Justice Partnership; Ashley Ames, Ipsos MORI; Brian Paddick, Liberal Democrat Mayoral Candidate (tbc)
CHAIR: Ian Mulheirn, SMF CHAIR: Ian Mulheirn, SMF
CHAIR: Olly Grender, Liberal Democrat Commentator
TUESDAY 20 SEPTEMBER 18.15-19.30
The Green Growth challenge: opportunities for publicprivate partnerships on development finance Dolce, Hyatt Regency SPEAKERS: Baroness Kramer; Yvo De Boer, KPMG; Liz Gallagher, E3g; Fiona Harvey, The Guardian CHAIR: John Springford, SMF
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Social Market Foundation | Conference newsletter 2011 | Page 4
Labour Party Conference: 25-27 September 2011 SUNDAY 25 SEPTEMBER
MONDAY 26 SEPTEMBER
MONDAY 26 SEPTEMBER
MONDAY 26 SEPTEMBER
19.30-20.30
13.00-14.00
13.00-14.00
17.30-18.30
Early intervention: can markets end child poverty?
Creating better financial outcomes: how do we empower consumers?
The Work Programme underway
Suite 7, Jurys Inn
SPEAKERS: Stephen Timms MP, Shadow Employment Minister; Graham Hoyle OBE, Association of Employment and Learning Providers; Dave Simmonds OBE, Inclusion; Seb Elsworth, ACEVO
The Green Growth challenge: opportunities for public-private partnerships on development finance
Suite 7, Jurys Inn SPEAKERS: Sharon Hodgson MP, Shadow Education Minister for Children (tbc); Graham Allen MP, Early Intervention Tsar; Dame Claire Tickell, Action for Children; Polly Toynbee, The Guardian CHAIR: Ryan Shorthouse, SMF
SPEAKERS: Chris Leslie MP, Shadow Financial Secretary; Edward Chandler, MasterCard; Brian Pomeroy CBE, Former Chairman of Treasury’ s Financial Inclusion Taskforce; Matthew Vincent, Financial Times
Suite 9, Jurys Inn
CHAIR: Ian Mulheirn, SMF
Suite 6, Jurys Inn SPEAKERS: Meg Hillier MP, Shadow Secretary of State for Energy and Climate Change; Yvo De Boer, KPMG; Rhian Kelly, CBI; Craig Bennett, Friends of the Earth CHAIR: John Springford, SMF
CHAIR: John Springford, SMF
MONDAY 26 SEPTEMBER
MONDAY 26 SEPTEMBER
TUESDAY 27 SEPTEMBER
TUESDAY 27 SEPTEMBER
18.00-19.00
19.00-20.00
08.00-09.00
13.00-14.00
Widening participation in Higher Education
Investment, growth and PFI
Whose crime is it anyway?
Suite 6, Jurys Inn
Suite 7, Jurys Inn
SPEAKERS: Angela Eagle MP, Shadow Chief Secretary to the Treasury (tbc); Gillian Fawcett, ACCA; Professor George Irvin, SOAS; Ian Mulheirn, SMF
SPEAKERS: Jeremy Corbyn MP, Justice Select Committee; Yasmin Qureshi MP, Justice Select Committee; Karl Turner MP, Justice Select Committee (tbc); Paul McDowell, Nacro;
Consumers and the financial services industry: who needs to be tamed, shamed or blamed?
CHAIR: Nick Timmins, Financial Times
CHAIR: Ian Mulheirn, SMF
Suite 7, Jurys Inn SPEAKERS: Gareth Thomas MP, Shadow Universities and Skills Minister; Nicola Dandridge, Universities UK; Liam Burns, NUS; Jeevan Vasagar, The Guardian CHAIR: Ryan Shorthouse, SMF
Suite 6, Jurys Inn SPEAKERS: Chuka Umunna MP, Shadow Minister for Small Business and Enterprise (tbc); Doug Taylor, Which?; Anthony Thompson, MetroBank; Maggie Craig, ABI CHAIR: John Springford, SMF
TUESDAY 27 SEPTEMBER 13.00-14.00
Smart on crime, tough on the causes of crime Suite 7, Jurys Inn SPEAKERS: Rt Hon Sadiq Khan MP, Shadow Justice Secretary ; a representative from the Community Justice Partnership; Clive Martin, Clinks; Simon Israel, Home Affairs Correspondent Channel 4 News CHAIR: Ian Mulheirn, SMF
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Social Market Foundation | Conference newsletter 2011 | Page 5
Conservative Party Conference: 2-5 October 2011 SUNDAY 2 OCTOBER
MONDAY 3 OCTOBER
MONDAY 3 OCTOBER
MONDAY 3 OCTOBER
19.30-21.00
08.00-09.00
12.30-13.30
12.45-13.45
The future of public service reform: lessons from Welfare to Work Bridgewater Suite, Jurys Inn
Breaking the crime cycle Royce Suite, Midland Hotel
Routes to success: improving skills to encourage social mobility Mezzanine, Manchester Central
Smart on crime, tough on the causes of crime Committee Room 3 Manchester Town Hall
SPEAKERS: John Hayes MP, Skills Minister; Faye Wenman, Taylor Bennett Foundation; Adam Hopley, a recent graduate from the Career Academies programme; Andy Westwood, Guild HE; Louisa Peacock, The Daily Telegraph
SPEAKERS: Nick Herbert MP, Minister for Policing and Criminal Justice; a representative from the Community Justice Partnership; Ben Page, Ipsos MORI; Simon Israel, Channel 4 News
SPEAKERS: Lord Freud, Minister for Welfare Reform; Andy Bowie, Avanta; Ralph Michell, ACEVO; James Forsyth, The Spectator (tbc)
SPEAKERS: Crispin Blunt MP, Prisons Minister; Richard Morris, G4S; Juliet Lyon CBE, Prison Reform Trust; Alan Travis, The Guardian CHAIR: Ian Mulheirn, SMF
CHAIR: Ian Mulheirn, SMF
CHAIR: John Springford, SMF
CHAIR: Ian Mulheirn, SMF
MONDAY 3 OCTOBER
MONDAY 3 OCTOBER
MONDAY 3 OCTOBER
TUESDAY 4 OCTOBER
17.45-18.45
19.15-20.15
19.30-21.00
08.00-09.00
A market in higher education: is it achievable? Committee Room 2, Manchester Town Hall
Keeping the home fires burning: who’s to blame for spiralling energy bills – companies, consumers or government? Committee Room 2, Manchester Town Hall
Early intervention: can markets end child poverty? Central 4, Manchester Central
Whose crime is it anyway? Chester Suite, Midland Hotel
SPEAKERS: Rt Hon David Willetts MP, Minister for Universities and Science; Professor Eric Thomas, Universities UK; Professor Neil Shephard, University of Oxford; Christopher Cook, Financial Times CHAIR: Mary Ann Sieghart, SMF
SPEAKERS: Charles Hendry MP (tbc); Richard Lloyd, Which?; Christine McGourty, Energy UK; Matthew Sinclair, The TaxPayers’ Alliance
SPEAKERS: Maria Miller MP, Minister for Disabled People; Graham Allen MP, Early Intervention Tsar
SPEAKERS: Robert Buckland MP, Justice Select Committee; Ben Gummer MP, Justice Select Committee; Elizabeth Truss MP, Justice Select Committee; Paul McDowell, Nacro
CHAIR: Mary Ann Sieghart, SMF
CHAIR: Ian Mulheirn SMF
CHAIR: John Springford, SMF
TUESDAY 4 OCTOBER
TUESDAY 4 OCTOBER
TUESDAY 4 OCTOBER
TUESDAY 4 OCTOBER
08.00-09.00
12.30-13.30
13.00-14.00
17.30-18.00
Enough homes in all the right places? Exchange 8, Manchester Central
A nudge in the right direction – delivering better financial outcomes for consumers Exchange 8, Manchester Central
National well-being: a strong fit for the Conservatives? Committee Room 1, Manchester Town Hall
The Green Growth challenge: opportunities for public-private partnerships on development finance Exchange 8, Manchester Central
SPEAKERS: Mark Hoban MP, Financial Secretary to the Treasury; James Harborne, MasterCard; Brian Pomeroy CBE, Former Chairman of Treasury’ s Financial Inclusion Taskforce; Kamal Ahmed, Sunday Telegraph
SPEAKERS: David Burrowes MP, PPS to the Cabinet Office; Bob Reitemeier, Children’s Society; Charles Seaford, New Economics Foundation; Randeep Ramesh, The Guardian
SPEAKERS: Bob Neill MP, Local Government Minister; Chris Tinker, Crest Nicholson; Councillor Rod Bluh, Swindon Borough Council; Councillor Michael Cornes, Trafford Council (tbc) CHAIR: Nigel Keohane , SMF
CHAIR: Ryan Shorthouse, SMF CHAIR: John Springford, SMF
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SPEAKERS: Rt Hon Caroline Spelman MP, Secretary of State for Environment (tbc); Vincent Neate, KPMG Europe LLP; Ben Caldecott, Climate Change Capital; Fiona Harvey, The Guardian (tbc) CHAIR: John Springford SMF
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continued overleaf
Social Market Foundation | Conference newsletter 2011 | Page 6
Conservative Party Conference: 2-5 October 2011(continued) TUESDAY 4 OCTOBER
TUESDAY 4 OCTOBER
TUESDAY 4 OCTOBER
WEDNESDAY 5 OCTOBER
17.45-18.45
19.30-21.00
19.30-20.30
08.00-09.00
Future childcare funding: how will the poorest families benefit?
Growing Pains? Where next for jobs and the economy?
Skills that work: a better market in Further Education
Making the grade: What is a successful university?
Committee Room 2, Manchester Town Hall
Central 8, Manchester Central
Committee Room 2, Manchester Town Hall
Fairclough Suite, Midland Hotel
SPEAKERS: Rt Hon Iain Duncan Smith MP, Secretary of State for Work and Pensions (tbc); Alison Garnham, Child Poverty Action Group; Anand Shukla, Daycare Trust; Zoe Williams, The Guardian
SPEAKERS: Rt Hon Oliver Letwin MP, Cabinet Minister; Rt Hon Danny Alexander MP, Chief Secretary to the Treasury; Brendan Barber, TUC ; Ian Mulheirn, SMF CHAIR: Angie Bray MP, Ealing Central and Acton
CHAIR: Ryan Shorthouse, SMF
SPEAKERS: John Hayes MP, Skills Minister; Graham Hoyle OBE, Association of Employment and Learning Providers; Ken Mayhew, SKOPE; Andy Westwood, Guild HE CHAIR: John Springford, SMF
SPEAKERS: Rt Hon David Willetts MP, Minister for Universities and Science; Professor Quintin McKellar, University of Herts; Paul Hannon, National Council for Graduate Entrepreneurship; Phil Baty, Times Higher Education World University Rankings CHAIR: Ian Mulheirn, SMF
Follow the SMF online at all three conferences http://smf2011fringe. wordpress.com Follow our live conference blog for news, views and more @SMFthinktank #smf2011fringe Follow us on twitter and use our #smf2011fringe hashtag to join in the conversation www.smf.co.uk
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Social Market Foundation | Conference newsletter 2011 | Page 7
Developed until proven guilty? In recent weeks, anyone who has escaped the hullabaloo between Ministers and conservation groups must have been living as a hermit. The National Trust, the Campaign for the Protection of Rural England, the Daily Telegraph and others have closed ranks against the Government’s draft National Planning Policy Framework and especially its ‘presumption in favour of sustainable development’. Tempers have frayed. Simon Jenkins, the National Trust’s Chair has referred to it as ‘the most biased document I’ve ever seen’. In response, Greg Clark has spoken of the ‘nihilistic selfishness’ of those opposing development. Another Conservative Minister has pointed darkly to ‘a carefully choreographed smear campaign by left-wingers’. But, since the early days of the Coalition Government, the criticism has come full circle. In March, the Government was condemned by a parliamentary select committee for leaving ‘a
Nigel Keohane Deputy Director, SMF
“Society cannot really have it all three ways: a rising population; sustained quality housing; and total conservation of all green spaces ... One of these has to give”
vacuum at the heart of the English planning system’ through its abolition of regional spatial strategies. This removed the housing targets that local authorities had to meet, arguably blowing a hole in housing supply. The Opposition benches lambasted the Localism Bill as a ‘nimby’s charter’. Concerns were raised that the New Homes Bonus, which will give cash rewards to communities that accept development, may not act as sufficient incentive to encourage housing growth where it is most needed. Damned if they do and damned if they don’t, one might ask: can the Government ever get the balance right? Perhaps not. But taken together all these individually controversial reforms might just make sense. The reason these unhelpful and over-excited arguments return time and time again is that we are not debating the right thing. Instead we are conflating two separate though inter-related dynamics: first, the mismatch between housing demand and supply; and second the decision - making apparatus used to approve development. The Government’s most recent estimates show that around 232,000 additional homes are needed each year to meet housing need. Society cannot really have it all three ways: a rising population; sustained quality housing; and total conservation of all green spaces no matter how aesthetic or otherwise. One of these has to give. In the second place, if the Government’s competitive market and decentralised decision-making is to prove itself successful, it must provide a significant net increase of houses. The Government should bear some of the blame for this confusion. The store put in their localist agenda may have given the false impression that communities can decide what they like irrespective of national, environmental and inter-generational concerns. While central planners may no-longer dictate specific housing numbers for each area, the Coalition policy (quite rightly) continues to exert a strong national influence through planning policy and financial rewards. The feverish nature of the recent debate has exacerbated this problem: the prospect of 3,000 additional acres of development was enough to excite media panic but ignored the fact that
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Social Market Foundation | Conference newsletter 2011 | Page 8
this represents 0.01 percent of land in England and the fact that these homes won’t be built in our national parks. So, how can we start to square this circle? In the long-term, the solution lies in the Government’s aspiration to engender more meaningful collective and political engagement with the tensions set out above. Judging by a recent YouGov poll, the public at large acknowledges these tensions and broadly approves of the Government’s strategy. 1 More urgently, communities need to be encouraged to debate what trade-offs they are ready to make. Few would disagree that using previously developed land should be the first port of call in development. But, SMF’s previous work has indicated that even building at very high (London-style) densities on brownfield land will be insufficient if houses are to appear where they are needed. Therefore, we are left with a series of less appetising compromises: would communities prefer smaller gardens and larger fields of oilseed rape? More playing fields or nicer views from their commuter train? Do we need a green belt or would green wedges be a more sensible option? These are the questions society and communities need to ask themselves. And, the way to make sure these are considered may be for the Government to crank up the financial reward to those areas that accept development. Given the inherent tensions, unless the Government is to be disingenuous and sit on an uncomfortable fence between green-field land and suburban development, it has to come down on one side. With UK household numbers set to increase by over a quarter between 2008 and 2033, the burden of proof should sit with those who advocate development rather than inaction. This article first appeared on the Public Finance blog 1
http://today.yougov.co.uk/sites/today.yougov.co.uk/files/yg-archives-pol-st-results-26-290811.pdf
SMF keynote events at the Liberal Democrat and Conservative Conferences TUESDAY 20 SEPTEMBER
TUESDAY 4 OCTOBER
18.15-19.30
19.30-21.00
Growing Pains? Where next for jobs and the economy?
Growing Pains? Where next for jobs and the economy?
Executive Room 8, ICC
Central 4, Manchester Central
SPEAKERS: Rt Hon Danny Alexander MP, Chief Secretary to the Treasury; Rt Hon Oliver Letwin MP, Cabinet Minister; Brendan Barber, TUC; Ian Mulheirn, SMF CHAIR: Olly Grender, Liberal Democrat Commentator
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SPEAKERS: Rt Hon Oliver Letwin MP, Cabinet Minister; Rt Hon Danny Alexander MP, Chief Secretary to the Treasury; Brendan Barber, TUC ; Ian Mulheirn, SMF CHAIR: Angie Bray MP, Ealing Central and Acton
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Social Market Foundation | Conference newsletter 2011 | Page 9
Investing in Plan C On the eve of party conference season, it’s clear that economic growth and the public service reform agenda will take centre stage. Ensuring that public services deliver value for money in tackling huge challenges like rising unemployment and the re-offending of those 75% of August rioters is tricky in any context, but right now it’s imperative. At the same time, the economic outlook is gloomy, and with the UK’s main export markets looking weak, the government is relying on investment to kick-start the economy as households and government pay down debt. These are huge policy challenges. One area of policy that epitomises this dilemma perfectly is welfare to work. Rightly determined to get more bang for its buck, the Government has set in motion perhaps the most ambitious payment by results (PBR) system ever commissioned, through its flagship Work Programme. But, as our recent report Will the Work Programme Work? found, in the light of a deteriorating labour market and unreachable performance targets, the scheme is facing a very precarious future.
Ian Mulheirn Director, SMF
“UK policy has had things the wrong way for decades: raising solely private finance for many capital projects, while using public money to finance services that have often delivered poor results.”
PBR in welfare-to-work, offender rehabilitation and drug rehabilitation requires careful risk management by commissioners. But, as our report suggests, if this is poorly managed by government, and excessive risk is pushed onto contactors, the taxpayer is likely to end up paying a high price: either they compensate investors for taking on risks the latter can’t control, or they end up bailing-out failing providers. Some have drawn the link between PBR schemes in services, and the Private Finance Initiatives (PFI) that have been central to successive governments’ infrastructure investment strategies. Like PBR, PFI is in part a means for government to get someone else to do the borrowing, to keep it off the books. But here too, questions have been raised about whether it’s effective: recent reports from two House of Commons Select Committees have suggested that the higher cost of private capital outweighs any efficiency benefits of using the private money. Given all this, it’s reasonable to ask whether there is a future for private investment in the public realm. The answer is yes, but it’s the mirror image of the way we’ve used it in the past. The cost of private capital is high whether it’s used in capital projects or the delivery of public services. But the benefits vary according to the uses to which that private finance is put. In textbook terms, markets can deliver two different types of efficiency gains. The first, ‘static’ efficiency, involves providers delivering things more cheaply at a single point in time. This is the kind of efficiency that is a central justification for PFI: get a hospital built, minimise the costs and cut out the budget over-runs. But the scope of such economies is limited, and for the most part the state is just left with an expensive loan. The Treasury Committee is right to be sceptical that saving here could outweigh the costs of private finance at 3-4% above government debt. Public services, by contrast, offer much more potential for a second kind of efficiency: efficiency over time, through innovation in how services are delivered. Welfare to work providers paid by results have to adapt continually, finding better ways to join-up complex services for their clients and understanding the needs of an ever-changing labour market. The ‘dynamic’ efficiencies offered by innovation here promise huge dividends. And potentially ones much larger than the additional costs associated with the use of private capital that’s necessary to set the right incentives. On this reading, UK policy has had things the wrong way for decades: raising solely private finance for many capital projects, while using public money to finance services that have often delivered poor results. That’s why the present government is right to try to pay non-state providers by results, where possible, since the opportunities for innovation in the delivery of complex and tailored services are vast. But the corollary of the argument is that it should be seeking to deploy more public capital to address the UK’s vast infrastructure challenges, and boost the UK’s ailing economy. Plan C, anyone?
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Social Market Foundation | Conference newsletter 2011 | Page 10
Latest publication: Will the Work Programme Work? The Government's flagship back to work scheme, the Work Programme (WP), is the most ambitious payment-by-results scheme ever launched in the UK, aiming to help 2.4 million longterm unemployed people find work over the next seven years. In it, private and not-for-profit providers will be paid for each jobseeker they get back into work. The design of WP drew heavily on the welfare-to-work model proposed by SMF in its 2009 publication Vicious Cycles. Welfare Reform Minister Lord Freud, when in opposition, cited the SMF's work as a key influence on the policy's development. Consequently, the SMF feels strongly that this laudable policy should not be derailed by poor implementation.
• Download Will the Work
Programme Work? • Read our news release
Funding for the new programme is tight and dependent upon achieving very demanding minimum performance expectations set by the Department for Work and Pensions (DWP). In addition, DWP has threatened to terminate the contracts of providers who do not meet these challenging benchmarks. In this paper, the SMF examines the viability of WP by forecasting the likely performance of the providers during the first three years, based on the actual performance achieved under the Flexible New Deal (FND), Labour's welfare to work scheme and the forerunner to WP.
Forthcoming events: Chalk + Talk
3 November - Paul Johnson, Director of the Institute for Fiscal Studies on the challenge of fiscal sustainability 1 December - Professor Henry Overman of LSE on housing policy and regional growth 15 December - Professor Richard Layard of LSE on well-being and happiness Find out more on our Chalk + Talk webpage at www.smf.co.uk/chalkandtalk
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