Public spending – a looming trilemma?
Do we have to choose between social justice and universal public services? This was one of the issues raised at this morning’s 2020 Public Services Trust seminar.
Paul Johnson from IFS opened the seminar by explained the full scale of the fiscal crisis. The top line is that from 2011 the public sector faces a decade of year-on-year substantial real terms cuts. It is inconceivable that cuts like this can be made without a concrete and visible impact on public services.
This prospect framed the response from Lord McNally, whose distinguished past includes his time as a senior advisor to James Callaghan between 1976 and 1979. While recognising the scale of the crisis, he warned against alarmism, citing three sets of decisions:
• Roy Jenkins’ fiscal tightening in 1970 which many believe lost Labour the election of the same year
• Denis Healey’s agreement to IMF demands for cuts in public spending (cuts which some economic historians now argue weren’t necessary). It was this that led to the winter of discontent, Labour’s defeat in 1979 and its subsequent decline into near political suicide
• Margaret Thatcher’s economic and fiscal policies which – whatever their economic upside – led to huge social dislocation and the running down of public services.
The priority for McNally was the maintenance of social cohesion, even if this meant higher taxes and a large ongoing public deficit.
The economist and business woman Bridget Rosewell countered by, first, by questioning whether most public spending really did contribute to social cohesion and inclusion, and, second, highlighting the risk that a Government not seen by the markets to be facing up to its fiscal responsibilities would be unable to finance its debt.
The subsequent conversation reminded me of the concept of the trilemma: a situation in which policy makers may be able to achieve two out of three aims but not all three. A classic trilemma in pensions policy comprises: incentivising saving, targeting the poor and limiting expenditure. Recently, speaking to a centre right audience, Niall Ferguson suggested free marketers faced their own trilemma: free trade globalisation, social stability and a small state.
In the face of the structural public spending deficit do we face a new trilemma? This is between national economic viability, protecting the poor (those already being hardest hit by the downturn), and welfare state universalism. As an example of this kind of thinking, it is significant that Conservative MP David Davis yesterday advocated means testing child benefit as a way of saving a few billion.
If protecting the poor while safeguarding the economy means reassessing universalism the implications are huge and very troubling to progressives.
The pro-social council – what is to be done?
So here, in outline, is the argument I made to the Association of County Council Chief Executives yesterday morning….
This week’s budget confirms we are entering a long period of public sector austerity, yet needs – particularly those associated with population ageing – will continue to rise.
Even without the specific fiscal challenges we anyway faced what Professor Niall Ferguson described as a ‘trilemma’ (a situation where you can have two out of three outcomes but not all three). Ferguson’s trilemma (and he was addressing his arguments from a right of centre perspective) is between open market globalisation, social stability and a small state.
Public opinion finds it hard to accept this reality, which is why opinion polls suggest people want a Swedish welfare state paid for by American tax rates (although, judging by the generally favourable response to the budget tax increase for the wealthy, this may be changing).
The future looks depressing and even frightening unless we can close what I described in my first RSA speech as the social aspiration gap. To create the future most of us aspire to we need citizens who are:
• More actively engaged in collective decision making at every level
• Living more self sufficiently
• Contributing more to the collective capacity of society
More and more evidence tells us that the crucial determinant of citizens’ ‘prosociality’ is the thickness and range of social networks they belong to and quality of social support they receive. This evidence comes not just from sociology but from evolutionary psychology and behavioural science.
So the question for local government as it seeks to protect (or even improve) social outcomes with shrinking public investment is: how can it grow prosocialism, particularly through the fostering of stronger social networks. Another way of putting this is: how can public investment achieve a stronger social multiplier effect?
Here – in a highly abbreviated form – is a six point checklist for a council genuinely committed to this goal:
a) Spend less on opinion polling but seek to gain much more insight into how people actually live their lives and how they frame their social reality
b) In seeking to strengthen social networks start from those that already exist and seek to support and stretch them rather than trying to create new social infrastructures dependent on time limited public funding streams
c) Mainstream social network building. Don’t let this agenda feel additional to all the other targets and pressures; do the tough intellectual work of disclosing how stronger social networks can contribute to existing public service outcomes (like raisings school standards or improving public health)
d) Social networks are about relationships, behaviours and conversations. Behaviours matter more than words. If local authorities want to promote deeper more generous relationships between citizens then councils’ own practice must reflect this. Local Strategic Partnerships, for example, must be truly transformative spaces in which service leaders are willing to see beyond their own organisational imperatives to the fundamental needs of the locality
e) Engage local councillors in a redefinition of politics and social change, moving from a government-centric to a citizen-centric model. Support and incentivise councillors to be capacity builders (if this sounds crazy, there are places it is happening)
f) Understand that the evidence of greater cohesion and capacity lies not in everyone agreeing with each other or with the council, but in people disagreeing creatively (see cultural theory blogs passim).
It was a great session yesterday. My ambition now is for the RSA to develop a consortium of local authorities signed up to this kind of radical agenda and willing to work as an innovation set (each council committing to innovating and learning from others’ innovation).
And, by the way, there is also a lesson here for central Government: it has potentially an important strategic and network-hosting role in fostering this kind of practice in local government. But when it comes to the complex, locally-grounded, task of community capacity building, central Government intervention is much more likely to be damaging than constructive.
The crisis is an opportunity but only if public sector leaders are willing to think big and be brave.
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