How Labour and the Conservatives intend to tackle the funding of public services after the next election has become a lot clearer, writes Mark Conrad The public spending battle lines are drawn and now local residents, and councils, can see clear differences in how life under a Labour or Conservative government in Westminster will look beyond the next general election. Last week, the Government published a strategy document, the Cabinet Office's Working together report, outlining how it intends to deliver and fund public services beyond 2010. It followed a speech in Birmingham by shadow chancellor George Osborne, which revealed the Conservatives would ‘come off Labour's unrealistic spending plans' and ‘overhaul the way government spending is controlled'. Mr Osborne stopped short of promising spending cuts – although he did promise to cut corporation tax – but the sentiment was clear: there is daylight between what a Labour administration would spend in future and what Conservatives would plan. Speaking to The MJ, Cabinet Office minister Liam Byrne said the events of last week had ‘set a clear dividing line between ourselves and the Conservatives.' Referring to a recent statement by shadow education secretary Michael Gove, Mr Byrne added: ‘We're angry about Conservative plans to cut back on public services – for example the plan to let failing schools "wither on the vine".' In contrast, the Cabinet Office report was a confirmation of government policy commitments – including substantial investment in personalised local health, education and welfare services – combined with the odd headline-grabbing new aim, such as plans to halve teacher training times. Mr Byrne said Labour would simultaneously ‘accelerate public service investment' and reforms. National media, and the Conservative opposition, berated Labour for the paucity of new proposals within Working together, but it reveals ambitions beyond mere policy programmes. As Prime Minister Gordon Brown states in the foreword, Whitehall is also ‘reflecting anew' on the role of the state, and the citizen, in the provision of public services. Alongside Labour's plan to devolve and personalise education, health and welfare services are new ambitions to utilise online technologies so citizens can scrutinise the performance of police forces or NHS trusts. ‘Renewed and reformed public services are the key to strong communities and a more socially mobile society. We will put people first by placing power in the hands of those who use our public services,' Mr Brown claims. ‘We are ushering in a new world of accountability in which parents, patients and local communities shape the services they receive, ensuring all our public services respond not simply to the hand of government, but to the voice of local people.' Good news for localists, it seems. But implicit in Mr Brown's statement is also the idea that central government could also withdraw from certain activities. Even as Britain emerges from this devastating recession, a short-term hike in public sector debt obligations will combine with long-term, demographic challenges to place unprecedented demands on tax revenues. This, politicians from all sides privately admit, may require a re-think over the scope and depth of services that can be adequately funded through national taxes. Mr Byrne has said this issue ‘is something we'll have more to say on in the Budget' next month. But a senior Whitehall source suggested: ‘This could create opportunities for local authorities. The devolution agenda in health, education and welfare is already rolling steadily and it is possible we may see more powers and responsibilities find their way into localities.' A report by consultant PWC last week highlighted the extent to which the recession is redefining the public spending landscape, applying pressure on central government. PWC estimate that Britain faces a £43bn ‘fiscal gap' by 2013. With the potential for tax rises limited, auditors believe up to £20bn could be found through another huge efficiency drive beyond the Treasury's current target to save £35bn by 2011/12. No doubt future efficiency plans will draw heavily on local government's expertise at identifying and delivering savings. Certainly, Mr Byrne accepts ongoing ‘efficiencies' will be required to fund future investment – and he warns town halls and local authorities will be required to innovative to find ways of delivering Labour's agenda. He has asked Sir Michael Bichard to review Whitehall's Departmental Capability Review programme to improve delivery and management chains within Westminster. Sir Michael is already assessing how local authorities can use frontline staff expertise and ‘innovate' to manage and deliver these services on the ground. Mr Byrne claims the two reviews will overlap, resulting in improved opportunities to co-ordinate central government ambitions for public services with the cross-cutting local delivery systems demanded by local area agreement (LAA) and multi-area agreement (MAA) regimes. ‘I've always been a passionate believer in local leaders. If we're going to free up frontline staff to deliver reformed services, that empowers local government to do things differently,' Mr Byrne said. ‘It will require local leaders to use their imagination and to be flexible. We're giving them the freedom to translate their local ambitions into realities.' Communities secretary Hazel Blears points out that this devolution of powers and responsibilities does not stop at town halls. ‘We want to make it easier for people to be able to shape local services and are introducing practical ways to put communities in control. ‘This will mean people and local communities will have a real say, can find out first hand what is being done to improve their local services, and push any issue they think is of importance up the priority list.' There are, however, some hard questions to be asked about how the government intends to fund this extensive reform regime while tackling record borrowing. The Financial Times last week estimated public spending might need to be cut by 1.4% annually to plug the fiscal gap. On the day PWC published its report, a survey of public sector managers undertaken by the National Endowment for Science, Technology and the Arts also revealed 55% of managers believe they will be unable to deliver acceptable service levels within five years. Many cite funding pressures as the stumbling block. Which brings us neatly to Mr Osborne's stance. Senior Conservatives are hesitant to talk about direct ‘cuts', but their language increasingly confirms spending restraint. The shadow chancellor used his speech in Birmingham on 6 March to re-state the party's commitment to slashing corporation tax. He claims the resulting revenue shortfall would be plugged by a new system of tax breaks on company debt, but critics warn of further pressure on public budgets. Mr Osborne also calculates Labour's reform programme would require a 3% hike in public spending – and hinted he would take a vastly different approach to balance the UK's books. ‘We have got to bring the public finances under control. We will come off Labour's unrealistic spending plans. We will bring about major reforms to the culture of Whitehall, putting the emphasis on value for money,' he said. But no major party could enter into an election ‘year' (the financial year 2009/10) without promising reforms – and sure enough the Conservatives are considering an overhaul of services that could be implemented within the tight fiscal environment. The key to success, they claim, is improved public sector productivity. As with Labour, the Conservatives are drawing on local government for inspiration. ‘As the chief executive of the Audit Commission [Michael O'Higgins] has warned so starkly, unless we press ahead with reform and get the increased productivity that brings, then the quality of services will suffer,' Mr Osborne told his conference. Privately, Conservative central office admits ‘great interest' in Sir Michael Bichard's study on empowering local frontline staff to improve services at low cost. A source told The MJ: ‘We're doing our own work on empowering community leaders and staff to deliver better services. Our ‘localised' welfare reform programme, overseen by David Freud, will be a big example. ‘But we'll be keen to see how Sir Michael frames his review. There is little doubt that frontline staff are vital to the reform agenda beyond 2010. Greater productivity at lower cost to taxpayers will be our imperative.' Mr Byrne's promise of sustained investment in local services or Mr Osborne's commitment to dump Labour's spending plans. In all likelihood, there is still a year to go before the general election. But the policy mist that had descended on the battleground is beginning to clear.
