My vision for a smarter state


I said on the steps of Downing Street, this would be a ‘one nation’ government, on the side of working people. Spreading opportunity, increasing social mobility, helping people to get on – these aims run through this government like letters through a stick of rock. Central to all this is being the government that finishes the job of turning around our economy and clearing the deficit.

Now for some people, these 2 things are contradictory. They say how can you be a ‘one nation’ government and at the same time cut spending? How can you help people get on, when there’s not as much money to go around?

Today, I want to take that argument head-on. I want to explain the principles that will guide us as we approach the difficult decisions in the Spending Review this autumn, and show how, by developing a smarter state, we can deliver not just better value for taxpayers, but better services too.
Clearing the deficit

That argument must start with restating the case for deficit reduction. It’s really this simple: if we don’t control the deficit, it will control us. A large deficit puts our economy at risk. If we lose control of spending, we risk higher interest rates, higher taxes, economic insecurity and all the pain that will bring for families across our country.

Achieving a surplus, on the other hand, will build our resilience.

It is now 7 years since the crash. If we are not trying to run a surplus and reduce high debt by the end of the decade we will be repeating the mistakes of the period that led up to the financial crash.

We saw over the summer the volatility in the global economy. So getting back into the black is about making sure we can face down such threats with confidence that we have money saved for rainy days. And there is another economic argument for controlling the deficit.

At the moment, debt interest rates are low. But in time, as the Bank of England Governor says, they will rise – and when they do, unless we have our books in order, the debt interest bill we will end up paying could be crushing.

I don’t know about you: but I’d rather be spending that money on schools and hospitals, rather than paying out more money to our foreign creditors.

But controlling the deficit is about more than good accounting. There’s a progressive, ‘one nation’ argument that cannot be made often enough. When deficits rise, it is working people who suffer. It’s working people who suffer when taxes have to rise to pay for extra borrowing and spending.

I’m in no doubt: competently running the economy is the first step in improving the life chances of everyone in our country. So we will stick to our long term economic plan and see the job through.

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Smarter state

Now, that answer begins by thinking properly about the state – what it does and how it does it. Now, there are some people who seem to have an ideological commitment to an ever increasing state, come what may.

And there are others who seem to think that reducing the size of the state is an end in itself. What I want is this:

An economy that grows and that allows you to keep more of the money that you earn, and a smarter state that delivers the key services people need and advances our progressive goals of increasing opportunity and real social mobility.

And building that smarter state basically means 2 things.
Protecting key priorities

First, we need absolute clarity on what government should prioritise in an era of obviously finite resources. To govern is to choose – and we have made clear choices.

I am clear: there can be no progress, there will be no opportunity, if we cannot keep the British people safe. And when it comes to protecting the British people, I know that our national security and wider prosperity are inextricably linked to how we work with our international partners to meet the threats of terrorism, poverty and climate change.

So that is why I have said that whatever difficult decisions we have to make in the Spending Review, we will meet our international commitments on defence and security spending and international aid, and we will protect our spending on counter-terrorism.

We are the only major nation to have delivered our promises to spend 2% of our national output on defence and 0.7% of our national income on international aid. And we are seeing just how valuable that aid spending is right now with the refugee crisis in Syria.

I am just as clear about our commitment to our key public services. Nothing embodies the spirit of one nation coming together more than the NHS – our commitment to free healthcare for everyone – wherever you are and whenever you need it.

So we will give the NHS the resources it needs. And compared with 2014, that means a real terms increase of £10 billion a year by 2020 to support the NHS in delivering its own Five Year Plan – while all the time getting the best value for money from that spending.

Similarly, we know there is nothing more important that extending opportunity to all good schools, so we have said we will protect the amount of money spent on each child at school.

As we ringfence these budgets, we will also try and prioritise those things that will increase the productivity of our economy and help living standards rise. So for example, we have prioritised the capital budget, and we are investing in roads and railways, broadband and smart grids.

These are the priorities we have chosen. And whatever difficult decisions we face, we will keep these promises, because they are fundamental to delivering the ‘one nation’ vision.
Principles of a smarter state

But deciding what government should do is not the same as deciding how best to do it. So secondly: where government does act, we need to ensure that it does so as effectively as possible.

And this is where I believe developing a smarter state really holds the key to showing how the necessity of cutting the deficit and the progressive vision of ‘one nation’ can go and in fact, do go, hand-in-hand. If we make the right decisions, then far from getting in the way of our progressive goals, the changes we make can, in some cases, actually improve the services that government delivers – and help people.

It’s not unlike business. Businesses are constantly adapting and changing, using new technology or new methods of delivery, to improve their products and reduce their costs. I’m not suggesting we should run government exactly like a business. I just mean that if we use their insights, we can help develop a smarter state.

So let me set out some of the principles that will guide that state.

Number one is reform. What energises many markets are new insurgent companies, who break monopolies and bring in new ways of doing things. We should apply this thinking to government. So many of our country’s efforts to extend opportunity have been undermined by a sort of tolerance of state failure: children-in-care and prisons being 2 absolutely standout areas.

Reform – whether be it breaking state monopolies, bringing in new providers, or allowing new ways of doing things – can cut the costs of these failures both economically and socially, and they help to advance the progressive causes of spreading opportunity and enhancing social mobility that I care so much about.

Two: devolution. The best businesses would never shy away from allowing their customers to shape the way they improve their services. If we are bold enough, government can go one better by actually putting many of those services in the hands of local people. It is also a proven reality that money spent closer to people is often money spent wiser – so we can really deliver more for less.

Three: efficiency. Businesses are always looking at ways to streamline their functions so they can become more effective. I would argue it’s an imperative – a moral imperative – for government to do the same. When money is tight, it’s simply unforgiveable to waste taxpayers’ money.

More than that, efficient government can actually help with our progressive goals. Opening up contracts to small businesses spreads entrepreneurship and drives innovation. Closing down government offices and releasing government land can help build more homes and spread home ownership.

Indeed, across the spectrum, there are opportunities for us to make a difference not just to people’s pockets but to people’s lives. For example, I believe the creation of the Government Digital Service is one of the great unsung triumphs of the last Parliament.

A whole series of things that used to involve complicated paperwork can now be done online, from registering to vote and paying your taxes to the work being done here in this building to help make the benefits system digital.

Part of the issue is our mentality. When a business uses technology to deliver more for less, it’s regarded as a good thing. But when government does it, it’s too often just badged as cuts. It’s as though good business is somehow bad government. This attitude has to change.

By focusing on these core principles – of reform, devolution and efficiency – we can deliver better, more progressive government that will meet the challenge of living within our means and at the same time help us to extend opportunity to all.

Let me take each in turn – giving a sense of where we can, and should, go further.

One: reform. Across a whole range of areas, from schools to health, universities to welfare, policing, apprenticeships and helping troubled families – the last government I led undertook a series of public service reforms.

It must be said, at the time, all manner of horror show predictions were made about what would happen to our country. But what actually happened?

In the last Parliament we not only reduced the deficit, but inequality declined, and relative poverty reached its lowest level in over a quarter of a century.

Crime fell. Public satisfaction with local government rose. Over a million more children were being taught in good or outstanding schools. Over a million people came off the main out of work benefits and over 2 million got into work.

Put simply, we proved that you could do more with less. In these areas, our reforms followed some general rules:

State monopolies should be broken and new providers with great ideas should be welcomed in.

Those providers should be paid by the results they achieve.

Professionals should be free from central control – but their performance should be transparent and their actions judged against clear minimum standards.

Vested interests, however strong, should be taken on so service users – parents, patients – come first.

Those who stand to benefit, like successful university graduates or employers benefitting from trained apprentices, can make a contribution.

The latest thinking in behavioural insights should be used to encourage the best behaviour.

Early intervention is key – whether it’s investing in things like health visitors or improving the provision of childcare. We have got to stop picking up the pieces when things have already reached crisis point – with all the misery, and extra costs, that brings.

And for those who are hardest to reach, there should be a whole government approach rather than a series of piecemeal and inconsistent interventions.

Our Troubled Families programme has shown just what we can achieve when we get different bodies channelling their resources into a single, locally-led determined intervention. I’ve just been to see the programme in action at Tenants Hall. The results are inspiring. More children going to school, fewer crimes, less anti-social behavior – and across the country thousands of troubled families turned around.

We need to do more of this. And we need to do more to encourage departments, local authorities and charities to work together collaboratively. Put simply: it’s now time to progress these ideas further and faster.

In June, I made the case for reform of social services and child protection. We need to apply the lessons we have learned in education reform to this vital area. Just as we improved the quality of teaching by attracting brilliant new recruits, so we’ll improve social work by bringing in new talent.

A new programme, Frontline, has already attracted hundreds of outstanding graduates to become social workers.

And just as we’ve replaced failing local authority schools with great new academies and outstanding free schools, so we will say to any local authority failing its children: transform the way you provide services, or those services will be taken over by non-profit trusts or other partnerships.

This will be a big area of focus over the next 5 years.

Another big step forwards has been our pioneering use of interventions like Social Impact Bonds, which pay private and voluntary sector organisations with some of the savings they deliver to the taxpayer. Take, for example, the Social Impact Bond supporting ThinkForward – a charity that places highly qualified ‘super coaches’ in schools where they identify and work with young people most at risk of not getting into work. In Tower Hamlets, this has reduced the NEET rate amongst some of the most at risk pupils by 88%, saving over £40,000 per pupil.

I want to take this much further by bringing models like this to scale – in areas like homelessness, mental health and looked after children too. Spending money smartly; saving money overall; improving people’s lives – this is what reform can do.

That’s also why I want to bring serious reform to our prisons. There can be few areas of government where we tolerate such failure. While criminals are in our prison, the state is responsible for every aspect of their lives, from who they see to what they eat, learn and do. Yet, nearly half of adult prisoners re-offend within 1 year of release – and for under-18s, that figure rises to two-thirds.

Who pays the price for this failure? Yes, the taxpayer – who foots the bill every time. But also the very poorest in our society, who are the main victims of these crimes.

No one who believes in social justice can accept this. So it’s time to be bold. A prison sentence is a punishment, yes. But it should also be a time for purposeful activity.

So we will look at selling off our inner-city prisons which are old, dark and overcrowded – and building new, effective prisons which are not just safe and secure, but contain facilities that will lower reoffending rates.

We also need to devolve power – like we have in education. At the moment, prison governors you have almost no control over what is taught in their prison and who teaches it, nor the right financial freedoms to provide meaningful work for their prisoners.

We need to give prison governors that control – and we are also looking at how we can incentivise and reward them for delivering the right outcomes.

Going even further, we could also invite bids for new prisons from those charities and others who wish to work with specific types of offender. I especially want to see improvement in the youth justice system.

So I have asked Charlie Taylor, the former Chief Executive of the National College of Teaching and Leadership, to review the whole system. He will look at governance and how we can adopt a whole government approach, rather than a series of little interventions.

Saving money and improving lives – that is what reform can do.

So can devolution. For the best part of 100 years most governments took powers away from the cities, towns and counties and centralised them in London.

In the last Parliament, I was determined to reverse this tide and transfer power from Whitehall to local communities. I think we have made real progress.

Through the Local Growth Fund, we set out a commitment to devolve £12 billion of money previously tied up in Whitehall and put it into investments where local communities and businesses said it would make the biggest difference. Our City and Growth Deals gave cities big new powers, including the ability to ‘earn back’ tax and set up local investment funds, such as the £1 billion transport fund here in West Yorkshire.

And of course, the whole process of building a Northern Powerhouse began with the historic Manchester devolution agreement which gave that city an elected mayor, control over £1 billion of spending, and powers over transport, education, welfare and health and social care.

Behind these changes was a simple idea: money spent closer is often money spent wiser. And we’re going to take this agenda to the next level. So we will see through our commitments to Scotland and Wales to give them the extra powers they want. And we will spread that initiative right across England too.

At the July Budget, we invited local areas to submit their proposals for new devolution deals with the government. Last Friday was the deadline day. We expected 25 submissions. I can tell you today, we got 38. Local people have really seized this opportunity and put forward transformational proposals.

For example – one area has proposed a new Land Commission led by a new mayor, which would have powers to accelerate house building and reclaim major sites from dereliction. While here in Yorkshire we’ve seen exciting proposals that will see more power given to the local area on transport, skills and housing. There is a lot of work ahead on each proposal and that work starts today – but I’m confident we will see devolution coming to Yorkshire in the years ahead.

A striking feature of so many submissions is how civic leaders and business leaders, neighbouring councils and important institutions like universities have joined forces to make a united offer. This is what I mean when I say we can develop a smarter state that advances opportunity.

This government will sign a new set of devolution deals, giving the opportunity for every part of our country – and everyone in it – to drive a better future for themselves and their neighbours.

Three: efficiency.

There is always scepticism on whether government can deliver on efficiency. And so this is a good moment to report back. By the end of the last Parliament, we had saved over £18 billion a year by finding more efficient ways of working.

We’ve reduced the size of the civil service, made better use of government property, bought smarter and spread the use of technology. The next 5 years will be about going further.

Take our emergency services. Right now we have a situation where in most towns, the police, fire and ambulance services all have different premises, back offices, IT policies and systems, and procurement policies – despite all their work being closely related.

Places like Hampshire have shown the way forward, where the emergency services have brought functions together to save millions of pounds a year. We need to see that sort of thinking in other places.

So I can announce today that we will introduce reforms that will enable the police, fire and ambulance services to work more closely together to save money and improve their effectiveness. And in areas with local support we will enable Police and Crime Commissioners to take on control of the fire and rescue services, including in London where that power will be vested in the Mayor.

This will improve accountability, raise effectiveness and deliver savings for taxpayers – that’s what efficiency can do. Indeed, across the piece, we should be bold. We should be smarter with what we do have.

At the moment, we sell off unused government land to developers. But the whole process takes a lot of time. Is it not time to cut out the middleman? Should government not just contract out development on this land and get building on it straight away?

These are the questions I want us to consider.

And I want us to go much further in making government digital – saving money and improving services at the same time. That’s what I mean when I say a smarter government can deliver on our progressive goals. And those are just some of the things we are going to be doing.

As part of the efficiency challenge, we asked public sector workers for their ideas – and we’ve had over 20,000 responses. We’re going to be working thorough all those ideas in the coming weeks. It shows a fantastic commitment from our public servants to want to build a smarter state, and it should give us great confidence that we can meet this challenge together.

So yes, we have some difficult decisions to make in the months ahead. But what we are showing is that deficit reduction and an opportunity society are not alternatives. They can complement each other.

Because with a smarter state, we can spend less and deliver more.

If we embrace reform, break-up monopolies, take on vested interests, devolve power and maximise the use of digital technology, we won’t just balance the books, we will lay the foundation for the most radical and most progressive government of our recent history.

So every time the media does a piece talking about the lack of resources, I say balance it with a piece about results too.

Because we’ve already shown that you can cut the deficit and cut inequality, and that you can maintain spending per pupil and get over a million more children taught in good or outstanding schools – and we are going to carry on making this argument.

It’s not just about resources: it’s about results. And that’s what you can trust this Conservative majority government to deliver – for you, for your family and for working people across the length and breadth of our land.