Money must be well spent

Tony Blair has pledged to improve our public services. Indeed he has taken the unusual step of asking us to judge him at the next election on this single issue. Yesterday Gordon Brown put large amounts of money on the table to try and redeem this pledge; will it work?

At one level it must surely produce some success. When Mr Blair came to power in 1997, public spending was just more than £300 billion a year. On the plans announced today it will rise to just over £500 billion by 2005-06. This is the biggest sustained rise on record. The Government cannot make increases on this scale without there being some improvement in public services.

But the real test is whether the money will be spent well. This is crucial. If the public sector wastes money, two things follow. First, we will not get the improvement in public services. Second, our standard of living will be hit. As a country we would have got more for our money if it had been left in the taxpayers' pockets. If the public sector were to waste 20 per cent of the extra money (quite possible on past performance), it would mean getting only 80p of public services for every extra pound taken in tax.

Mr Brown is well aware of this pressure. He talks constantly of the need for public sector reform as well as additional spending. But spending is easy and reform is very difficult for two reasons. In the private sector firms have strong external pressures encouraging them to increase efficiency and improve service to customers.

These pressures come from competitors, shareholders and bankers - and from the fact their customers can choose to go elsewhere.

There are no such external pressures in the public sector.

In their absence, the drive for improvement in public sector organisations has to come from within. But people who work in the public sector, as currently constituted, have no incentives to take the risks involved in change. If they take risk and it goes well, they get no reward. If it goes badly, they get roundly criticised - often in public by bodies like the National Audit Office (NAO) and the Public Accounts Committee. Faced with such incentives, they do the sensible thing and avoid taking risks.

But risk is at the heart of any reform. Reform means innovating, and changing the way things are done. In my time in Whitehall, I lost count of the times I heard even senior civil servants say, when faced with suggestions of change, "What will the NAO say?" rather than, "Will this produce a better public service?"

Real change is not impossible. In the Eighties Margaret Thatcher and Nigel Lawson got the public sector to change. Whatever you think of what they did, they did show how to do it. It needs a clear definition of reform. Big organisations need to be told clearly what to do if there is to be any hope of change.

It has to be driven by strong political will. Any sign that the Prime Minister is not absolutely determined will be seized on by those who prefer the old ways. It means having no truck with civil servants and public sector managers who drag their feet.

Mr Brown spoke of getting rid of failing leadership in schools - but schools have to be in a dreadful state before they fall into this category. Why should such reforms only apply to the worst cases when we need to raise standards across the board?

Mr Brown has introduced objectives, but these are too broad in scope and too many in number to drive management. The Department for Education and Skills has an objective "to ensure that all young people reach 16 with the skills, attitudes and personal qualities that will give them a secure foundation for lifelong learning, work and citizenship in a rapidly changing world".

This is far too broad. Nobody in the department could be held accountable for it. The first thing Mr Brown must do if his targets are to be effective is get rid of objectives like that - although I see that it survived the review intact.

The Chancellor is relying on inspectorates to monitor progress. I am concerned this creates a fearful blame culture which is part of the problem. The solution is to get it right first time, not to appoint a host of people to examine why it went wrong.

The same story is repeated throughout the public sector. Targets that are too broad, too many targets, inadequate accountability and no real rewards for success.

If we want progress we need a leader with clarity of purpose, determination and the ruthlessness to make sure his intentions are carried out. Mr Blair must make sure he does that. No one else will.

? Steve Robson was Second Permanent Secretary to the Treasury from 1997-2001, advising the Chancellor on public sector reform.