Why targets are off the mark

WHEN Michael Barber, head of the Prime Minister's Delivery Unit, warned this week that setting targets for public sector activities carried great risks, there was for a moment a glimmer of hope that the Government had stumbled on a major truth. Unfortunately, he did not follow it through.

The world is full of evidence that targets distort behaviour, and the more emphasis placed on them, the greater the distortion. Set the railways a target of punctuality and they will reduce the number of trains so the others have a better chance of running on time. Set schools a target for higher pass rates in exams and they will ban the weaker pupils from entering, so they don't drag the average down.

The world is also full of evidence that no-one understands a job better than the person in the front line - be it the sergeant in charge of a troop, a surgeon in charge of an operating theatre or a head teacher in charge of a school. So it is patently absurd for a remote head office, or a remote centralised and centralising Government, to think it understands the essence of a business activity or a service sufficiently well to set narrowly defined, detailed targets.

Only politicians or civil servants whose careers are built on administration, not management, believe this can work - just as they alone believe the answer to missed targets is to set more of them with bigger penalties for failure.

This matters not just because everybody consumes State services but because the State is 40% of the economy, so inefficiency in the sector makes us all significantly poorer. If targeting causes waste and inefficiency, it reduces the nation's prosperity and undermines its competitiveness. Piling-on of jobs in the State sector paid for with taxpayers' money may temporarily prop up employment but if they are not allowed to work efficiently everyone is held back.

Tony Blair and Trade Secretary Patricia Hewitt - and presumably Michael Barber - have picked up on the antipathy to targets but drawn the wrong conclusion. They say Labour is suffering because it appears too managerial. Too mismanagerial, possibly. But that is a symptom, not a cause. The root of the problem lies deeper.

Three things - mismanagement based on targeting, excessive regulation and failure to deliver on promises - are the real reasons for voter disenchantment and all have a common root defined brilliantly by Dieter Helm of New College Oxford and the consultancy Oxera. At an Institute of Directors seminar on regulation yesterday, he said politics was about choice - either guns or butter, coalmines or clean air. But the brilliance of New Labour was to substitute 'and' for 'or' - guns and butter, coalmines and clean air. Not something for everyone but everything for everyone.

It was good politics because it got them elected but it is impossible to deliver because, in a world of finite resources, choices have to be made and clear objectives have to be set. Labour's problem is that it cannot clarify objectives without destroying the political broad church, so it is trying to get by without making those choices. Its answer is to fudge and to disguise this by layers of targets and regulation, which is effectively targeting in another guise.

It may be that politicians and civil servants genuinely believe targets are how objectives are achieved - though the experience of the Soviet Union ought to have told them otherwise. More likely, they simply do not know what to do and are hoping either that targets and regulation will achieve some progress, however wastefully, or that they will conceal the true awfulness of the failure until after the next election.

Either way, they underestimate the damage to the economy as a whole. As Helm says, when there are no clear objectives, targets lead inevitably to collapsed morale, more intervention, more cost and worse results. Unfortunately, Barber has yet to grasp that.

Little interest
CHANCELLOR Gordon Brown said in his Budget that we should look at fixed-rate long-term mortgages on the US model. Well, Andrew Frankish of advisory firm Mortgage Talk points out that these exist already.

He says the Cheshire Building Society is offering a 25-year fixed rate at 5.49% until the end of April 2028. With up to 80% loan-to-valuation, portability and overpayment facilities, this is just the sort of product Brown would want us all to have.

So has the Cheshire been trampled in the rush? Not really. Since the loan's launch last August, only 125 people have actually signed up.

You can lead a horse to water, but you cannot make it drink.