John McDonnell
Bus Post 30 5 07
I recently had dinner with Principals from the 13 FE Colleges serving the Thames Valley, and with fellow MPs from both the Labour and Conservative parties.
Funding hovered over the ample dinner like Banquo's ghost. Eventually the inevitable happened. We were back in that futile argument I have lived with all my life in the UK public sector. If you, the politicians, give us more money the world will be perfect. If you don't give us more, there will have to be cuts in what we do.
This was a good humoured and sensible version of a common argument. I do not wish to pick on the FE Colleges, as they are amongst the better run parts of the rambling public sector. The truth is, as Labour are discovering, pushing much larger amounts of cash into the public sector does not suddenly solve all the problems. There is no amount of cash likely to be granted which will take away the need for "tough choices" and improved performance.
In practise, with a Labour or a Conservative government, each sector, department or main activity in the public sector will receive next year the same amount as last plus an allowance for inflation, plus some real growth. Enormous energy goes into arguing over whether the increment will be !%, 2% or 3% real, and hugely different outcomes are predicted depending on which it is. Most of this is poppycock. Anyone running an activity with a guarantee they will not be paid less in real terms than the previous year is in a very comfortable position compared to most businesses. Many politicians foolishly stoke this argument, attributing magic powers to the additional 1% or 2% they claim their side has voted which the other might not have done.
Contrast the position of manufacturing industry. Every year the main customers in the global market are likely to seek price reductions. A UK business may be told lower your prices by 10% or we will start to buy from China or India. After a negotiation they might settle for 3% a year price reductions for 3 years. Overall UK manufacturing has achieved a 5% productivity increase each year. In other words, a UK manufacturer can give his customer a 3% price cut and still earn more profit to buy the better machines and invent the new products so he has a future. They do this by constant striving to make it better cheaper, faster. They apply new technology. They give their staff incentives to perform better. They cut out waste, try new methods, raise their quality. They do not save money by reducing quality or skimping on service, for then they would lose the business.
We need to change the way the public sector is managed so we can start to enjoy decent productivity gains there too. Instead of reaching for the government cheque book as the automatic response to more demand or more difficulty, public sector bodies should also look to increase their private sector incomes, cut their costs, change the way they do things. The internet, broadband communications and the greatly enhanced data processing capacities of cheap modern computers offer huge scope to transform public service delivery. Why do we not use distance learning techniques, video lessons from the best lecturers and teachers, and individual teaching packages on line to improve the quality and cut the cost of some of our teaching service? Why do we not use school facilities more in the evenings and week-ends for other purposes to raise revenue?
The problem is persuading public sector managers to take the risk, to adapt and change, to welcome new technology. In the private sector it is adapt or go under. A manufacturer who does not match his competitor’s ability to apply modern machines to the production process will lose out. A company which does not understand changes of fashion and requirements will soon stumble in the marketplace. So often in the public sector there is either no stimulus to change, or it comes as a clumsy instruction from the centre. If each individual College, school, surgery does not want to implement the change and may not understand the point of it, the results can all so often be poor.
