Osborne’s growth agenda

Whether the Conservatives like it or not, their agenda in government will be the “more for less” agenda. That is, having to cut public spending and find ways to improve services at the same time. This is far from impossible: after all, Labour has proven in the last 12 years that you can virtually double the money and have worse services. To achieve the reverse, all you need is public service reform—to do what Blair talked about in his final years in the job. George Osbrone has put the reform agenda at the centre of his speech on the economy today. He says:-

“We need a new model of growth. We need to change from an economy built on debt to an economy powered by savings and real returns on effort. A corporate sector less dependent on debt, with more equity investment in start-ups and the success stories of the future. Public sector reform so that government lives within its means and delivers world class public services at the same time. And a country that pays its way in the world – saving and investing more to build a truly sustainable economy. This is the compelling vision that I believe can restore confidence today and belief in a better tomorrow. ”

Given that Labour has tested to destruction the idea that more money means better services, Osborne’s line deserves serious consideration.

Jeff Randall in The Telegraph details the astonishing lack of return on the education spending:  the money is there but the quality of provision is not. The Swedish schools model that the Tories are proposing would take whatever the state spends on education – say £6,000 per pupil – and ask independent schools if they can teach children for that amount. I once asked Per Ledin, the head of a Swedish school chain, if he could provide decent education for this sum. He threw his head back and laughed: he could do it for far less, he said. The British have no idea just how big their school budget is. Even if this budget was frozen (Cameron has pledged to increase it) we can have far better results by letting independent schools provide state education: more for less.

One other example springs to mind. In my interview with Alan Johnson a fortnight ago, I asked him why he cancelled contracts for new independent clinics to provide NHS services. He said it was because the need did not arise as the very threat of private competitions forced the NHS clinics to raise their game: bed spaces and extra capacity were magicked out of nowhere.

“When you introduce these [private] centres, you find that performance suddenly zooms in the local NHS hospitals that had previously said they couldn’t do any more hip replacements,’ he says. ‘So you had to decide if taxpayers’ money would be well spent on a lovely spanking new [private] centre that very few people would use.”

It is, in my view, a monumental missed opportunity to then remove that threat. The Blairite reforms worked: extra bed spaces were made available not by diktat or by “investment” but by the simple threat of competition, more for less. What a cheap and easy way to deliver a better service for patients! But Johnson concluded that this means the threat should be removed. It is, depressingly, true that since Andrew Lansley decided his job was to cosy up to the NHS establishment, a Tory government would not expose the system to this degree of competition. Worse, it would make the NHS bureaucracy independent of government, guaranteeing that it won’t be held to account by patients or politicians.

Finally, public service reform can actually boost a country’s exports. Who is coming to Britain to provide independent clinics to the NHS? Companies from South Africa and California, countries (and states) where private firms provide the public services. Who is coming to help set up independent schools? Companies from Sweden, like kunskapskolan. If I were a Swedish education firm, I would do UK schools for a few years, rename myself “St George’s Education Trust” , plonk the union flag on my company notepaper then go off to China and mop up. Because if the Brits wont sell British education to the Chinese, someone else will.

My point: we have to ask what the future engines of growth in the world economy will be. They will almost certainly be something we can’t imagine at present: that is the beauty of the free market. Not even Bill Gates predicted the rise of the internet. Five year plans don’t work, as no minister can tell what direction the economy will take in five years. All you can do is liberalise, to give your country the space and freedom it needs to nurture creative skills. This is the best recovery plan. And it’s very encouraging to see Osborne thinking along those lines. We have world class teachers and doctors in Britain: empower them not the bureaucracies who control them and great things will happen.