HM Treasury News Release
4 April 2000
SPEECH BY RT HON ANDREW SMITH MP, CHIEF SECRETARY TO THE TREASURY,
TO THE IPPR NEW ECONOMY LAUNCH EVENT, 4 APRIL 2000
THE FUTURE FOR PUBLIC SERVICE AGREEMENTS
Attached is the text of a speech given by Chief Secretary to the
Treasury, Rt Hon Andrew Smith MP,
to the IPPR New Economy Launch Event, London, 4 April 2000.
Thank you for that kind introduction, and to Matthew Taylor
and the IPPR for inviting me to speak today. I want first to set out
our ideas about setting PSAs , and then I want to briefly cover how
all this fits in with our ambition of modern, high-performing public
services combining innovation and excellence.
As many of you know, PSAs are a unique innovation. Colleagues from
other countries in Europe and across the world are intrigued and,
sometimes, frightened by our radical approach. Never before has a
British Government set out so clearly the aim, objectives, resources,
performance targets, and operations targets for every major government
Department in one public document. Neither has any government publically
committed itself to reporting annually against those targets.
The 1998 Comprehensive Spending Review PSAs were a revolution in this
respect. And for our departments, I think they were something of a
revelation too. PSAs challenged them for the first time to think about
what were the outcomes they really wanted in each policy area. They
also challenged departments to think about how their success might
best be measured. But most importantly they challenged them to commit
publically to delivering the improvements we have targeted within
the resources allocated to them in the CSR. Through the PSAs, the
Government made clear that it was investing for reform. Reform for
better public services and a step change in the way they were delivered.
Not everyone sees it that way of course. PSAs have come in for their
fair share of suspicion and criticism. According to Simon Jenkins
in the Times, Gordon Brown and I sit at the heart of a "vast cobweb"
of targets. In fact, according to Mr Jenkins, I am building a structure
like Stalin's Gosplan! Mr Jenkins even accuses my officials of being
"music-loving, theatre-going liberals". Those of you who have dealings
with the Treasury will judge whether that's and accurate description.
The radical nature of PSAs, and their immediate impact on Departments
inevitably led to some shortcomings in the new system the first time
round. As John Garrett pointed out in the Guardian, our emphasis on
the serious issue of sickness absence in the public sector looks unbalanced
when we didn't have comparable measures in other areas of people management.
And some of our targets are simply not very good, because we were
new to the business: setting targets to achieve 100% prompt payment
of invoices looks good, but will often be unachievable for very sound
reasons, if an invoice needs to be investigated.
So the current spending review, is a big opportunity to improve the
PSAs and learn from experience - both positive and negative - as we
take them forward.
Setting the SR2000 PSAs
We are doing that in a number of ways.
First we are focussing even harder on the things that really matter.
PSAs are all about priorities. Openness and accountability about priorities
should not be allowed to be fudged by too great a mass of targets.
Second, we are making sure part of this focussing process involves
separating out the key overall goals (the "what"), from targets for
Departmental processes and operations (the "how").
Third, we are working harder than ever before on ensuring we target
the right measures of success. Determining what it is you want to
achieve is the first crucial step. But picking the right measure to
avoid unwanted distortions in the system, is as important.
Finally, we are sharpening up our targets, making them as transparent
as possible. We should be clear in every case about what the
terms of the targets mean, when we are committing to deliver
the target, and how it will be measured.
The way we are conducting the review means that we are tackling all
of these issues head on.
In the past few months, I have had a series of meetings with Ministerial
colleagues to nail down their highest priorities. Everyone is determined
to show Parliament and the public the things that really matter to
us. Whereas some Departments had more than thirty policy targets after
the CSR, most Whitehall Departments will have no more than ten high
level PSA targets after SR2000.
I am also making PSAs even clearer by ensuring they are short and
sharp, containing only the aim, objectives, and top few political
priority targets. New supporting documents, Service Delivery Agreements,
will describe how these priorities will be delivered, and the management
and operational changes Departments will be introducing to facilitate
On measures, departments have been working together with the Treasury
to ensure the measures to support the next round of targets are the
best possible in the light of evidence. And in another first, the
Treasury is leading work with other Departments, the National Audit
Office, and the Audit Commission, to agree the basics about what makes
for good performance measurement in Government.
Delivering the new PSAs
So that's how we're ensuring the targets are the most specific, measurable,
outcome-focussed targets they could possibly be.
We also want to make sure the right support and structures are in
place to allow Departments to deliver public services fit for the
21st Century. I want to briefly examine three reforms here.
First, we are determined to break down artificial barriers in policy-making
and delivery, using the PSA process to make Departments jointly responsible
for delivering some key policy objectives. It is important to get
this right as government increasingly has to organise horizontally,
with joint work across departments to deal with challenges which don't
organise themselves conveniently in line with the traditional vertical
departmental silos. For this Spending Review we have launched fifteen
cross-cutting studies of problems that cross Departmental boundaries.
With subjects as diverse as crime reduction, new gateways to care
for the elderly and conflict prevention in sub-Saharan Africa the
studies have pulled together expertise from outside and inside Government
to propose targets for cross-Departmental working. In some cases they
will result in further full cross-cutting PSAs.
Second, Departments are now more than ever drawing on outside expertise
to raise their productivity and to produce the step change in our
public services that we all want to see. This Government wants to
listen and learn from the best practice available. The mantra is "what
matters is what works".
This is why I am committed to the work of the Public Services Productivity
Panel, which I chair. The Panel brings together high level experience
of the public sector and the outside perspective of the private sector.
It brings together people with deep knowledge of the public sector,
such as Andrew Foster of the Audit Commission, and Sheila Masters
with her NHS experience, and leaders from business like John Makinson
from Pearson's and John Dowdy from McKinsey.
The Panel is an excellent resource for all Departments to draw upon.
Each Panel member is assigned to detailed projects, supported by Departmental
and Treasury staff. And some Panel members are also supported by their
own company staff. This openness and joint working encourages innovative
approaches, and puts an emphasis on the practical steps that will
help us do things better.
Already good examples of the fruits of this approach have been published.
John Makinson wrote an excellent report with the big Government office
networks on incentivising good team performance. Andrew Foster has
highlighted both good practice and bad in customer service in the
big DETR driving agencies, so that we challenge poor performance as
well as praising the good.
The reports are only a means to an end. And that end is delivering
real changes in the effectiveness and customer focus of our public
services. John Makinson's report represents a bold and radical new
approach to pay in the public sector. His proposals have the potential
to lever up productivity in the Inland Revenue, Customs and Excise,
Benefits Agency and Employment Service. Work is underway to implement
new pay systems based on team incentives from 2001. These will deliver
real improvements to taxpayers and users of services as well allowing
staff to share in the benefits of better performance.
The Makinson report is only one element of the Government's strategy
to empower public servants. For too long, public services have been
allowed to stagnate because public servants have been undervalued,
and have not been listened to. So the Government third reform is to
turn this around, encouraging innovation by front-line staff and by
local managers, and celebrating the success of our most outstanding
managers and teams, as beacons to others in their sector.
The reforms to the Civil Service inspired by the Prime Minister and
being led by Sir Richard Wilson, offer the prospect of transforming
our Civil Service - retaining the elements so prized abroad, such
as its probity and professionalism, but encouraging more adventurous
thinking, greater diversity, and a stronger sense of good management.
Local autonomy versus central direction
I want to touch on the important issue raised by Matthew [Taylor]
an issue all major programmes of reform in any institution must face
and tackle: that is, to what extent should the centre direct and impose
change, and to what extent should local agents be allowed the flexibility
to find their own strategies for delivery, shaped to local context
and taking advantage of the available expertise.
Some criticism of the Government's modernisation programme has centred
on the perception that it inevitably involves highly inflexible directives
from the centre. I do not accept this, and would argue instead that
Public Service Agreements and our programme of reform offer an important
opportunity to local service deliverers to shape their own strategies
within the framework we have set.
We believe that local government and local services are a crucial
source of good ideas about improving service delivery, and the vast
majority of public servants take pride in the standard of service
they deliver. We are determined to learn from good practice at local
level, and to tackle unacceptable variations in performance where
Only last week, I hosted a seminar at the Treasury bringing together
experts from inside and outside Government to see how we might best
raise the performance of the less good units to that of the best.
The real challenge for the Government is not debating an artificial
tension between local autonomy and central direction but in making
sure that good practice from some of our most outstanding public services
is successfully shared.
This is not to say however, that there are not issues of balance which
we need to work on. But I see this as a dynamic process. Different
combinations of direction and autonomy will be appropriate for different
services and between different units within services. This is a matter
which I will be discussing with colleagues, particularly as we make
progress on their Service Delivery Agreements, which will state clearly
for the first time how they intend to cascade their high level commitment
to local agents.
To conclude, I believe PSAs have been something of a revolution.
Departments have recognised the real benefits for their own management
of clear priorities and targets, and we will see further steps forward
in the quality and clarity of the PSAs which come out of this spending
But like the Productivity Panel, PSAs should not be about elegantly
drafted glossy documents: they must be about driving change on the
ground that the public can see. The Government has set out its vision.
In PSAs we have published a ground-breaking set of commitments. In
our modernisation and investment programme, we are giving public sector
employees the tools to do the job. That has raised public expectations.
So now they have to see the change we have promised.