Time for a devolved democratic budget

The countdown to Rachel Reeves's budget is reaching a fever pitch of despair from the government and opposition benches. There is a sense that we will get more of the same permutations of taxes and spending cuts that have been a major reason for the poor performance of the UK compared to other nations over much of the past 45 years. 

The media obsession with tax increases, unfunded projects and the NHS has dominated the airwaves and plays into the belief that these are the metrics to be examined when the chancellor delivers her budget on 30 October. They are missing the real issue, the government's model for budgeting is fundamentally flawed. It is failing to devolve budgets to those who have the knowledge, the contact with their customers and the willingness to innovate and work in partnership and at a pace that gets things done. We need a more devolved inclusive and locally accountable budget process. A step change on par with what Keynes advised and Attlee introduced following his landslide election victory of 1945.

The UK government's derisory budget management stems from what Mrs Thatcher saw as too much public spending and the profligacy of councils and other public bodies in delivering public services. She introduced the tendering of public services, the sale of council houses, the privatisation of many state-run services and reduced public expenditure. She centralised many local democratic services to be run by government departments and agencies. They in turn were told to contract out these services to private outsourcing companies. She also abolished the GLC, Metropolitan Councils and John Major extended this spree of abolitions to Scotland by reorganising local government in Scotland to eliminate most of the regional councils.

This was followed by John Major's introduction of Private Finance Initiatives, later to become Public Private Partnerships. These mechanisms to remove capital expenditure from government spending were embraced by Blair and Brown who were equally wedded to centralisation. By these mechanisms, central government effectively defenestrated local government and replaced it with an ill-considered collective of rapacious multi-service outsourcing companies that are now the operators of what used to be public services. Once ensconced in this role they have used their claim of greater efficiency and near monopoly position to ramp up costs and maximise profits. 

Evidence from various audits shows that the quality of service has often diminished and costs have escalated in many of these services. In some instances, massive profits have been taken and companies have subsequently been bankrupted by the debt they have taken on. When this happens the risk reverts to the government which has had to either bail out 'too big to fail' companies by allowing them to win more contracts or to take services back into public control. Notable examples include probation services, rail franchises and some academy schools. The outcome of these failures has been a double jeopardy for the government and more importantly for those dependent on these critical services. It is one of the tragedies of the last forty years but has escaped detailed examination because of the lack of transparency about the way an ever-increasing swathe of public services has been centralised, privatised and gutted from any form of democratic accountability. 

The expectation is that Rachel Reeves will allow the Treasury to impose another round of budgetary control that reinforces the trend of removing democratic control at both the local and national levels. The Treasury has little confidence in other Whitehall departments to reconfigure services other than by the simple expedient of controlling the size of the budget and telling them to find efficiencies. 

They do not recognise that one of the reasons public expenditure has exploded is not the profligacy of councils or other accountable bodies, who generally keep within budgets and who were normally prudent in the control of public expenditure before compulsory tendering of services. The contracting out of services and the insistence of PFI and PPP for capital investment have transferred much of the operation of public services to multi-service outsourcing conglomerates. They compete in a restrictive market that largely excludes local companies that cannot bear the cost of complex tendering procedures. Having won the contracts they have been able to escalate prices as the contracts were often far from watertight and councils and local companies have lost the capacity and expertise to win back contracts.  

Rachel Reeves should be divesting the management and procurement of these outsourced services from centralised Whitehall departments to the regions and councils. There is evidence that this is having some benefits where Metro Mayors have been trusted to take back control. They are far better positioned, as are Councils to specify appropriate service level agreements and to encourage local companies to deliver services according to needs, not some generalised specification that takes no cognisance of local circumstances and priorities. Massive outsourcing service companies like G4S, Capital, and Serco, which have become so dominant, cannot be allowed to be the justification for centralised government budgeting. 

At the core of a more effective model of government budgeting is an understanding that the specification of services is best done with an understanding of local knowledge and priorities. Local democratic bodies and local businesses have been victims of untrammelled centralisation. Innovation and adoption of new technologies are seldom implemented successfully by overly complex government initiatives. The way for the Starmer/Reeves government to achieve growth is by befriending and trusting local democratic bodies to deliver the services and infrastructure. Devolving budgeting in this way would accelerate the mission of growth and ensure it is more than another mantra.