My speech at the SMF Business Forum, 17th October 2006

The Treasury’s work on the first Comprehensive Spending Review began back in May 1997, immediately after the General Election. Indeed, working out how to organise such a cross-government review, alongside our decision to keep to the spending plans we inherited for the first two years of the government, constituted a major part of our discussions with the Treasury prior to the 1997 election.

And the conclusions of the CSR in 1998 were, I believe, a radical and historic step forward from the short-termist, input-driven system that had gone before:

  • Firm three-year departmental budget allocations meant that Government was able to work to a sensible long-term planning horizon;
  • Separate resource and capital budgets allowed us to protect essential investment from short-term pressures and the provision of end-year flexibility put an end to wasteful end-year spending surges;
  • The creation of clear fiscal rules ensured that public spending decisions were properly informed by decisions about what is affordable; and
  • the introduction of Public Service Agreements meant that, for the first time, Government set out the key outcomes it expected investment and reform to deliver.

Almost ten years on, Treasury Chief Secretary Stephens Timms is now leading our second Comprehensive Sending review. This offers us a huge opportunity to take stock and look back over the past decade, to examine what record levels of investment and radical public service reform have delivered to date and how our public spending reforms have fared so far; and look ahead, to set out the further steps we must take to ensure that Britain is fully equipped to face the challenges and opportunities of the next 10 years.

Let me start by making three points about CSR07:

  • First, this CSR must put us in a position to respond to the profound and long-term challenges that we are facing (from the accelerating pace of innovation, to demographic change, climate change and the continuing threat of terrorism). We are working closely with Cabinet colleagues – including through new working groups – to help really define the nature of these challenges and the key policy areas we must focus on.
  • Second, in the current tight fiscal climate, we are pursuing an even more ambitious value for money agenda – entrenching efficiency improvements, showing willingness to take tough choices and through Sir David Varney’s review, looking at further options for transforming service delivery across Government, so that we continue to improve services within a prudent fiscal framework, locking in the macroeconomic stability established since 1997;
  • And third, to ensure effective delivery and sustained improvement across all government services and in the key outcomes we want for business and the public, we will take further steps to develop the central framework of Public Service Agreements – accelerating our agenda of greater devolution, reduced bureaucracy, robust accountability and citizen engagement.

I want to use this opportunity today to talk a bit more about these plans for the PSA framework.

Evolution of the PSA framework

The needs and requirements of individuals, families, communities and business are rightly at the heart of this government’s approach to public service delivery.

In 1997, we were faced with a public sector lacking in capacity and struggling after years of under-investment. Basic standards in public services were unacceptable – with hundreds of thousands of patients having to wait over 6 months for operations and only 45% students achieving 5 good [A*-C] GCSEs at 16.

So in CSR 1998, the introduction of PSAs across the whole of Government played a vital role in galvanising the system to deliver ambitious improvement, eliminate unacceptable variability and provide unprecedented levels of transparency. Our goal was to provide the public and users of services with more information than ever before to hold services to account, as well as making the case for investment of taxpayers’ money in public services: an enormous step forward.

In 1998 we set over 600 performance targets for departments – our first attempt systematically to articulate the Government’s goals. And, not surprisingly for a first attempt, we did not get it all right. The PSAs certainly worked to focus investment decisions on key government priorities but too much of our work on targets happened after the spending review was complete, without sufficient consultation with front-line public service deliverers.

In SR2000 we recognised the need to reduce this to a more manageable number to identify priorities and to improve clarity – reducing the number of targets from over 600 to 160 and starting the consultation on objectives from the very beginning of the review. We have continued this evolution, so that in SR2004 we set 110 targets across the whole of Government.

In 1997 the system also included too many input and process measures, behind which departments also retained many more input targets which they passed on to local public services. This led to excessive micro-management rather than encouraging ownership and innovation within the delivery chain, and saw Departments burdened by both input and output targets.

The 2000 spending review saw a shift towards outcome-based PSAs that we further embedded in the run up to SR2004, when we abolished the requirement for Departments to produce Service Delivery Agreements (which included over 500 subsidiary, process controls). The vast majority of current PSAs now focus on the outcomes that matter to real people: Is crime going down on my street? Are children growing up in poverty? Can I get staff with the skills I need for my business?

We also learnt the importance of a relentless focus on delivery. Setting a target is not an end in itself. So with the establishment of the Prime Minister’s Delivery Unit in 2001, we put in place a robust delivery architecture to challenge and support departments from the centre which has seen more focused and more rapid delivery in key areas.

And over the years we have also driven improvements in data quality, to ensure that the public can have greater confidence in the results we report – so in 2002 we asked the NAO to provide independent scrutiny and validation of the data systems underpinning all PSAs.

As a result of our continuing reforms there are many examples where clear objectives and targets for change have injected ambition into the system, increased the capabilities of our public services and played a key role in delivering improved outcomes across a wide range of services.

For example, PSAs have undoubtedly driven significant, measurable and continuous improvements in health, crime, education and employment, and PSAs on productivity and macroeconomic stability have underpinned our economic drive.

But as the Chancellor said when he set out the Government’s agenda for prosperity and social reform to the SMF back in 2003, we have also learnt that national targets work best when they are matched by a framework of devolution, accountability and participation — empowering public servants with the freedom and flexibility to tailor services to reflect local needs and preferences and to develop innovative approaches to service delivery and raise standards.

The Devolving Decision Making Review – which we published in Budget 2004 – set out this vision for greater devolution in more detail, so that in SR2004, as well as abolishing Service Delivery Agreements, we:

  • Introduced national PSA ‘standards’ where the Government’s ambitions for improvement in key public services had been achieved and where the focus needed to shift, within a framework of clear minimum standards, to allow freedom for local areas to set a relevant local target or focus instead on other local priority areas;
  • Increased consultation with a wide range of stakeholders to inform the phrasing and measurement of targets, particularly the frontline. For example the child poverty target in SR04 was agreed after consultations with 220 organisations in a series of seminars.
  • Introduced Local Area Agreements to provide a single performance framework for local authorities, giving them space to work with partners on local priorities alongside national ones

The Chancellor also spoke in 2003 of the important role that citizen-focused methods of accountability should increasingly play in driving public service performance as Government moved away from the old input, interventionist, departmentalist controls over front line public service managers. Mayor Giuliani’s pioneering approach to ‘real-time data’ in New York provided a key example – where the publication of local and national performance indicators incentivised local managers to continuously monitor and learn from their performance and led local people to expect more from those services in return.

Next steps: evolution of the PSA framework in CSR07

The second Comprehensive Spending Review must continue to strengthen the PSA framework – building on the lessons we have learnt over the years, whilst ensuring that our approach to delivery and performance management is right for the next decade.

Over the last year we have worked to analyse evidence from experts departments and frontline deliverers (including the work the SMF published on public sector targets last September). The Chief Secretary will shortly initiate the next phase of engagement with Departments.

In contrast to 1997, public services have a stable foundation on which to build – following record levels of investment and considerable growth in frontline skills and capacity. But there are new challenges to adapt and respond to, and citizens – rightly – have ever-higher expectations.

So looking ahead, the PSA framework in CSR07 needs to meet four key challenges:

  • with 90% of current PSAs due to come to an end in the forthcoming spending period, it is right that we need to refresh the new set of PSAs to effectively articulate and drive progress on the priority outcomes for the next decade – responding to the long-term challenges which the country now faces;
  • we can do more to ensure that the PSA system at Whitehall level better supports effective joint-working and co-ordinated efforts across organisational boundaries right through to the frontline, something that is crucial if we are to successfully deliver the outcomes which matter most to families, businesses and citizens;
  • informed by the work of PMDU and building on the agenda of devolution set out in the Devolving Decision making review in 2004 – in CSR07 we must do even more to put in place the conditions needed for successful delivery. This means going further to systematically engage and collaborate with public service professionals – genuine consultation, early in the process, can ensure both that we set the right indicators (which do not distort operational priorities or create perverse incentives) and that we put in place robust delivery plans, which clearly set out how incentives and accountabilities will work in diverse and complex delivery chains;
  • and we need to do more in the CSR to embed greater user satisfaction into the PSA framework – both by giving citizens far more scope and power to influence and engage with services and giving front-line managers, professionals and workers space and incentives to deliver responsive, personalised local services and innovative solutions at the frontline;

To respond to these challenges, and continue the evolution of the framework we first established at the last comprehensive spending review, there are a number of concrete steps we can now consider:

  • First, we should continue an evolution towards a more focused set of ‘corporate’ PSAs at the centre to send a clear message on the highest priority outcomes for the spending period. We can drive more effective co-ordinated action across Whitehall departments by setting PSAs across Government according to the key challenges we face, rather than solely on a department-by-department basis.
  • Second, to strengthen accountability and improve delivery at local, regional and national level we should go further to ensure the frontline influences the way PSA outcomes are defined, measured and delivered, improving and deepening consultation on ‘Delivery Agreements’ for each PSA, which clearly set out the level of ambition, strategy for delivery, and role of each organisation involved, and which we plan to publish.
  • Third, we must incentivise responsive public services by giving more weight to user experience and satisfaction in PSAs and ensuring that central bureaucracy does not crowd out local ability to deliver in a responsive and innovative way by continuing to rationalise the number of indicators that underpin PSAs and attaching national-level targets only where this is the most effective way to drive delivery.

And finally we can do more through the CSR to embed genuine user engagement at the key interface between citizen and frontline, shifting accountability so that service deliverers are more directly answerable to the public they serve. As the Chancellor said in his speech at the ‘21st century public services’ conference in June, we will give citizens the information they need to know how local public services are performing, by ensuring that timely data is published regularly on key indicators and can be easily accessed by all.

Ruth Kelly will soon publish the Local Government White Paper, which touches on many of these important issues in relation to local services. So we have been working very closely with colleagues in DCLG and across government to ensure our approach fits with and complements the proposals she will outline on local performance management.

This direction of travel for the PSA framework in CSR07 is the product of analysis and reflection over the last year – and genuine engagement with experts, departments and those who deliver our priorities at the frontline. I welcome this opportunity to set out our thoughts for PSAs and discuss them with you today.

Posted November 26th, 2015 by admin