OMG CSR EMA RIP

October 22, 2010 by · 16 Comments
Filed under: Credit crunch, Politics 

Taking a car load of teenage boys to play football in Surrey last night, I found the Comprehensive Spending Review has certainly had an impact. The boys were incensed by the abolition of Educational Maintenance Allowances (the weekly allowance of between £10 and £30 paid to 16-18 year olds in full time education). They predicted dire consequences including fewer kids from poorer families staying on in education, more students failing to attend lectures (EMA payments get withdrawn if students miss classes) and a rise in the crime rate.

Although understandable, were their predictions so over the top? There surely will be consequences. While most people go to school reasonably close to where they live, poorer teenagers are more likely to go to FE colleges post 16 and these are often several miles from home. Without EMAs these travel costs may be prohibitive. A couple of the boys to whom I gave a lift last night have cleaning jobs early in the morning but, again after travel costs, these jobs won’t compensate for the loss of £30 a week.  

I am not surprised that EMAs were targeted by the Coalition. I don’t suppose many cabinet ministers know youngsters who receive the allowance, which must disproportionately flow into Labour constituencies. But there is a more substantial reason for Treasury hostility, one which led to tough questions being asked about EMA cost effectiveness even in my time in Government.

This problem is the deadweight. EMAs were introduced as a way of persuading poorer kids to stay in education. But they are a blunt tool given estimates which suggest about four out of five people who get the allowance would probably have stayed on in education anyway. If the country is facing austerity then a form of spending in which only 20 pence in the pound is having the desired effect is surely an obvious target?  It may be tough on my son’s mates but life is tough and the public finances must be brought under control.          

To some this is an open and shut case. But here are three possible reasons to think twice:

1. All known methods of increasing post compulsory participation among disadvantaged groups are expensive and the EMA is actually comparative quite cost effective.

2. The conditional element of EMAs (as I said you don’t get the allowance if you don’t do the course) may be the reason why there have been impressive improvements in educational attainment among the EMA group.

3. Even in a time of austerity isn’t there a case for saying that poor young people who stay in education should have enough money to be able to pay the basic costs of food, clothing and travel?  

The Coalition says it will replace EMA with a more targeted form of support but this lacks credibility. First because the amount of money the Government says it intends to save on EMAs (£0.5 billion) is near enough its total cost and second, because the problem with EMAs is not their eligibility (they are already means tested) but the deadweight. Targeting would mean identifying which young people would not stay on without the subsidy, but without introducing lie detectors to year eleven classrooms it is very difficult to see how this could be done. 

As we learnt from Gordon Brown’s 10 pence tax debacle, it isn’t until a service or payment is actually taken away that people start to protest. While I predict a backlash against the changes in child benefit eligibility, I don’t expect to see much of a fight about EMAs. Working class teenagers lack the resources, skills and allies to make a row. But if you asked me to balance the savings made by a CSR cut with the likelihood of malign social impact, I’m afraid I’m at one with my car load of dismayed footballers.

PS Yesterday I mused briefly about the different approaches of the Prime Minister and the Chancellor. The excellent Peter Oborne – who knows ten times as much about these things as me – writes about this today.

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The Big Society and local austerity

October 21, 2010 by · 9 Comments
Filed under: Credit crunch 

There was one mention of the Big Society in George Osborne’s CSR statement. It is difficult to avoid the impression that this mention was tokenistic, especially given the widespread view that the Chancellor is among those in the Cabinet least enamoured with the Prime Minister’s big idea. (There are, it seems to me, some distinct echoes of Blair and Brown’s first term in the balance of power and influence between Number Ten and HMT on domestic policy but this blog is not the place to speculate on such matters.)

It is hard to argue that the Big Society ran through the statement and plan like the words through a stick of rock. True, there was, as had been expected, a strong localist theme. The message to councils is they have a lot less money but some more freedom over how to spend it. But, as New Philanthropy Capital (one of the most intelligent and balanced voices on third sector matters) argued yesterday by ring fencing schools, NHS and some adult care funding, it will probably be the non statutory services – ones which are often most engaged in community development – which will be the least likely to survive year on year cuts.

There is a tendency to see locally delivered public services as falling on a continuum with core statutory services (schools, health, police) at one end and community focussed and preventive services at the other. The lazy thing is to protect the former at the expense of the latter. But this would be a mistake. Not only are the best community based services very effective in meeting needs and heading off future problems, they are much less expensive. Relatively small shifts in core provision could liberate enough money to protect at least some community services. But will this possibility be explored?

Here’s an example. Imagine a social housing estate with a large primary school which also provides a base for some community based provision – say engaging parents, working with troubled families or supporting at risk young people. The default option is that the school’s core business of teaching survives without any cuts while everything else is scrapped. But if all the spending was looked at together, and a proper cost benefit assessment made, a very different policy might emerge.

The school might decide not to replace a couple of members of staff who were retiring or moving but to maintain class sizes by reducing classroom teaching to nine instead of ten sessions a week. It might then ask community workers to find and help train a group of volunteers (grandparents or unemployed youngsters, for example) who would be willing to sit with the schoolchildren on Friday afternoon while they did their homework or other extra curricular activities. Thus the school and community work more collaboratively, local people are valued and develop new skills, and important services which help to build civic capacity and prevent future problems get maintained.

There may be many flaws with this suggestion, but the problem is that in most places we simply won’t see discussion which place core and community based spending together to explore the scope for synergy and innovation. This is what I would call a Big Society approach to local austerity. Who in Government is going to encourage this kind of thinking?

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The CSR is a big test for the Big Society

October 19, 2010 by · 6 Comments
Filed under: Credit crunch, Politics, Public policy, The RSA 

Today many people – public service workers, users and welfare beneficiaries – will start to learn their fate. Soon after, I suspect, we will find out whether the deficit plan and the fear it is bound to instil in so many people will knock a vulnerable economy back into stagnation.

Fewer people will care, but it will also be a big day for the Big Society. It was widely noted that George Osborne’s June budget statement and supporting documents did not mention David Cameron’s big idea. It is important to its credibility that there is some reference to the idea tomorrow.

On the one hand, there needs to be evidence that the concept has helped shape the decisions being made. I understand there will be a strong localist theme in the statement and plan. The basic deal is that local authorities get less money but more freedom over how they spend it. This is the right strategy and it is credible to link it to a Big Society approach.

On the other hand, advocates of the Big Society need to emphasise its relevance in the context of austerity. The point here is not, as it is often characterised. that communities will be expected to provide voluntarily that which was previously funded (although there will no doubt be some of that). Even if Labour had won the last election and cut less deeply, less quickly there would still have been a gap between social aspirations and what the state could guarantee. Big Society champions have to show how their perspective can help close this gap.

One way of thinking of this is through the liberation of three types of hidden or dormant assets:

At the level of the individual we know that people accept that they should engage more and give more back to society. While three quarters of respondents regularly tell pollsters that local people should have more influence over local decision-making, fewer than a quarter say they are prepared to participate in community activity themselves. The Big Society is about releasing this asset by making it easier, more enjoyable and more powerful for people to engage.

At the level of the community, we know that even deprived neighbourhoods have many human assets. For example, there are often strong social networks but these are hidden from policy makers and service providers, different networks don’t always join up and many people who could join in are isolated (these are all findings from the RSA Connected Communities project in New Cross). The Big Society is about a deeper understanding of community assets and how to foster and mobilise them.     

At the level of organisations a huge amount of benign social potential is wasted. The reasons are many ranging from unclear mission, lack of ambition and an overload of external demands and targets to a failure to engage and innovate or the deadening impact of organisational culture. The Big Society approach challenges organisations in the public, private and voluntary sector to maximise the social multiplier effect of their actions (this is what the RSA 2020 Public Service Commission meant by ‘social productivity’).

In the face of a lot of bad news tomorrow, people who think (for reasons good and bad) the Big Society is vacuous or a scam will have an easy script from which to read. The rest of us, with a more positive inclination, need to sharpen our argument and deepen our evidence that whatever the immediate context our country cannot flourish in the long term unless we get better at mobilising social assets.

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Why the Coalition shouldn’t oversell the CSR

October 14, 2010 by · 4 Comments
Filed under: Credit crunch, The RSA 

Thankfully, I wasn’t in Number Ten when the decision to invade Iraq was made. Whatever anyone thinks of the war (and we will have the report of the Chilcot Inquiry in the New Year), there is not much doubt that the process of decision making and communication leading up to the decision were deeply flawed. In particular, informed opinion and advice against the invasion was too easily dismissed, the case for the war overstated and the responsibility to develop a contingency plan for things going wrong shirked. As I have argued in the past, while these failings may be merely regrettable in the context of conventional domestic policy decisions, they are much, much more serious when facing the momentous decision to go to war.

What made me think about this again was the controversy over next week’s comprehensive spending review. I am not for a moment arguing that the detailed and nuanced decisions made in the CSR are comparable to the yes or no of going to war. Nor, even in the worst case scenario, does anyone think another economic downturn in the UK would generate the level of human suffering that has occurred since the Iraq invasion.

However, the decision to take a hard line on deficit reduction is a very big call. As far as I can tell, it is opposed by a majority of economists and if it is wrong it could significantly worsen the state of the economy and damage the livelihood of millions of people in the UK. More than that, if the economy does slump, it will be counter-productive: the lost revenues as a result of slowdown would probably be greater than the difference between the Coalition’s fast reduction approach and the last Government’s more gradual (although still very painful) plan. We could end up with deeper cuts and a bigger deficit.

Whatever my past tribal loyalties, I hope the decision turns out to be right. David Cameron, George Osborne and Nick Clegg all speak powerfully about the need to lower the deficit. As the Prime Minister said last week in his conference speech, Labour’s deficit reduction plan would mean the UK continuing to have a rising stock of debt (and rising interest payments) far into the future. That we are this year spending more on debt repayment than on the NHS is hard to stomach. But the fact remains that many serious, politically-neutral experts (for example Anatole Kaletsky in the Times this morning) say the scale of spending reduction planned could be a huge mistake.        

The understandable temptation for the Coalition facing so much opposition to its plan is both to make its case as forcefully and unconditionally as possible and to create a culture in and around Government that dares not either question the plan or explore contingencies if it doesn’t work. But this would be bad Government and bad politics. Instead, Coalition leaders should be allowing dissenting voices to be heard, showing that they know the risks they are taking and have a credible and responsible plan for changing course if things go wrong (another massive failure of the Iraq process). Chris Huhne has adopted something of this tone but he seems to be alone.

In the last few days we have seen a great deal of evidence (on house prices, on retail sales and on manufacturing output) of economic slowdown. This may not be sufficient to change the policy but must surely alter the balance of the debate. If the CSR does go wrong and there is an inquest, we will want to know that the Chancellor and his team were looking at the evidence right up to the last minute not closing their minds to uncomfortable facts.

As I say, the Prime Minister and his colleagues make a powerful economic and political case for radical deficit reduction. But even last week George Osborne was guilty of some creativity with his facts (for example, overstating the proportion of UK debt which is held abroad). These rhetorical flourishes will not look good if the policy fails and people suffer.

So, in the interest of informed and balanced public discourse (something the RSA always seeks to promote) and in the political interests of ministers making brave but risky decisions I hope the next few days will see a change of tone from ministers. Instead of trying to convince us that radical deficit reduction is right come what may we need to hear the Coalition acknowledging that the argument is finely balanced, the risks real and that there must be a plan B if a double dip looms.

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